Members of the media and the press are not authorized to be on this call. If you are from the media or the press, please disconnect from the call now. The content presented on this conference call is proprietary to, and/or subject to the copyrights of Jefferies or third parties. Further, as a matter of legal compliance, we remind you that you must not attempt to elicit from any speaker at this event any material non-public information or other confidential information, and accordingly the speaker may decline to respond to any question in his or her sole discretion. You may not publish or otherwise publicly disclose the name of or otherwise identify the speakers unless Jefferies permits it in writing. By attending this event, you agree to all these restrictions.
Hi, good afternoon, good morning, good evening to all of you wherever you might be calling in from. My name is Janardan Menon. I'm the semiconductor sector analyst at Jefferies, and I'm very happy to have with us Mr. Peter Schiefer, President of Infineon's Automotive Division, and Daniel Györy , Senior Director of Investor Relations at Infineon. Welcome to all of you for today's Infineon's Divisional Automotive Call for 2024. The format of the call will be as in previous years. Mr. Peter Schiefer will first present, go through the slides which we will be showing while we are running through that, as well as are already available on the Infineon website. After that, we will go into a Q&A session where we will be taking questions in the order that they're received. And with that, I hand it over to you, Peter.
Yeah, thank you, Janardan. And also from my side, a very warm welcome to the 2024 Automotive Call. And with that, we can please share the slides. Thank you. Next page, please. So what I will start is I give you an update on the market and our market position. I will then go a little bit deeper in our structural growth drivers, electromobility, but also software-defined vehicles. I will do a bit of a deep dive of some of the innovative showcases which we prepared for this year, and then ending also with an overall summary on the financial numbers. Next page. Yeah, starting with the market overall situation and our position, first of all, I think it's very much important to outline again that we continued to build on our number one position in the automotive semiconductor space. In last year, we could even expand on that.
We could grow around about one percentage point in overall market share, and very much highlight also was that for the first time we became the number one also when it comes to the automotive microcontroller, so pretty much a highlight for our team. When we look to the 2024 year, it's also fair to say that if we at least look to that numbers which are already public, the year's not ended yet, I think we can clearly see that we do outperform our peers, so that's why I believe that this continuation of the strong support towards the number one position and also further growing on that will continue even in the calendar year 2024. Next slide, please. Yeah, as I think China is typically a topic which is very much in the discussion, I want to bring a China slide in already in the beginning.
I think it's clear to everyone that China is by far now the biggest automotive market when it comes to semiconductors as well. In some areas you hear China is now leading in innovation. I would be a bit more specific there. I would say yes, there are some applications where we see China customers taking leadership, but not in all, but in some they are. What is fair to say is that they're very fast in bringing technology into cars and on the road. This speed advantage in terms of bringing new applications and new innovative ideas in the cars definitely is important. That's why we are very strongly engaged also with Chinese OEMs, Chinese customers. I also want to repeat what I said in the last years is China is also about very much quality products.
So the Chinese customers really value the high quality from Infineon we bring into the automotive semiconductor solutions. And being a big market for sure, there are also attempts to ensure that the supply chain is resilient. And that's why Infineon also decided a differentiated manufacturing strategy where we make product-by-product decisions, what kind of product families we in future also will produce in China for the Chinese market. When we compare 2023 to 2024, it's also good to see that in this big market or biggest market for automotive, we could further increase the share of our revenue, which we from the total revenue in China. So that went up. That means there was a growth from 2023 to 2024 in the Chinese market. And I think even more important as we are the number one also in China, how well are we doing with winning new business?
And here, 2024 was or will be also a very good year because the total amount of new business wins which we did in China was exceeding by far the level of what we did in 2023. So there's still an acceleration of winning new business in China. Next slide, please. That was the proper action. Yeah, now let's go to the structural growth drivers. Next slide, please. So similar to last year, I would summarize that we have two main structural growth drivers which continue to stay intact. So first of all, and foremost, for sure, it's the electrification of cars. So the cars which are electrified in one or the other ways, whether it's a full electric car or a hybrid, plug-in hybrid, range extender.
And this penetration of electrified cars will continue to grow despite that we currently see a little bit of a deceleration on the long run. I have no doubts that the new normal will be electrified cars. The second growth driver, which we title software-defined vehicle, is basically a combination of an architectural trend where we see that the electronic architecture in a car is moving into a zonal structure or domain structure, so clustering of functions into fewer, more performing clusters. And what we previously mapped out in ADAS/AD, so the autonomous drive function will become a key block of that zonal architecture, and there will be interdependencies between the zonal architecture and the applications. So therefore, we summarize those now under the term of software-defined vehicle, and I will explain a bit more detailed later on what it means for the success of Infineon.
