Dear representatives of the media, dear colleagues, a very warm welcome to our annual press conference at Infineon Technologies AG. All the members of the management board are participating in this conference. Welcome, Jochen Hanebeck, Chief Executive Officer. To his right, Chief Digital Transformation Officer, Andreas Urschitz, Chief Marketing Officer. On his left, Dr. Sven Schneider, Chief Financial Officer. And next to me, Rutger Wijburg, Dr. Rutger Wijburg, Chief Operations Officer. Mr. Hanebeck is going to give you an overview on the current financial year. Besides that, he will also talk to you about the outlook for the fiscal year that has just started. Afterwards, all five members of the management board will be available for your questions. To all the journalists who are following us via the stream, you are cordially invited to send in your questions.
The link to the question tool is right next to the stream. You can also, of course, access this via the QR code. If you would like to ask a question, please also state your name as well as the publication you work for. With that, over to Jochen Hanebeck.
Vielen Dank, Herr Tauber. Thank you, Mr. Tauber. Sehr geehrte Medienvertreterinnen und Medienvertreter—Media representatives, liebe Zuschauerinnen und Zuschauer—Viewers. Herzlich willkommen—Welcome to Infineon's annual press conference, here on site and in our live stream. We're reporting for the first time from our new video studio here at the Campeon, and we appreciate your interest. Infineon can look back on a remarkable 2023 fiscal year. We've achieved new record figures in a challenging market environment. Both revenue and earnings are above our original forecast for the year. They are a first confirmation of the more ambitious course we've taken as a company. It's exactly a year ago to the day, that we raised our long-term financial targets through the semiconductor cycle. We've now shown that we are delivering at this higher level of expectation as well.
A clear focus on the long-term structural opportunities of decarbonization and digitalization is proving to be the right recipe for profitable growth. Semiconductors are essential in mastering the energy-related challenges of our day and in shaping the digital transformation. Here at Infineon, we provide crucial building blocks for technological progress. Our semiconductor solutions are the engine of sustainable global development, and we are making a tangible contribution to a future worth living in. In the past fiscal year, we laid some important foundations for the long-term future of Infineon. This includes forward-looking investments in our research and development, as well as in our production capacities and targeted acquisitions to strengthen our technical expertise. We want to continue to grow in the long term and to strengthen our profitability, and for this, we are creating the right prerequisites.
I will now place the development of our business and some of the strategic decisions we took in the past fiscal year in context. We shall then look ahead to the 2024 fiscal year, which began in October, and to our guidance for the year. After that, the entire management board will then be available to answer your questions. First of all, a look back. The market environment for Infineon was very mixed in the 2023 fiscal year. On the one hand, electro mobility and renewable energies, as well as the associated application areas, ensured consistently high demand. On the other hand, consumer applications, communication, and computing, and IoT applications experienced a temporary lull in demand. Despite these challenging conditions, Infineon closed the 2023 fiscal year with a very sound fourth quarter.
Compared to the previous quarter, group revenue increased by 1% to EUR 4.149 billion. The segment result reached EUR 1.044 billion. The segment result margin was 25.2%, compared to 26.1% in the previous quarter. Free cash flow amounted to EUR 614 million, following EUR 320 million in the previous quarter. Our order backlog, consisting of confirmed and unconfirmed orders as of the end of September, amounted to EUR 29 billion, following EUR 32 billion the previous quarter. We had expected this development, and it shows that our customers' ordering behavior is normalizing. Many are placing orders in a less long-term way. However, the order backlog in the automotive division still amounts to more than double the division's annual revenues.
If we look at the 2023 fiscal year as a whole, the bottom line is revenues of EUR 16.3 billion, a significant increase of 15% compared to the 2022 fiscal year. By way of comparison, global semiconductor revenue shrank by around 13% in the same period. Revenues in Infineon's reference market, which is the semiconductor market, excluding microprocessors and certain types of mass memory, fell by around 1%. These figures demonstrate that Infineon is in an excellent position in those semiconductor markets that are characterized by strong structural growth.... The increase in revenues was accompanied by a significant improvement in profitability. The segment result margin rose to 27%, compared to 23.8% in the previous fiscal year. Adjusted free cash flow, which excludes investments in large front-end buildings, amounted to EUR 1.6 billion.
