Hello and welcome to the Deutsche Bank Deposit Receipts Virtual Investor Conference, dbVIC. I'm Zaf Aziz from the Deutsche Bank team. I'm pleased to announce our next presentation will be from Infineon Technologies. Before I introduce our speaker, a few points to note. Please submit your questions in the questions box. All of those presentations will be recorded and can be accessed by the Deutsche Bank website, adr.db.com. At this point, I'm pleased to welcome Infineon Technologies that trades on the Xetra using the symbol IFX and on OTCQX under the symbol IFX.
Yeah, good morning, everybody. Thank you very much for the kind introduction, and thank you very much for having me. My name is Daniel Györy. I'm leading the Investor Relations Team of Infineon here in Munich, Germany, at our corporate headquarters. Yeah, it's a pleasure to be able to speak to you today. I have prepared a little presentation about the company, about our current developments, and then for sure there is also time for your questions, so I will try to keep my presentation brief for you to enable also the possibility to ask questions. Let me start off by quickly introducing Infineon Technologies AG. We are a semiconductor company with a focus on IoT and power systems. Here on the slide on the left-hand side, you see, for example, the applications we enable. For example, we enable green and efficient energy.
As a side remark, efficient and green energy does not only mean that it's to some extent renewable and sustainable, but it also means that it's a very simple and cheap form of energy. For example, in many regions in the world, including south of the United States, currently solar energy is by far the cheapest source of energy. We have mobility, which we enable in a clean and safe way that includes not only electrification of cars, but also more advanced ADAS and assistance systems, for example, level two, level three ADAS systems, which allow you to virtually drive the car itself on the highway, for example, but also coming into inner cities at a certain point in time. There is also the IoT business, which covers a lot of products that are used in your everyday life, which makes the life smart and more secure.
For example, smart home components, but also robots, mowing robots, so whatever you have in your modern house and home to make your life easier. You can see here on the left-hand lower side a bit of an overview on our financials. Our revenue in the last year has been roughly EUR 15 billion. We will end up at a similar number this year. We guided currently for a slightly down revenue, so it will still be ballpark EUR 15 billion. That makes us about the same size as, for example, Texas Instruments. You can see from our history that the peak revenue value we have seen so far was in fiscal 2023, EUR 16.3 billion. That was the high time after the COVID shortages, so it was a bit of a high cyclic period.
Also, the margins were at the upper end of our margin range with 27%, but still this year we are aiming at a mid-teens segment result margin, which is comparable to an adjusted EBIT, which is still a good number for sure. We keep on working on improving the margin and considering that currently we are in a slow phase with regards to our savings. I also am very confident that the margin will pick up once we come back to a regime of growth. On the right-hand side, you see a bit of an overview over our segments. You can see that we have four segments. The biggest segment currently is the automotive segment. Then we have a few more segments, green industrial power, which focuses on infrastructure topics and renewable energy.
We have then the power systems and sensor systems business, which focuses on medium and lower voltage power applications, including, for example, data center applications, where the most prominent application today would be AI data centers. Whenever you use systems like ChatGPT or Gemini, you will have huge data centers that do the computation for you. Those data centers need to be powered, and many of the semiconductors we provide are used for powering AI. Last but not least, our Connected Secure Systems business, which is having a chip card and security card business. For example, in your passport, there are certain chips that enable safe and secure identification. We provide those chips also for the U.S. passport.
In our CSS business, we do also have microcontrollers for connectivity, for example, to enable smart home devices to be part of your home network or to connect via Bluetooth. From a product point of view, and that is the right-hand lower side, you can see that we have different parts in the portfolio. The biggest, starting here from the lower-hand side, is power semiconductors, which cover a wide range of semiconductors that are required to deal with physical currents to convert electricity and to enable transportation. We have 30%, give or take, embedded control and connectivity, which includes microcontrollers and connectivity components, which is pretty unique because it is a specific, let's say, method of producing semiconductors.