But besides the two structural growth drivers, I don't want to forget to mention that even in a flat car production scenario for the next years, there is semiconductor growth also in the remaining applications, and to summarize that all these comfort or premium features, whether this is interior lighting, external lighting, seat control, all of that is further growing. Functions which are in the past only in premium cars will trickle down to mid-class cars or affordable cars, so that means even in the remaining applications and even in the flat-ish car production, we will see the semiconductor content increase. Next slide, please, so a little bit deeper into the electric cars or xEVs.
Here, as you know from the past, it's very much important to understand that Infineon Technologies is basically having all major technologies you need for making cars electric and also a very broad product portfolio from the microcontroller, the sensors, the PMICs. But then when it comes to high voltage power, for sure, also in that area. Here, there are key technologies. Silicon IGBT for many, many years was the dominant technology. Then over time now we see silicon carbide kicking in and starting with applications, for example, on the on-board charger side, it's all gallium nitride. And Infineon is the only company which really has a deep technology leadership, but also a manufacturing leadership when it comes to all of the three technologies. And why this is an asset to have three technologies, I will explain also a little bit better later on.
You see on the right side of that slide some of the recent highlights, whether it is on silicon where we have the thinnest wafers, which gives you the best efficiency, whether it is silicon carbide where we have the most competitive factory landscape there, or gallium nitride where we also recently demonstrated the 300 mm gallium nitride technology, which brings then gallium nitride to the functional cost parity towards silicon. And that for sure is all needed in classic light vehicles, cars, passenger cars. But what we see now in the last year, there is more momentum coming in, for example, trucks. We see swapping that technology over in two-wheelers and three-wheelers. And we also see besides the classic full electric vehicles, still more momentum towards hybrids and especially also range extender solutions.
That's why I believe for the next years to come, there will be a coexistence of ways how to drive cars electric. And also there will be a coexistence of the semiconductor technologies which are needed to fuel the demand for that electrification of the cars. Next slide, please. I talked about even affordable cars, and I think there's a big discussion going on, and there's also a big pressure in the market that the cost for electric cars is going down. And that's why Infineon took this strength to have access to not only one technology, but to a broad variety of technologies. And we introduced what we call a fusion solution or fusion module. And I show that because this explains why it's so important that we have not just a technology, but really a broad range and the leadership in a broad range of technologies.
What this fusion module basically does is basically you can say you get an almost silicon carbide performance to an almost silicon cost. You get the best of both worlds. What this chart in the middle of the page does show you is the classical WLTP cycle. So the normal driving cycle. You see on the scale the kilowatts, and you see on the x-axis then the energy consumptions in kilowatt-hour. You see that the majority of the daily ride in a car is anywhere between 10- 90 kW That means that's an area where if you have a normal driving cycle like defined in the WLTP cycle, this is where your use case will be.
So if you now make an inverter which can do maybe 200 kW or 150 kW, and you populate that inverter with very expensive silicon carbide, you see by that chart that most of the times you don't even use silicon carbide. And that's why we came up with this fusion inverter where we only populate one third of the chips with silicon carbide and two thirds we do with more cost-competitive silicon. And that means in the normal driving cycle, you almost only use the silicon carbide, and the 80 kW is good enough for that. That means only for one third the cost of silicon carbide, you can get the high efficiency of silicon carbide in the WLTP cycle.
And on the right-hand side, if you extend it, and this is a highway drive, if you go to a German autobahn and you go full speed, then you see that the blue color kicks in. So basically, when you accelerate or you overtake, only in that case, you will use the silicon. That doesn't come that often. So you get a much cheaper power, and the loss of efficiency is only minor. So at the end, this fusion inverter gives you more than 90% of that what the full SiC or silicon carbide inverter would give you at a much lower cost. And that is one example of what we can contribute having the opportunity on both technologies to come up with more affordable cars.
And that's very much important that this is also not increasing the complexity of the control of the car because we made our solutions in a way that it's very easy for the customer to replace silicon carbide inverter and just plug in a fusion inverter and get almost the same performance to our costs. Next slide. So why do I explain that? Because as you know, we always said that the semiconductor content for an electric drive car is much higher than a classical diesel or gasoline engine. The numbers you see now as an average semiconductor content for 2024 are very much in range of the numbers I showed last year for 2023. That means the increase of content basically is compensating the price decline. So give or take about the same numbers.