That figure corresponds to about 10% of our annual revenue, and is therefore within our target operating model. As forecast, the reported free cash flow amounted to EUR 1.2 billion. We want Infineon shareholders to participate appropriately in the company's success. At the same time, we want to maintain the financial room for maneuver, which is needed to further develop our company. We'll therefore propose a dividend of EUR 0.35 per share for the 2023 fiscal year at the upcoming annual general meeting. That would increase the dividend by EUR 0.03 per share. On behalf of the management board team, I would like to personally thank our 58,600 employees for what they have done. In the past fiscal year, they once again achieved extraordinary things. We have 12 months of challenges behind us. The Infineon team mastered them with flying colors.
I'd also like to thank Constanze Hufenbecher. After successfully building up the management board department for digital transformation, she decided not to extend her expiring contract and pass the baton to Elke Reichart as of the first of November. Since 2021, Constanze Hufenbecher has made a major contribution to Infineon's progress in the fields of digitalization and sustainability. She has laid important foundations to the digital agenda and the sustainability strategy. In addition, she's shaped a culture of cross-departmental collaboration within the company. I'd like to thank her personally, and on behalf of the management board, for her achievements. Digitalization is a decisive lever for our company. I'm very much looking forward to working together with Elke Reichart. She'll bring new perspectives and impetus to the management board team, and will use her extensive experience to help lead Infineon into an even more successful future.
Elke, it's great to have you on board, and once again, welcome to Infineon. Viewers, looking at the years ahead, there are five core applications which are particularly important for Infineon. These are: electromobility, assisted driving, renewable energies, data centers, and the Internet of Things. These five core applications are what is driving our business. Together, they account for about 60% of the expected revenue growth in the coming years. The trend towards electromobility is continuing. China, the most important market for electric vehicles, is showing very robust growth momentum. Many manufacturers there have made considerable progress. Infineon is represented in many vehicle platforms. We supply semiconductors worth between $500-$1,300 per car for more than 10 different models of leading brands that are already on the road.
More models with our semiconductors are likely to come onto the market in the near future. Globally, about 70% of all new vehicles registered in 2023 will be electric vehicles. We expect this share to rise to around 45% by 2030. At the same time, manufacturers are equipping new models with more and more driver assistance functions. And then there's a third development in the automotive market. The car is increasingly become a software-defined product. It's rather like what we've seen with smartphones. For manufacturers, the user experience is becoming the key differentiator in the competition for customers. These trends are significantly increasing the demand for semiconductors per vehicle. Today, an electric vehicle contains semiconductors worth up to $1,300. That's almost twice as much as in a combustion engine vehicle.
By 2030, that value will increase to as much as $2,000 for higher value vehicles. We'll take advantage of this development for Infineon. With more than 300 different product families, we offer the most comprehensive automotive portfolio in the industry. It consists of power semiconductors, microcontrollers, sensors, specialized memory chips, security solutions, and connectivity solutions. Combined with our technical expertise and our leading application know-how, it offers our customers major advantages, and it gives us a decisive competitive edge. One company that I've been working with closely for many years is Vitesco Technologies. We are expanding our collaboration with this leading international development manufacturer of modern drive technologies. Together, we want to further improve the efficiency and safety of future generations of electric vehicles and to reduce system costs.
To this end, Vitesco will use the third generation of our AURIX microcontrollers in its control systems for new electric and electronic vehicle architectures and electromobility solutions. The multi-year agreement, which will come to effect as of 2027, will have a planned order volume of more than EUR 1 billion. AURIX, that is a real success story for Infineon. It was specially developed for embedded control systems with highly, the highest safety requirements. We were the first on the market with a solution. The product family's been in high demand among customers for years, and is becoming even more popular with each new product generation. Among other things, AURIX has become the standard for driver assistance systems, engine control, and safety in vehicles. We've significantly increased revenues from our automotive microcontrollers, which include, TRAVEO and PSoC product families, in addition to AURIX.
Revenues jumped by more than 60% to almost EUR 3 billion in the fiscal year 2023, and the prospects for the future are good. The changeover by many manufacturers to new vehicle architectures, enhanced driver assistance systems, and the electrification of vehicles are boosting demand. We therefore expect revenues in this field to double by the end of the decade. We have already significantly improved our automotive microcontroller market position in recent years. Since 2022, we've been the number 2 in the global market, and it's our clear goal to become number 1 in the years ahead. Safety combined with performance. With these advantages, our AURIX microcontrollers also enable the next level automated driving, and here is a current example. In October, the BMW Group launched its new 5 Series in Germany. This includes the BMW i5, the purely electric version of the vehicle.