Interestingly enough, the same scale or production processes that work for those called MEMS sensors, so micro-mechanical, electromechanical systems, those same production processes are also valid for quantum computing, which is also a growth field we have identified. Infineon provides actually to many producers or upcoming producers of quantum computers. We do provide the basic hardware components, and then we do have a small memory business, which is specialty memory focused for, for example, embedded applications or automotive applications like NOR flash. That is not the usual type of memory you would hear of on the consumer side. For example, very famous is NAND flash, which is used in solid-state disk drives or USB thumb drives. This is not the kind of commoditized memory we are doing. That gives you a bit of an overview. Just to help you again, a leading power semiconductor company.
We are not doing, for example, advanced processing units like NVIDIA or Intel, but we do power components, sensors, microcontrollers, and also analog devices and technology. Also, we are not focusing on commoditized memory products, just to give you a glimpse. To give you more details on that, let me jump to the next slide. Here you see a market ranking, which shows some of our primary areas of operation. You can see that we are clear number one in market leaders, which is a very important thing to be. If you want to be strong and very profitable, you need to be a leader in your respective markets. For example, if you look at the power semi market, which includes discrete components, so that are basic chips, but also modules, which are a combination of different chips.
For example, you would use such a module in an electric car or in a solar inverter. Those modules are an important part of our power business. Altogether in this market, we have a market share of roughly 20%, close to 20%, 18% exactly, and that is twice as large as the second biggest competitor, modified semiconductors. Here in every car, on average, you have between $700 and $1,300 of semiconductor content in each car. Infineon is the clear market leader of this market. We have around 13%-14% of market share in automotive semiconductors, again, significantly bigger than the next biggest competitor. A special area of ours that we have also been extremely successful in the past is automotive MCUs. MCU stands for Microcontroller Units.
That is, so to say, a small brain which is used in a car to steer certain applications. Different from a central processing unit, a CPU, microcontrollers are more optimized for a rugged and embedded environment, which means they require less power, produce less heat. For sure, they do not have the same computing power, but for the respective applications, they are tailor-made and a very important part, for example, of modern cars. Now, what is this market leadership based on? For example, on the microcontroller side, where we are again market leader, we do not do the production of the microcontrollers ourselves. This is a standard production process, which can be done with so-called foundry partners like TSMC, GlobalFoundries, and so on. Our know-how, our focus lies in providing the design of the chips, in providing the required software and ecosystem.
For power semiconductors, that is a bit different. Here, Infineon is actually leading by far in the production know-how. Let me here again jump to the next slide. If I have a closer look at our offering in the power semiconductor world, which we call power systems, because it is actually much more than just a power semiconductor, you would see the power semiconductor here on the right-hand side as the power switch. Before that, you have actually also a driver, which is translating electric signals from a microcontroller, for example, into a signal that can be physically switched in order to enable a current that drives something. For example, that can be a washing machine, that can be a lawnmower, but it can also be for sure a car or an airplane or whatever you have that uses an electric motor to move something also in factories.
This is always the same construction. You have a microcontroller, which is giving the signal. You have a driver IC, which is translating the signal into a more tangible voltage. You have a power switch, which is actually doing the physical switching of the currents in order to drive something. This is backed by our very broad and reliable sourcing of raw materials. All of that is produced by ourselves at world-scale fabs. We combine it with application understanding and a complete packaging know-how. It is very important to understand that given efficiency is key for power semiconductors, the production is very delicate. There are different materials that come into play when we talk about semiconductors.
This is not only classical silicon, which is basically 90% of all semiconductors are based on silicon, but there are more interesting materials that are coming up, so-called wide band gap materials, referring to the physical property of the so-called band gap. Those materials include silicon carbide and gallium nitride, both materials which offer more advanced properties for power semiconductors. Infineon is the only player in the world that actually has a full portfolio covering all three materials. Let me give you here a few examples. For example, with regards to silicon carbide, we are the only player that is operating world-large, world-scale 300 mm plants in power semis. We have achieved a new milestone of doing 20 micrometer thin power semiconductors. 20 micrometer is a fraction of a millimeter, and it's really, really thin. It is thinner than a human hair.