Also, there is a growth in semiconductor content over the next years because there is simply more electronics coming into cars, also electric cars. A big driver is the software-defined vehicle, which I explain a bit more later. But the multiplier is key. You see that the number is basically tripling from 2024 to 2030, yeah, 2024 to 2030. So the increase in the penetration of electric cars pretty much drives semiconductor content. And again, despite the fact that we see a little bit of a deceleration in 2024 and 2025, on the long run, I'm fully convinced that the electrified car will become the new norm. Next slide. Yeah, now I mentioned several times this term software-defined vehicle. Let me go a little bit deeper to explain better what I mean with that.
So first of all, there's a strong desire of the car OEMs to kind of get everything which has to do with application software, with services into control. And this only can work if you make basically the software independent of the hardware of the car. So a separation of software and hardware. And why is that needed? Because OEMs want to really monetize new functions and data. There should be software over-the-air updates. They want to make upgrades and updates over the entire life cycle of the car. They want to introduce maybe new features which they can charge. And on an innovation perspective, this also would mean that you can get new features in the car. You can even upgrade the cars when it comes to cybersecurity aspects.
At the end, if you get into that architecture where you have a software-defined vehicle approach, you can at the end also reduce the complexity of the overall systems. You all know that speed matters. Bringing a car to the market in a shorter time is important. Complexity reduction is important and also cost reduction. That means at the end, out of this maybe 100 different boxes in a car, this gets consolidated into clusters. We call that zones. That means different functions get clustered. By that, it's much more easier to dislink the software part from the hardware part. Then now coming to the semiconductor perspective, in order to make that architectural change and clustering possible, basically, you will see two main trends.
On the left-hand side, you will see that if you combine now many different boxes into fewer boxes, you are more or less centralizing everything which has to do with the compute. So all the compute functions are more centralized. But towards the opposite, when it comes to power distribution in the car, where today a car only has one battery and one wiring harness, basically, that is centralized today. But then if you move into this zonal clustering approach where you have several clusters in a car, you need to make sure that you bring the power to all of these clusters. So basically, from a central, this power distribution architecture today, we go to a decentral. So the compute is getting more central. The power is getting more decentral.
And that has both an impact on the semiconductor requirements, which I will go a little bit deeper in the next slide. So starting with the left-hand side of the previous slide, that is this centralization of the compute. And in the pictures, kind of a hint to what that means. You still have also in this new zonal architecture what we would call edge compute. So every box which is gray or greenish will remain a separate box. Typically, this is real-time controls, the braking, the airbags, all these things which are real-time relevant, which are safety relevant, which are security relevant, that will remain a separate box. But other functions which are here shown in the light greenish and purple color, this will be central. And this is either a high-performance compute box or a zonal box.
And what all of that has in common is that you need more performance. So the more features you integrate in one cluster, you need more performance. You also need to communicate between the boxes. So that means you need to have a much better connectivity structure. For sure, safety and cybersecurity plays a role. So you need to have upgraded safety and security functions. And also, you need to make sure that the boxes, even though they are connected, are kind of working independent of each other. And here, the key message for today is with this trend towards this zonal architecture. And first, OEMs are bringing cars on the road now. And for the next five to 10 years, there's a clear and strong trend towards that architecture.
And the key message very much is that for all these boxes and all these applications, our AURIX microcontroller family, and especially our new generation, we call it TC4, is already equipped with everything which is needed to be a perfect fit in this new architecture, which will evolve now over the next years into the car. Next slide, please. So this is now the right-hand side of the box two pages before. When it comes to power distribution, and you may recall that I said power distribution today is central because it's a battery and a wiring harness. And in the future, it will get decentralized. And the reason for that is you have then these different clusters.
And you can imagine if you, for example, are driving on the Autobahn and on very high speed or during a mountain, and there is a failure, for example, in the power steering for the steering wheel, the system would need to detect the failure in basically speed of light. It must be able to disconnect the failure and to reconnect alternative power supply. And at the end, there is no safety-critical situation. And to make that very fast, you can imagine that this cannot be done by classic electromechanical solutions like relays or fuses. So all these relays and fuses need to be relays with safety elements, with semiconductors which have diagnostic functions, which have protection functions, and can switch the energy. And that's a huge and large opportunity for the semiconductor solutions. And Infineon is super prepared on that.