The 5 Series is the first car to be approved for semi-automated driving at up to 80 mi an hour on the roads in Germany. You'll see what advantages this offers customers. The motorway assistant takes the strain off the driver and creates additional comfort. It maintains speed, holds the lane, and keeps the distance of the vehicle in front. While driving, you can place your hands in your lap up to a speed of 80 mi an hour, as long as you keep a close eye on the traffic and remain ready to intervene. While driving, the car suggests lane changes, for example, to overtake. A glance in the outside mirror is enough to start the maneuver. The assistant takes care of everything else. The active lane change with view confirmation by BMW is unique in the world.
With your hands on the steering wheel, the function is available even up to 110 mi an hour. Even on long journeys, you are relaxed and safe on the road. As you can imagine, advanced driver assistance systems, such as the one in this example, require considerable computing power. However, a powerful central computer in the vehicle's control unit alone is not enough. In automated driving, safety must be guaranteed at all times, and that's made possible by the AURIX microcontroller as a safety companion in the control unit, combined with our power management chips for a reliable power supply. In addition to embedded safety, let us look at this control unit. You can see the two arrows showing the Infineon products. In addition to embedded safety and security functions, the AURIX microcontroller offers other key features: real-time responsiveness and high computing power with low power consumption.
This combination makes an ideal solution for a wide range of automotive and industrial applications. In addition to electro mobility and driver assistance systems, the accelerating energy transition is another growth driver for our business. The expansion of renewable energy generation is being vigorously promoted all over the world. At the same time, the energy infrastructure for transporting and storing electricity needs to be upgraded. In order to make a sustainable contribution to decarbonization, all stages, from green power generation to a stable, efficient grid infrastructure, storage, and consumption, must be taken into account. Semiconductors are essential along the entire energy chain and offer Infineon great growth potential. Digitalization is increasingly permeating all fields of life. More and more data are being collected, stored, and connected. Data centers are the backbone of data processing.
Major cloud providers are increasingly using generative artificial intelligence to make the data usable for various applications. As example, ChatGPT interestingly demonstrates large language models have the potential to take digitalization to a whole new level. In the coming years, artificial intelligence will be used in more and more fields of application. This development, too, opens up great growth potential for Infineon in the field of power systems. According to calculations by the International Energy Agency, data centers already accounted for about 2% of global electricity consumption in 2022. By the end of the decade, that share could rise to as much as 7%, and that will bring energy efficiency in data centers even more into the focus of attention. Training AI models is particularly energy intensive. In an AI server-...
The architecture contains power semiconductors worth between $850 and $1,800 that reduce power loss and cooling costs. This allows operators to reduce their operating costs significantly and to avoid carbon dioxide. We therefore expect a strong demand increase. Energy offers highly energy-efficient power solutions, the entire data center energy supply chain, from the network grid to the central processor. Green computing is an ideal field of application for our company, and is a good example of how closely decarbonization digitalization are linked. The IoT plays a decisive role in the green and digital transformation as well. The potential of IoT applications is diverse in many areas. IoT solutions can contribute towards achieving global climate targets. Semiconductors are needed everywhere, in the mobility sector, industrial manufacturing, in agriculture, in the healthcare sector, in buildings and towns.
At Infineon, we serve all of these fast-growing, IoT markets. In addition to the right hardware and software, connectivity is a crucial component for the Internet of Things. We want to viably supplement our existing connectivity portfolio of Wi-Fi, Bluetooth, Bluetooth Low Energy, and NFC, and to expand our expertise in this field in a targeted way. That is why, in October, we acquired the company 3DB Access. It was a startup based in Zurich, and we've been working with it for some time already. It's a pioneer in the field of secure and energy-efficient Ultra-Wideband technology. This technology can determine positions and distances precisely, and is at the same time robust against signal interference. This makes it extremely interesting for many automotive, smart home, and consumer applications. The technology enables secure access control, for example, to vehicles.