That brings us to very, very high efficiency in the power conversion, actually making us by far the leader and also looking even at a price-performance ratio in a leader. This is especially important for low-voltage applications, for example, data center power conversion. Silicon carbide is a material which is aimed at higher voltages. For example, it is used in solar inverters, but also in high-power industrial applications and high-end electric cars. For example, Teslas are powered by silicon carbide. Other brands like Korean manufacturers or Chinese manufacturers are using silicon carbide because it offers the highest efficiency for that kind of application. Here, Infineon is working on the most competitive 200 mm silicon carbide power fab, which is located, from our point of view, in Kulim, Malaysia. Here we concentrate all our silicon carbide know-how.
Since we are a bit ahead in technology, we use a trench architecture, which is building on our strong history and pedigree in power semis, but also are adding, as we speak, super junction technology. That is all very technical. I understand this, but it is important milestones or steps in order to achieve the best power semiconductors in order to retain this leadership. The same is true for gallium nitride. We are now the first player that has introduced a 300 mm gallium nitride wafer, which enables us to bring gallium nitride, which is actually a very good material for fast switching. That means very compact charging adapters and so on. The usage of gallium nitride then enables highest efficiency at lowest form factor. Here again, with the 300 mm scale, we enable in the future also the cost parity to silicon.
All of that is making us the leader in power semiconductors, also from a production point of view. Maybe just to give you a quick deep dive here on the 20 micrometer technology we use in silicon. This is just a—there are different examples, but this is just a showcase here. Infineon has achieved 20 micrometers in wafers. Again, this comes for high efficiency, also saving material. We are by far leapfrogging this technology. If we look at our competitors, if we look at Western competitors, most of them have reached around 40 micrometer thin wafers. If we look at Chinese competitors, they are still operating at a wafer thinness of 80 micrometers or above. Just to give you a rough feeling from a technology point of view, how Infineon is positioned. Yeah, that was a bit of a showcase in the technology side.
Let me once again present to you a bit of our markets. I introduced already the four segments we have on the left-hand side. On the right-hand side, maybe some more details on our applications. For example, we have defined five primary growth drivers. That does not mean that it is the only areas where we are growing. There are more areas, much more areas, many areas more. I would say those five are maybe the most prominent ones. One of that is e-mobility. That is not only electric vehicles, but also all sorts of hybrids. We are currently seeing a bit of a different momentum in different parts of the world. The truth is also, for example, if we look at China, in China now, every other car is electrified.
I would say if you are only focusing on combustion engines, the growth perspectives in China, but also for the world in total, are very, very dire. I think electromobility in many aspects is a true value add because it enables very reliable, very smoothly operating cars. Infineon is the key provider for technology around that. Renewable energy, but also energy transportation and storage, are important. I think everybody of you knows solar. In many parts of the world, solar is by far the cheapest source of energy today. What is maybe even more important with regards to renewables is the possibility to save or store energy. Here, for example, Energy Storage Systems, so-called ESS, are becoming more and more important.
An energy storage system next to the battery requires a lot of sophisticated power semiconductors in order to do the conversion and also to do efficient charging and decharging of those battery units. Another key trend is the so-called software-defined vehicle. It is very different from a car you used to buy 20 years ago. One could always say that today's cars are smartphones on wheels. Honestly, I myself am a more classic car guy, but I think the majority of customers really prefer fancy screens and a lot of functionalities and lights and whatever you have in a car. What is still very compelling is also the driver assistance function. If you have today a very modern car, it drives itself almost on the highway. All of that requires a lot of semiconductors.
Infineon is virtually addressing all automotive semiconductors except for cameras and high-performance units, and that is a vast portion of it. Newer cars will be more and more connected. I think that's very important to understand. Here we have a huge growth driver. In addition, we are going to extend this business. We have announced the acquisition of the automotive Ethernet business of Marvell. It's a company you might know. We believe that this is a very good expansion of our MCU business, which we can make even stronger by enabling the connectivity part of that. We are very proud that we have closed this deal, and we're looking forward to the closing, for sure subject to regular general approvals, and then the integration of this business to further boost our growth here.
IoT, I already mentioned it is also a growth driver because more and more devices in your household are connected. This is happening almost clandestine. If you think back 20, 30 years ago, if you had shades or something, they were manual. You had to pull the shades up or down. Today, if you buy a new house or if you are checking into a hotel, almost all the time, the shades are automatic. This is a typical IoT function, which can be steered remotely. It requires still also power and power semiconductors to drive the motor. This is a typical IoT application that probably nobody notices, but it is still there and is a huge growth driver for us. Last but not least, AI data center business, very, very important today.