We have a good long history on that kind of specific products, which now become very much important in this boost of functions as all of these so far used electrical or electromechanical solutions need to be replaced by semiconductors. So that will be for that is one explanation why this software-defined vehicle term is so important because it's not only driving the microcontroller story. It's also driving this power story because all of that is only possible if you replace electromechanical solutions with semiconductors. Next slide, please. So that gave you now an overview on these key structural growth drivers, and I want to give your attention now to some of the innovation showcases which I prepared for today, and on the next slide, I start with 48-volt.
You may have heard that some of the OEMs are experimenting to move the battery voltage from today 12 volt to 48 volts. And the reason for that is if you take a classic car for today, you have a handful of applications which need very high power. So maybe 3 to 4 kWs today is normal. And then you still can handle this classic 12 volt battery. But in the cars which will now sign for the next years to come, there are many more applications which require more than a kilowatt. So easily, we can say that we need to triple the demand on these high-power loads. And then you can imagine that this becomes very critical for the wiring harness.
So what you can do to kind of keep the wiring harness in control and keep the weight of the wiring harness low is you need to reduce the diameter of the cables. And you can do that if you increase the voltage. So if the voltage goes up, the current goes down. That means with one and the same cable, you can transport a higher factor of energy. And that's the rationale why the automotive industry kind of is forced now to move slowly but steadily into 48 volt power net in addition to the 12 volt because otherwise, the complexity of the wiring harness cannot be managed. And there will be in the beginning two or three handful of high-power features which will go first. And then over time, other loads will follow. Why do I tell that here? What is the reason?
Because on the next slide, you see that you basically need a full new broad spectrum of products which can manage all these different loads, and Infineon is already prepared, so we have the technologies developed. We have the product families developed, and there is already a very broad portfolio available today for our customers to design first projects. We will further expand that because the broad portfolio which we have already on 12 volt, we also want to offer that to our customers for the 48 volt migration because that will fuel also further growth for us and will become a key element for growth in the next years. Next slide, please. Yeah, I talked already about silicon high voltage, silicon carbide, and mentioned gallium nitride. A little bit of a deep dive in gallium nitride.
Gallium nitride, I would really say Infineon is a first mover when it comes to gallium nitride. We have by far the most patents. We have by far the biggest team of experts. We just recently introduced the first 300 mm gallium nitride manufacturing process. Why is that important? Because the scale in the wafer diameter makes the manufacturing cost more effective. That means this is a vehicle for us to bring the functional cost of a certain switching function for gallium nitride towards the level where silicon is. So making gallium nitride functions as affordable as silicon functions. And then by that, getting the performance benefits to our customers. And with our GaN Systems acquisition, we also had a big step into further expanding on that leadership. So why is that important also about the volume? So I want to explain in the next slide.
We are on the left-hand side. It's maybe a bit complicated chart, but you only need to look at the term switching speed and efficiency. And here you can see that compared to silicon and silicon carbide, gallium nitride has an advantage in the switching speed and in the component efficiency. And both together, the efficiency of the component and then the opportunity that the component can work on a much higher frequencies, that those parameters make sure that the overall system in the car is more efficient. And more efficient means with one and the same battery size, the range gets better. You can drive more kilometers if the system is more efficient. So gallium nitride brings more efficiency. There's one other parameter which is to be considered. That's the one on top, power output.
Here you see that gallium nitride is not as good as silicon and silicon carbide. This combination explains why the first applications where gallium nitride will be effectively used in our on- board charger, the high voltage to low voltage DC- DC converter, and the 48 to 12 volt DC- DC converter. Because these three are applications where the switching speed and the efficiency are dominant criteria and not so much the power output. That's why these three applications will be the first ones where gallium nitride will go into the car. We see design wins on the DC- DC as well on the onboard charger already now. In the next year, we will see cars on the street using gallium nitride. Traction inverter typically needs more power. That's why traction inverter will come later.
And here it will go in conjunction with new innovative topologies where on the one hand side, when you have brought the efficiency of your inverter already to the maximum, the next level would be to tackle the switching losses in the electrical motor. This can be done by more innovative topologies. And with that topologies, combinations between silicon carbide and gallium nitride will also play a role. So I think important to remember gallium nitride design wins in automotive start now. First applications onboard charger and DC-DC. Traction inverter, there are solutions where gallium nitride will play a role. Predominantly where you have more innovative and dedicated topologies tackling also the motor losses. Next slide, please. So then switching from the power back to the microcontroller.