3DB Access is already a preferred partner and IP provider for major car manufacturers. In addition to applications in cars, the technology can also be used for access control to buildings. Indoor navigation, precise location tracking, and presence detection are further promising areas of application. The acquisition opens up additional opportunities for us in an interesting growth market. Analysts at ABI Research expect the market for Ultra-Wideband chipsets to grow by 13% a year to more than $3 billion by 2028. Indeed, the success of our company depends crucially on always being one or rather two steps ahead of our competitors in technological terms. We are strengthening our leading position in power systems through targeted investments in our technological expertise, and the consistent expansion of our capacities, such as the large front-end production sites in Dresden, Villach, and Kulim.
Driven by decarbonization, growth in the power semiconductor market is accelerating. Solutions based on silicon carbide, in particular, are showing an impressive development here. This applies both to the automotive industry and to a wide range of industrial applications such as solar systems, energy storage systems, and charging stations for electric vehicles. These applications will be followed by others. As already reported, we shall therefore significantly increase the scope of the ongoing expansion of production facilities at the Kulim site. In the second expansion phase, we want to build the world's biggest and most competitive silicon carbide power semiconductor factory, using 200-millimeter production technology. For the first phase of the expansion, we expect that in about one year's time, in other words, in autumn 2024, we shall reach the ready-for-production milestone.
Leading customers from the automotive sector and from renewable energy are supporting our investment decision with numerous long-term agreements and advanced payments totaling about EUR 1 billion. One of the new partners is the Hyundai-Kia Motor Corporation, the third largest car manufacturer in the world. The great trust that our customers are placing in Infineon as a reliable partner and driver of innovation strengthens us on our path. Alongside silicon carbide, gallium nitride or GaN, is becoming a key material for power semiconductors. Our objective is to be a technology lead across the entire spectrum of power semiconductors, i.e., in silicon chips, in technologies based on silicon carbide, and in gallium nitride. Especially in applications such as mobile charging, power supply for data center, solar inverters for households, and onboard chargers for electric vehicles, GaN promises a very strong market growth.
Analysts expect that the market for GaN power applications will grow by 2028 to about $2 billion. A few weeks ago, we completed the acquisition of GaN Systems. The Ottawa-based company brings with it a broad portfolio of gallium nitride-based energy conversion solutions and first-class application expertise. All the necessary regulatory approvals have been obtained, and we are very pleased that the GaN Systems team, with more than 200 employees, is now part of Infineon. The strengths of both companies in terms of intellectual property and understanding applications complement each other perfectly. Together, we now have about 450 GaN experts and more than 350 GaN patent families. In addition, we have a large number of promising customer projects. This puts our company in an excellent position and opens up great opportunities for us in various high-growth markets.
We are significantly accelerating our development roadmap for GaN solutions and will further strengthen our leading position in power systems. Viewers, I'd now like to turn to the outlook for the 2024 fiscal year. The difficult geopolitical and macroeconomic environment means that for the foreseeable future, there will be a volatile market development. Our target markets will continue to follow very different demand patterns. It is very positive for Infineon that the structural demand for the majority of our automotive semiconductors continues unabated. The increasing semiconductor value per vehicle continues to be our growth driver, as I've already explained. We continue to see strong demand in these fields. In the current fiscal year, we expect a low double-digit percentage increase in revenues compared to the previous year, and that is even assuming that global car production will remain flat in 2024 instead of rising.
We believe that our assumption is supported by the latest estimate of global vehicle production by the information service S&P Global. In classical automotive semiconductors, delivery times have become shorter and stock levels and supply chain are considered sufficient. With regard to certain key products, however, some of our automotive customers have approached us with a request for additional buffer stocks, and they're also prepared to pay for this additional service. In renewable energies and associated application fields, we see a similar healthy demand picture. Solar and wind energy generation, energy storage systems, grid and charging infrastructure ensure that demand for semiconductors will remain high. This also applies to heat pumps, which are supported by government subsidies in many countries to help reduce the carbon dioxide footprint of residential buildings.
In contrast, we expect a slowdown in the orders for industrial applications such as automation, robotics, and this phase is likely to last well into the 2024 calendar year. A recovery is not yet in sight for domestic appliances, which are heavily dependent on consumer confidence. The demand environment for consumer communication and computing IoT applications is weak at present. Inflation and economic uncertainties are shaping the mood. Consumers and companies are holding back on spending. We expect there'll be a cyclical recovery in demand in the course of the second half of the fiscal year. Until then, inventories will be reduced. In the medium term, the growth momentum in the application areas mentioned will remain positive in view of the advancing digitalization. Now, our business expectations.