We are not doing the CPUs or the graphics cards like NVIDIA, but since those graphics cards are very sophisticated chips, they require also a sophisticated provision of power. Here, Infineon comes into play. Maybe just to show you one little slide on that one, this is a typical data center. You have a lot of different components. You have switches, you have a compute tray, you have the GPU boards. In each part of those boards, you need power conversion. Let me show you this in an easier slide. If you look at data center AI applications, you're starting from the grid, obviously. Then you have three stages of power conversion. You're starting from grid voltage, which can be 110 V, can be 200 V in Europe or many parts of the world.
You are transferring those 200 V AC into something mid-voltage like 50 V DC. In the server, you're distributing this further by transforming it from 50 V to 12 V. Most interesting, very close to the actual processor, you are reducing the voltage to around 1 V, bringing it further down from 12 V to 1 V. This requires a lot of semiconductors to do the actual transformation of the different currents. Since you are at about 1 voltage of core voltage, but the chip requires, depending on the chip, it requires 700 W, 800 W, 900 W. That means there's a lot of power. I would say 2,000 W are an iron or an oven plate. If you have two of those chips, it would be enough heat to boil your water or whatever you'd like.
This power needs to be provided and requires very high currents. There are very sophisticated power components that are required ultimately to provide this. I mean, just to give you an example here as a deep dive, this is the product, how it looks like. You have different, let's say, power stages that are handling the power conversion very close to the compute core. This is sophisticated technology, and it's required to have the best and efficient way of providing power to a data center. For sure, we could deep dive into that. Maybe let me just, as a quick remark, tell you the presentation here I'm showing is available on our website. I just changed here the title. The full presentation you will find as Q2 Investor Presentation on our website. All the slides I show here are available.
Whenever you feel you want to read something, you can look up the presentation under infineon.com/investors. Yeah. With that, I'd like to stop here and open the room up for questions. If you have a question, feel free to type it here into. I already see there are also some questions, so I will answer those now. For sure, I do hope you will have some more questions. The first question is, how are you leveraging incentives from the EU- U.S. chipset? Yeah, for sure, we are doing this. This is actually quite a recent topic. We have, let's say, upgraded our facility in Germany, Dresden, to a fourth module. Here we are investing around EUR 4 billion-EUR 5 billion. We have managed to get around EUR 1 billion of subsidies from the European Union on this one.
The final closing or confirmation for those subsidies just happened two weeks ago. That was a lengthy discussion. It started one to two years ago, for sure. The final confirmation has been arriving last week. I'm happy to confirm that we have gained EUR 1 billion of subsidies here. The same is true for other parts of the world. Whenever there's the possibility, we do leverage those kinds of incentives. We have not built a new plant in the U.S. recently. The reason for that is there is strong competition in the power semiconductor market. For sure, in the United States, building a new fab is very, very expensive. For sure, we were always looking at the global footprint of our company. Currently, we do have several backend facilities that are facilities that are packaging.
We do have a lot of administration and R&D facilities in the U.S. Our U.S. headquarters is in San Jose. It used to be Cypress Corporation. Here we do have our U.S. headquarter, but we do not have major U.S. production currently. Therefore, we cannot use those kinds of incentives in the U.S. The next question is, what were the drivers behind decreasing revenues in fiscal 2024 and providing outlook for fiscal 2025? Yes. First of all, we do provide an outlook for fiscal 2025. Actually, we are the only company currently in our space that is actually providing an outlook for the fiscal year. The reason for that is that we are also required by German regulation to do it, but all the other players do not.
There is usually a guidance for the quarter, and then there's a guidance for the fiscal year, which is, by the way, going from September to September. We are currently in our third fiscal quarter, which is equal to a second calendar year quarter. Our outlook for the fiscal year 2025 is to have revenue development slightly down versus prior year. This is new. The previous outlook was flat to slightly up. The reason for that change in the outlook is not that the underlying markets have diminished or deteriorated. Quite to the contrary, we see our underlying business coming in very well. I talk to this in a second, but we have seen headwinds from currency development. The dollar has somewhat depreciated. That means for us, since the majority of our revenues are coming in dollars, that means it's a slightly negative development.