And you may remember that I said that if in this zonal architecture, there always will be some applications which are very much linked to real-time needs, safety needs, security needs. So this kind of applications will remain separate independent boxes where you need real-time safe controllers. And this is where AURIX became a really industry standard for that. But also there's more applications which need, for example, more power. I mentioned that when I talked about the zonal architecture. And that's why we built in the latest generation for the microcontroller family. We call it TC4, a so-called parallel processing unit, the PPU. So basically, in addition to the microcontroller core, there is a parallel processing unit. And this can be used to have very fast compute power for safety reasons, but also for example, adding or enabling artificial intelligence functions there. So it's basically a combination.
So, for example, customers start to come up with virtual models of sensors replacing a real sensor in a car with a virtual model. But then you need a lot of horsepower to model and run the virtual model in the controller. And that's why the parallel processing unit is used for that one. There is also a dedicated support for our customers. There was a company which we acquired, Imagimob. This gives a complete toolset to run AI-based functions then and bring that into the AURIX environment. And with that enhancement of the high performance efficiency and effectiveness, we also can, coming from the microcontroller base business, which we also can address the needs for low performance MPUs.
And by that, the TC4 is not only valued on the classical applications which you know from the past, but is even therefore very well suited for this new trend in the zonal architectures. On the next slide, I also want to highlight that TC4, even though first hardware is only available by 2026 or late 2025, there's already first great design wins. So this also is important to know. On the one hand side, yes, TC4 is already seen now, will be successful and can basically be the next step on our TC3 success, which was bringing all the growth.
For sure, the fact that we have such a great market penetration with our previous generation TC2 and the situation that our customers have developed a lot of software for the TC3, which very easily now can be reused when they switch to the next generation TC4, is helping our success there. Also very much seen now is that from project by project business, the microcontroller awards go more in platforms. That means an OEM or a customer will decide on an entire platform. That means the single design wins are much bigger than we have known from the past. So there's a triple-digit million lifetime design wins which will become the standard. And from this very first design wins, which we have already, you also can see from the flags that this is not a specific region. It's basically a worldwide regional distributed success.
And with this first year now of designing in TC4 family, this gives me already a very comfortable feeling that we can continue the successful journey which we started with the TC2, where we've even further boosted with the TC3, that we now can also bring that into the TC4 world. Next slide, please. Yeah. Then one slide on the financial performance. So first of all, starting with the current fiscal year 2024, I think if I show, if I look to the final numbers and I compare that to my peers, I would say that we could really manage the 2024 year when it comes to growth better than our peers. I'm also very happy that I kept my promise, which I gave you a year ago to keep the profitability above 25%. So I see that also very much important achievement for the 2024 year.
I also conclude and I tried to explain it in my presentation that I do see our growth drivers for the midterm growth intact, despite that there's maybe some deceleration in this and next year on the electric cars, but on the mid and long term, I see that intact. So electric, but also software-defined vehicles as big drivers. And with all that, I think now looking to 2025, the new fiscal year, for sure 2025 will be a difficult year. We have to digest the inventory build-up. There will be a market situation which I would say at best is flat from our car production. There will be some BOM increase on the one hand side. On the other hand side, there will be the situation that we need to digest the inventories. There will be some price down.
So overall, I would say year-over-year, there will be a decline in revenue slightly. And with that, a difficult year to manage. What we do to make that year as good as we can on the one hand side, for sure we will tap into those product areas which will see some growth, which will keep us in the growth perspective. So microcontrollers, our silicon carbide ramp, also the smart power components. That's the one which I showed in this power distribution section. That will be the strong product segments. They need to kind of compensate the segments which are a bit weaker. And when it comes to active cycle management, I and my team will do all what we can to make the most out of the efficiency of the factories.
So making sure that we avoid as much as possible further idle capacity, managing the fabs, managing the cost of the fabs. And for sure, the already announced Infineon project Step Up, which is a structural improvement project which will help there. So overall, 2025, a difficult year. Some balancing topics we have, which will also make us more resilient on the margin on the fiscal year 2025 and the next years to come. And as mentioned, we will do the best efforts also to ensure that we are as efficient as possible in our operational landscape. Yeah. And to summarize that, I think on the next slide, I hope that you saw that our track record continues. I think being the number one, we have a strong commitment in the team that we have built on our number one position to make us even stronger in the market.