In the current first quarter, we expect with an exchange rate of $1.05 to the euro, that revenues will be around EUR 3.8 billion, which would be a decline of around 8% compared to the previous quarter, which reflects a more pronounced seasonality. Many customers reduce inventories towards the end of the year. With the forecast revenue, the segment result margin will be around 22%. For the 2024 fiscal year as a whole, we expect revenues of about EUR 17 billion ± EUR 500 million. At the center of the revenue range, this corresponds to an increase of around 4% compared to the previous year.
This means that after the two boom years of 2022 and 2023, group growth will be below the mark of the more than 10% period we set ourselves an average over the semiconductor cycle. However, the succession of different growth phases is nothing unusual in the semiconductor market, and as a company, we know how to handle them. Above all, we expect only a very moderate decline in prices for our products. The price pressure in the distribution channel in the business segments that are in a weak market environment is greater. Thanks to our systems approach and our value-based pricing, we've achieved structurally higher average prices for our products, and we expect that these will remain stable over the cycle. In the current phase, we are deliberately accepting higher underutilization costs.
Specifically, this means that we are reducing our manufacturing speed in order to keep our inventories under control. At the same time, we're maintaining buffer stocks because we want to be prepared for possible geopolitical disruptions to the supply chain and also for a faster market upturn than currently expected. We expect the Segment Result Margin to be around 24% at the midpoint of the revenue range. That would be very solidly in line with our target operating model. However, the mixed market picture will be reflected in different margin developments in our business segments. For fiscal 2024, we expect investments in property, plant and equipment, and other intangible assets, including capitalized development costs, to be around EUR 3.3 billion. One focus is the completion of buildings as part of the first expansion phase at the Kulim site, and the beginning of the second phase.
We are also investing a large proportion of the funds in the construction of the building for our Smart Power Fab in Dresden. Substantial funds are also flowing to the facilities for machinery to manufacture products based on silicon carbide and gallium nitride. Adjusted free cash flow, which has been adjusted to exclude investments in front-end buildings and the acquisition of GaN Systems, is expected to be around EUR 2.2 billion. At around 13% of the forecast annual revenues, the adjusted free cash flow will be clearly within the target of 10%-15%. The reported free cash flow should be about EUR 400 million. Viewers, finally, I should like to sum up. Firstly, Infineon had a strong 2023 fiscal year and has set new records for revenue and earnings. Secondly, the current market dynamics are mixed.
The mobility future and renewable energies are currently the strongest growth drivers for our business, and in all other areas, we see a temporary difficult cyclical market environment. Thanks to our broad-based business, we are also successful in the current phase. Our outlook for the 2024 fiscal year shows that we expect solid profitability and a year of slower growth. We expect the consumer-related application areas to recover in the second half of the fiscal year. Thirdly, decarbonization, digitalization will remain the foundation of our business in the years ahead. In our key applications, we continue to see strong growth drivers and great opportunities for Infineon. Therefore, we are continuing to implement our strategy with determination. We are investing in our application technical expertise and in the expansion of our production capacities. We're expanding our position as a leader in power systems and IoT. Thank you for listening.
Together with the management board team, I shall now be happy to answer any questions you might have.
Thank you very much, Mr. Hanebeck. We will now start with the Q&A session. Let me just explain it once again to all the journalists here in the room, as well as those joining us on the stream from your office, the home office, wherever you may be from. Journalists who are joining us via the stream can submit their questions in writing. You will find the link right next to the stream, as well as via the QR code displayed. Please do give us your name as well as the publication you work for when submitting your question. We're happy to answer your questions as long as you are a registered journalist. Those journalists who are present in the room, please just raise your hand. We will then pass a microphone to you, and you will be able to ask your question live.
We will ask a second, Joachim Hofer, Handelsblatt.
All right. Thank you very much. I have three questions. One question: How did your China business develop? How did the shares develop? Did it increase? Did it decrease? What are you expecting for China going forward in the new fiscal year? Number one. Number two, you praised AURIX. However, if we talk to your customers, you will find that they can actually not deliver enough at some points. Maybe you could specify that a bit. So, you know, what are the issues there? And the third question, the Israel-Hamas conflict, what impact does this have on your business? It's not just immediate in that particular region. Instead, many politicians across the globe are talking about this as well. For example, in Malaysia, and you are, of course, heavily invested there, they're also talking against Israel. Thank you very much.