We would have been able to absorb the negative currency development very well. The main reason for us now to adjust the guidance is that we foresee a potential tariff impact. Let's be very clear. The current trade dispute is a challenging situation for business. It is for all global companies, I think, the case. For sure, we will cope with the situation. Currently, our customers have not given us any indication that there might be headwinds from the tariffs, but we consider it prudently to incorporate a certain headwind. Therefore, given the current data is not fully available, we have taken a guesstimate, and we have done a flat rate haircut on our second half-year expectations by taking 10% of the fourth quarter revenues. This leads us primarily to adjusting the revenue guidance slightly down.
The gross margin is still supposed to come in around 40% because we are working on keeping the margins stable to the extent possible. Segment result is set comparable to the adjusted EBIT will be mid-teens. Free cash flow reported EUR 900 million adjusted for major front-end acquisitions and buildings EUR 1.6 billion. We still do invest to a certain extent because we believe there are very strong growth prospects in the coming years given the drivers I explained to you. This is our guidance for fiscal 2025. We are also asking about the revenue development. Why did revenues decrease in fiscal 2024? The reason is very simple. During COVID, which was already back in fiscal 2020, we had a very strange development. I think you all remember the situation when we had the pandemic in 2020. The markets were collapsing, and we were adjusting for capacities.
The recovery was very quick. All of a sudden, everybody wanted semis end of 2020, and this went on for three years. There was so much market development and so much enthusiasm that for three years, we were in strict allocation. We did produce all we could, but we could not fully supply all the demand. Everybody did order, our customers did order semis, and they told us also they will order much more semis. It turned out at a certain point in time, there have also been inventories increasing, and this happened in fiscal 2023. The innovator number you are seeing for fiscal 2023 is or was at that point in time a bit overstated. There was a lot of inventory filling up.
At the end of fiscal 2023 or at the beginning of fiscal 2024, we did go into an inventory correction. This inventory correction did last up until give or take now because now in the last two quarters, we have seen a very strong inventory correction, and this has finally normalized. Worried not for the tariff disputes, I think we would now come back to a state of steady growth. I also want to highlight this, our growth targets for the year in Infineon is a very forgiven that we are a company of a significant size. We have a very strong growth trajectory. Our average growth target is more than 10% on average through the cycle. As said, in the last two, three years, we were in a very pronounced down cycle, which is kind of a special situation.
We want to achieve an average segment result, a margin of 25%, I mentioned at the beginning. For us, in our markets, we have different factors like pricing, like volume growth. For sure, we do need a certain volume growth in order to be able to handle this. All in all, we are confident that we can continue our growth trajectory. There is still one question. Yeah, there's just one coming in. Our manufacturing footprint is fairly flexible, but we believe that the advantages of having a very strong manufacturing concentrated is outweighing also to have a very dispersed footprint. That is very important from a cost competition point of view. IP portfolio projections, yes, we do have a very strong IP, but there is also a strong know-how in our production processes. That is really important.
All I mentioned at the beginning, the production processes, they are very, very sophisticated. Nobody else has the same amount of scale of production know-how and ultimately of people. I think we have reached the end of the time. Maybe one last question I can take here. The guidance for the full year on tariffs seems quite high in terms of potential impact. Could you explain the reason for that? How do you see IFX being impacted if Section 232 tariffs are implemented? It's a brilliant question. The assumptions we have taken on tariffs are mostly on indirect effects we are expecting. Currently, even if there are 232 tariffs coming, we do think that the direct impact of those tariffs will be manageable because we do only export about 10%-15% to the U.S. We have some old production in the U.S.
The net exposure of export to the U.S. is limited. We believe we can handle this. As said, for the indirect impacts of the tariffs, we have taken a guesstimate, which is the best thing we can do at this point in time. We have included it in our guidance, and we find it prudent to do this for the time being because it de-risks the potential or it de-risks our guidance. I guess we have reached the end of the time. I'm not sure if there are any more questions now, but I think I did cover most. Thank you for having me. Yeah. With that, I will hand it back to Dr. Bang. Thank you.