The structural growth drivers are intact. The cars will get electric, electrified, electric vehicles will be the new normal. The software-defined vehicle, meaning having the zonal architectures combined with the ADAS function, will be a big growth driver. There's a lot of innovations we do. There's a lot of technology leadership. There's a lot of manufacturing leadership. Combining that with the deep entrenchment with our customers, the strong customer intimacy, working on the new projects and helping our customers to make better solutions is a key driver for us. We have already a great portfolio, the biggest very likely in the market. We will further build on that. You have my promise that I do with my team utmost to make this active cycle management. We also will make sure that we get the most out of our structural cost position. Thank you for listening.
I think now it's time for questions.
Thank you very much, Peter, for that presentation. Maybe I'll start off with a couple of questions, and then we will go on to those who have dialed in and take their questions as they raise their hands. My first question is actually on pricing, and especially on China. As you might have seen, there were some reports recently that companies and OEMs in China, especially BYD, SAIC, etc., were asking their suppliers for around a 10% drop in pricing because they were trying to alleviate what they saw as very competitive pricing in the car market itself in China in 2025. You have previously said that you expect a low single-digit decline on your average pricing based on your contracts for next year. Is that still valid?
Have you seen additional pressure coming from China, from Chinese customers? And how do you see that Chinese pricing situation playing into your overall global pricing levels?
Yeah, thanks for that question. First of all, I agree that the price pressure or the competitiveness in the Chinese market is continuously fierce, but that is not only limited to China because this plays also in the U.S. and European customers. So the requests for price down we see or I see in all regions. So therefore, the currently ongoing price negotiations are definitely very critical and very challenging discussions, no doubt about that. On the other hand side, there's still the fact that a big portion of our business, more than half, is business which is booked for over many years, so long-term pricing roadmaps.
There are also categories of products which typically are at the end of the lifetime where you have special deals with customers. You don't reduce the price. In exchange, you guarantee a resilient supply. And there's also a part which then is in a classic price negotiation where you may need to give a bit more. But then in average, the assumption from us was then letting that out would lead to this low single-digit percentage points from an expectation. Now, we have not closed the annual price negotiations because the year is not ended now. But from those which are closed, they are matching my expectations. So that means from the today's perspective, I'm cautiously optimistic that that holds despite the fact that I agree with that there is a lot of strong requests out there.
Understood.
My second question is on how you see growth in different parts of the car. Infineon has always been associated as being someone who's very strong in the EV powertrain because of your very strong position in IGBTs as well as in silicon carbide. But as you know, the EV market has sort of underperformed expectations, let's say, from one or two years ago, but when I see your own performance, you seem to be outperforming the market. You grew in FY 2024. Most of your peers were down in revenue in FY 2024, so I just want to get an idea as to where do you see more of your growth coming from? Is it from the software-defined cars, ADAS, which is the bigger driver of your growth versus EV powertrain?
And how do you see those two sort of going forward over the next three, four, five years for Infineon?
Yeah, that's a fair assessment. So the growth you saw in 2024 was, I would say, predominantly also from the non-EV partners. So the microcontrollers, the smart power, the broad portfolio. We have so many different products which play into the structural growth drivers, the ADAS, the zonal architectures, but also classic comfort and premium functions. And you see it also on the market check-in on the microcontrollers. So that's an evidence for the product. So there are structural growth drivers outside EV cars, such as ADAS and so on. And then there are product families such as microcontrollers, which also disproportionately high did grow in that. And I see that continued.
That's why I also mentioned today not only these, but all the other areas, because we have really the benefit in Infineon that we basically tackle all the key trends which will drive the growth. And yes, we are maybe more seen towards the EV car due to the strengths, but we should not underestimate how strong our portfolio is due to the fact that it's so broad in addressing all the key trends and key driving factors.
Understood. Thank you very much. Miran, I think we can go on to the questions in the queue. Can you just open them up in order, please?
Just as a reminder for everyone, if you'd like to ask a question, please use the raise hand icon on the bottom of your Zoom window.
Or if you're dialed in by phone, you can press star nine to raise your hand and star six to unmute yourself. The first question today is from Joshua. Joshua, please unmute yourself and go ahead with your question.
Hey, guys, can you hear me okay? Okay. Hi. I wanted to follow-up on one of the - okay, great. Thank you. I wanted to follow-up on one of the first questions. I mean, as you know, there's widespread concern about insourcing and, I would say, the sustainability of business in China as there's a push to use local vendors. Could you maybe speak to your insulation across the product portfolio, or do you feel better about some areas, more concerned on others, and where you expect more competition? Thank you. And I have a follow-up.