In the former union.
Right. So we're gonna be starting, and let's answer the questions. Right. Let's start with China. So in China, we are definitely seeing that the Chinese economy is cooling down. Of course, you can also see in the newspapers that the GDP is currently in decline. Of course, this is also reflected in the demand in that entire market. How did the Infineon China business develop compared to the previous fiscal year? Well, the Chinese share of the total revenue has actually remained more or less consistent. That has materialized in our balance sheet and the fact that we can still see large demand in the automotive segment, as well as in the consumer, computer, and communications segment, even though there we have seen a decline.
Absolutely, and to be very specific, it actually declined by a few percentage points, but those are the markets, you know, that Andreas Urschitz just mentioned, that have contributed to that. Now, your second question was regarding the microcontrollers, and I have to say, that was indeed a position where we couldn't deliver enough. However, that situation has practically rectified itself. There's just some little bits and pieces here and there from the older microcontroller generations that are still not ideal. So if you ask customers today, that situation is a very different one. Now, on the Israel conflict... Of course, it's just very sad because, you know, after every single person who is killed, who is hurt, you know, every single person has a story to tell. And that being said, we are, of course, first and foremost, dealing with our team.
We have a design center in Netanya, and we're trying to help those people as much as we can. The sales market is not massive in Israel. We again, like I said, we only, quote, unquote, "have a design center in Netanya." Vielen Dank. Ich nehme eine Frage aus. Right, and I'm gonna take a question from online. Philip Alsop from Silicon Semiconductor. In how far are you linking the success you've had to partnerships with other organizations in order to find technological solutions, as well as long-term projects, and developing those accordingly? So how important is the collaboration in your financial success with these different organizations and companies? Well, I'd say innovation in our environment is something that we can definitely not reach by ourselves. We need strong partners to do that.
That could be research institutes, and of course, we have a very wide-ranging international network in that regard. It could be startups, with whom we're working together. But it could also be... It could also be partners on the manufacturing side, foundries, for example, but also very clearly our customers themselves. Of course, via our product to system approach, we're trying to produce and define the best possible chipsets, which will then increase the customer added value. And of course, in order to achieve this, we need the interaction, the collaboration, especially with our key customers. So Infineon wouldn't be what it is without all the partners, you know, in all of those industries and areas that I mentioned. Thank you very much. Nick Flaherty.
Thank you very much. Nick Flaherty from ee News Europe. Wanted to ask a little bit more about the payment for stocking that your customers... I mean, that's a very interesting move. Are you storing parts for them? Are they paying for that? Is that the... are you becoming a warehouse for your customers?
Ja, soll ich auf Deutsch, glaube ich, antworten? Right, please do answer in German. So yes, in fact, we are, in fact, offering the Semiconductor Resilient Fund. Their customers are using it, especially in the automotive side of things. They can mandate us to actually stock certain volumes. All of this makes a lot of sense, of course, because we've always said that, you know, with semiconductors, we're not a just-in-time product. Our manufacturing times in the factories are between six to nine months, if we look at microcontrollers, for example. And therefore, we believe it is a very sensible approach, which, by the way, also in the past, was lived successfully in Japan as well. And now, this service, of course, that we basically do stock a certain amount, we do allow ourselves to charge a certain service fee. Wir haben eine Frage von Christoph Römer.
Now, there's a question from Christoph Römer from dpa:
Based on the weaker expectations in the current fiscal year, is the strong expansion of capacity still the right way to go?
Well, just like in any cycle, I would say this is a conclusive yes. I'm reminded of the last large investment in Villach. When we announced that, the questions came up: "Oh, is this the right thing to do in the current market environment?" And the statement is always the same, a factory and really getting it going just takes one to two to three years.
When Villach was finished, the customers really, basically, just snatched the products out of our hands, and the large planned expansions in Kulim, for example, they are going to only be able to contribute properly to our revenue in 2025 and then also in Dresden in 2026. And until then, we expect that the current market weakness will be absolutely behind us, and then we will see the clear structural growth drivers at the forefront again. One question, Hakan Ersen, Reuters. Right.
Just a follow-up question to that. Does that mean that in 2025, 2026 at the latest, you will or you are expecting continued growth and stronger growth?
Yes, we're assuming that... Well, let me rephrase. At the moment, we have a market phase which is more or less an inventory digestion. So I think that's something that we're currently seeing.
What that means is that in some value chains, we see a surplus, right? And we do expect that this is absolutely going to be finished. And on top of that, our structural growth drivers, especially on the decarbonization side of things, are going to be also pushed via regulations. You know, that could be CO2 targets in the fleet, for example, but it could also be ramp-up targets regarding renewable energy consumption and production. And we do expect that at the very latest, the markets will pick up significantly again.
One question from Dresden, from Radio PSR, Ben Hille. He is once again asking you to summarize, in maybe two or three words, what contributed to the positive development in this year? And a follow-up question: Can the results be broken down into the individual sites?
Meaning, which part of the revenue and of the profit can be allocated to the Dresden site, specifically?
Well, the latter, I must say, is very difficult for us to nail down, because our P&L statement, or also our business management, is taking place across the four known divisions. But I can assure you that the Dresden site is absolutely one of the core sites, and with the latest expansion, it will actually become the largest site within the Infineon family. And with that, of course, it is going to be a crucial pillar of our future strategies. Now, to summarize, as you asked, what contributed to the success factors? Well, of course, first of all, first and foremost, the employees of Infineon. Without them, none of this would be possible, and it's all 58,600 employees of them. Then, of course, also our customers.
I believe, also our consistent orientation towards structural growth drivers, which have made us very independent in the automotive areas, more or less, of course, of the number of manufactured cars. And especially, of course, with our own electro-mobility. I think that's really it in a nutshell. Yes, maybe if I can just jump in there with a financial component. If we look at 2023, the revenue increase of 15% is about half volume driven, and the other half is price and mix changes. And I think that is also absolutely the corresponding effect and the result. There's just one counterpoint, which is, of course, also the empty buildings that we had last year in order to manage our inventory.
Mr. Scharinger with Sonntag. Yeah, hello. Right. So just two questions.
How is outsourcing changing for you with the European factory of Taiwan Semiconductor? Are you going to outsource more? What does that mean for your business model? And then, with the acquisitions, are we to expect you to make smaller acquisitions like GaN in Canada? You know, smaller acquisitions because you already have a relatively broad portfolio, and maybe you just want to fill smaller gaps. Or is it, from your perspective, more difficult to carry out larger acquisitions in the United States in the past, like those two large ones that you carried out in the past? Thank you very much, Mr. Scharinger. Mr. Wijburg is going to answer the first question.
Happy to jump in here on the outsourcing. If we look at outsourcing, of course, you also need to look at the portfolio of Infineon.
On the one hand, we, of course, have the power semiconductors. We have a very differentiated technology, Mr. Hanebeck just mentioned this as well, with our 300-millimeter manufacturing, as well as our silicon carbide and GaN, on the one hand, again. On the other hand, of course, we also have the solutions business in the automotive sector with AURIX, right? And that's definitely going in a different direction. I think the strong growth we see in AURIX is not going to be internal, it is going to be, of course, carried out with the TSMC as well as with our joint ventures. So I think over time, the internal capacities are, of course, going to strengthen, but there's also going to be external growth, which is technology-based. Now, in the next few years, we see outsourcing of 35% growing to 40%.
But I do believe that we absolutely have to separate the different components here.
Right. Thank you very much for that. And then on the M&A question, Infineon has a very broad and well-balanced portfolio, and, therefore, we are not really dependent on acquisitions in order to achieve our financial targets, especially, of course, our growth targets. However, the world is very dynamic, and, there's always new technologies that are available. UWB is, you know, a, a great example. And therefore, I would absolutely say that we are absolutely, scouting the markets for other potential M&A targets. That could be, for example, targets that may or may not be in to the tune of, of billions, but we don't need a transformational M&A activity in order to continue our success story.
Of course, as you rightfully pointed out, M&A, when it comes to semiconductors, the semiconductor industry, it's of course a very political topic. And of course, you have to balance what you may or may not actually get approved by the regulator. But I do believe we are very experienced in that. And sorry, we're passing the microphone. Here we go. Right, so the two large acquisitions, International Rectifier and Cypress, do you think you will continue to operate in this magnitude? And also the product portfolio, I think it's definitely brought Infineon huge benefits. Do you think this is still possible and necessary? Well, International Rectifier was necessary in order to strengthen our core segment that Infineon also had, right? To give us even more economies of scale.