Yeah. First of all, yes, there are local semiconductor competitors coming up in China.
Typically, what you see is they're very much dedicated on certain product families. And here, the beauty or the benefit Infineon has is that we have such a large portfolio, and it's not so easy to replace each and every product easily. So there will be some product categories which will be addressed earlier. Some may come later. So there will be also a change over time. But we are very confident that we can keep our xEV share high there because we continue to bring up next-generation technologies which help our Chinese customers. And they are very fast in bringing new upgraded cars on the street, as you know. And they use latest and greatest technology to build good cars. So that helps.
Also, the broad product portfolio in general helps because in order to gain time to bring new cars to the market, it's very convenient to talk to a broadliner because then you get your solution much faster compared to having the need to talk to 10 different companies. But I don't want to ignore it. Yes, there will be some areas where we will lose predominantly in older technologies, in older products that will be replaced earlier. On the other hand side, there's so much innovation coming on that we have a lot to win if we play our strengths. And one of our strengths, which is besides the technology, also these entrenched activities with our key customers. With all the key OEMs, we have, for example, joint labs, joint development activities. So being very much entrenched with the customer.
I appreciate that color , Peter.
As my follow-up, you guys have obviously gained a lot of share in the auto microcontroller franchise with investments you've made in AURIX over the last really probably five to seven years. Can you maybe talk about the runway you feel like you have left and how much more share there is to gain there? And in particular, how does your content opportunity per vehicle change as we move from, I think it was 5% to 50% of the mixed zonal and domain architectures? Thank you.
Yeah. To your first question, I mean, it was a very nice jump which we did in the market share. Looking into 2024, from the numbers I have seen, I would expect that there may be even a slightly increase on that. Towards the next years, I think the pipeline is full. The design builds are there.
We added our next-generation technology to build on that, so I think we have done a lot to continue that successful journey, and the second question, I was not 100% sure I understood how well are we positioned in the zonal architecture. Or maybe you want to rephrase?
Sure. It was basically how much does your content change per vehicle as you move from distributed ECUs to domain and zonal controller architectures?
The content change, so basically, on the one hand side, you will see if you build these clusters, you will see maybe lesser number of systems, then you may think, "Yeah, if I don't have any longer 50 systems but five systems, I lose the number of microcontrollers," but on the other hand side, the content of the microcontroller is much higher, so you replace maybe two smaller microcontrollers with one more complex.
So therefore, from an overall BOM content, I see that the move towards zonal architecture will increase the microcontroller content and not decrease. This sounds a bit counterintuitive, but due to the fact that there's so much more functional value added into a zone, we see that in that direction.
All right. Thank you, Peter.
Thank you. Our next question is from Guillaume. If you would please unmute yourself and go ahead with your question.
Hello everyone. Thank you for the time. I wanted to ask about one of your big competitors.
They announced that they have a central high-performance computer in five nanometers and that they see that part of the market with a lot of excitement and that that computer will control a lot of the other functions of the car and perhaps even give them a position to sell the other microcontrollers, let's say, together integrated with that central computer. So my question is about that central computer, whether do you have plans to have something like that as well or not? And I don't mean the central computer to do the ADAS, but for the other functions of the car.
Yeah. And this question very much goes with the slide number 11 where I did show the zonal architecture. And so basically, yes, in this zonal architecture, there will be a couple of high-compute functions.
The infotainment is one, the ADAS/AD is one, and then maybe the chassis control can be either a zone or an HPC, a high-performance cluster. On this page 11, left-hand side, the two shiny green ones are these high-performance clusters where you have these two main applications. We do not have the strategic direction to do those green boxes. That is what we are partnering with those companies because this high-performance computer or SoCs, we call them, they need also safety and security. That is typically where AURIX is very strong. That's why in these two high-performance clusters, you see next to the big SoC, which you mentioned, you will also see an AURIX performing on the safety and security. All the other boxes, the purple zones, the greenish, the green, that remains and will not be consolidated there. Not everything will go there.
And that has to do with real-time. So for example, if you have an accident, you want that your airbag is exploding in real-time, not after you were talking to a high computer. If you brake, that must be real-time. If you want to have safety and security functions, so that stays there. So that means, yes, there are some areas which go into that high-compute clusters, but there's also a lot which stays out there because it's real-time safety or security related.
Thanks. Got it. Thank you.
Thank you. Our next question is from, I believe, it's Didier. Please go ahead, unmute yourself and ask your question.
Yes. Good afternoon, Didier Scemama from Bank of America Securities. Just a couple of questions. Probably one that is unfair to you, Peter.
Looking at the slide on semiconductor content per battery electric vehicle, I know it comes from a third party, but am I right in understanding that from 2024 to 2030, the overall content goes from 1,300 to 1,650? It looks like the power, let's say the xEV drivetrain is flat to down, and then basically all the growth comes from SDV and other applications. And is that the main takeaway here, e.g., as you move to those future silicon carbide silicon modules for the traction inverter, you would expect actually the content to be flat to down in the longer run in the powertrain for electric vehicles? And I've got a quick follow-up. Thank you.
A very good question, and you are relating to slide number nine, and you captured it correctly.
What you see is that the light bluish part, maybe we can see the slide number nine, that this light bluish part is kind of same or even lower in 2020, certainly compared to 2024. There are two effects. First of all, we still see a continued increase in kilowatt per car. This has to do, one, that there is a higher share of fully electric cars versus plug-in hybrids. Secondly, we will also see more range extender, which have two motors. So the overall kilowatt will increase. But then you have a price down because it is a very competitive market. And then you are right, the semiconductor content may be flat or even down in the next years. But very much important is the numbers underneath that. We have 11 million in 2024, two million in 2023.
So that means even in a slightly declining share per car, we have a factor of three cars which have that high content. So that's why it remains a structural growth driver because of the number of electrified cars is a factor of three. That means despite the fact that the content is flat or even down, it will be a growth engine for us.
Got it. And the other question, one of your competitors mentioned quite a lot of noise on this transition to 800 volts in China and in silicon carbide in particular. Obviously, you are the major incumbent in traction inverters in China with mostly IGBTs, I would think. So do you think that your market share in China could be at risk from that transition? Do you expect to keep your share in the transition to 800-volt architectures?
Yeah.
First of all, I agree that there is a transition from 400 to 800 volt, and I think one high-volume car manufacturer, which is also using our technology in silicon carbide, which very early on moved in 800 volt, is Hyundai. That's public knowledge, and we are the supplier for that. So that's a big growth engine for us, and then also we announced in the previous quarter, we also design wins on silicon carbide in China with Chinese customers, and that is also both on the 800 volt and 400 volt.
I think we have time for one last question. Miran, can we take a last question?
Thank you. Our last question for today is from Lee. Please go ahead and unmute yourself and ask your question.
Great. Thanks. Nice to see you there, Daniel, and Peter, thanks very much for a very good presentation.
I'm just curious on what you think the speed of adoption could be in Europe for software-defined vehicles. I mean, we have seen a major new class being postponed to 2026. We've seen CARIAD move to West Coast integration. And we just wonder what that means for Europe and maybe your traction there because otherwise it does look as though it's a China-dominated play, software-defined vehicles. Thanks.
Yeah. Good question. And I fully agree. Even so, it was invented in the West. The implementation of the zonal architecture is much more fast in China. That's why it's very helpful for Infineon that we have an excellent position to all these new OEMs in China which are using AURIX in their platform strategy. So we are benefiting from that move in China there. And Europe, yes, I also see that there are platforms with some delay.
So therefore, we will see the contribution from the China revenue from microcontroller earlier before Europe will kick in in the later years.
If I've got a chance, maybe just squeeze in a follow-up here. Very interesting that you've got a PPU in your TC4. I guess I've got a two-part question, really. Can you just confirm what the architecture is that you're basing that on? And maybe just help me understand how analogous this could be to a neural engine and where your line stops and centralized compute partners would begin because this almost looks like a pseudo-microprocessor with that sort of neural engine inside. Thanks.
Yeah. Thanks for that question. And I think from a performance-wise, we will go into this very much low-performance MPU. The performance is not good enough to go into high-compute cluster, for sure, not.
But it helps a lot to enter or to get part of the share in the low-performance MPU market. And it also will help these new ideas on taking functions of a car, which, for example, was used in hardware more on the virtualization, like having a simulation model of a sensor or of a motor control and then running it on a much higher speed in that PPU cluster.
And is it based on TriCore or something else?
Well, it's a separate parallel processing unit independent of TriCore.
Perfect. Thank you.
I think that brings us to the end of this call. Thank you very much for joining us and for your interest. And thank you very much, Peter and Daniel, for giving us all that information. And that pretty much ends it. Thanks a lot.
Pleasure. Thank you. Bye-bye.