Cypress then was a very broad expansion of our product portfolio. Now, if I say in the lower single-digit billion area, I think those are smaller companies that are simply a good fit in theory. That's what I was talking about.
Okay, Automotive News Europe is asking via the stream, how do you plan to increase the business with automotive manufacturers, especially in Europe?
Well, historically speaking, we've been very active in this regard. We have been a historic innovation partner of the automotive industry because, of course, our development cycles here are really going into multiple years, right, before we can offer new products. So I think the historic exchange on the innovation side has been very strong.
However, we also see the automotive manufacturers insourcing or wanting to not only manage, but also really buy certain key components in terms of the flow of goods as well, and therefore, under certain conditions, we are open to this as well. The number of announcements in the silicon carbide area, of course, also alludes to the fact that this EUR 1 billion or more than EUR 1 billion that we have received from customers in order to expand the Kulim manufacturing and hedge that. Of course, all of that came from automotive manufacturers. It didn't come from Tier 1s, and you, of course, also saw some names that we were working with in such a, you know, close cooperation. And I do believe even going forward, we're going to be announcing more of those as well.
We have a question from Bloomberg News.
This relates to the European Commission laying charges at China, that they are subsidizing their own automotive industry and therefore are distorting the market.
Do you have any grasp on the current EU investigation on government subsidies on e-cars in China, and how that affects you, and what possible effects that could have on our customers?
Well, we are definitely not the experts on, that car level, but I can only tell you that as Infineon, we, of course, are representing, global open trade, and any and all types of trade restrictions, we believe are counterproductive in the long run.
Joachim Hofer, Handelsblatt. I have a question to Ms. Reichart. With your other male colleagues, I can absolutely imagine what's under their,... you know, what's in their, in their unit. Maybe you can also tell us a little bit about what you're standing for.
What you want to change in this man's club?
All right. Thank you very much for that question. Now, as my title says, digitalization, of course, is a big topic, which of course, is also one of the big company goals, then also sustainability, and again, this has to do with decarbonization, business continuity, business excellence. All of this, of course, basically targets how we can be faster, how we can digitize decarbonization. And it's always these two areas, right? It's number one, internal in our company, but then on the flip side, also for our customers.
Just one thing I would be interested in, because your area basically also affects other areas. So how do you deal with that?
You basically have to jump into the other divisions and say, "Hey, do this" or even you have to talk to customers and say, "Hey, do that." So how are you going to be tackling this? I mean, of course, you don't know the company in such detail, so what's your plan for the first three months?
Well, that's exactly what you were saying, right? It's a horizontal function. It's an enabler function. So it is absolutely supposed to support the other divisions, standardization, improve consistency across divisions. So my experience from other roles in my career or the transformational roles, I think is very important. And I do think it's also important to have a very clear idea of where we want to end up at the end of the day, and then align that with the visions of the company.
Then once you've done that, really just take a step-by-step approach. But I do believe the overall goal has to be clear. It is clear, by and large, but we just really have to see that we can carry this out on a monthly basis, on a quarterly basis, and that we can really break it down into these milestones that can be achieved. Well, I would also like to add a concrete example to this, because one of the core topics going forward is, of course, also our digital face, our customer-facing digital face, and we would like to improve this. We're assuming that in the long term, more than 90% of all customer touchpoints will be only taking place on digital platforms.
And in this context, of course, my division, so as the Chief Marketing Officer, of course, I'm working very, very closely aligned with Ms. Reichart's division already now, you know, already in the first few days that we've now been together in this new setup. Ms. Reichart, in this context, of course, is responsible for providing the digital platforms. And then in my division, we are creating, of course, the content that we're uploading in order to be as attractive as possible, making sure that we have a coherent story when customers, for example, navigate our website. All of this just has to work hand in glove, and yeah, just work hand in glove, and I think that's a crucial part of the strategy.
Eine Frage von Thomas, Thomas Koch, PLATOW Börse.
In the coming months, and also looking at your annual forecast, where do you see the largest risks and opportunities that may cause you to miss the forecast or raise the forecast yet again?
Ja, ich glaube, die Kernthematik-
I think the core topic-
in the guidance
Of course, we've also outlined this in the guidance and the analyst call very, very clearly today. You know, and we're also feeling very well and very, very good about, for example, our automotive division, and we have lots of data points there. In the other markets that Mr. Hanebeck just touched on, the consumer markets, the IoT markets, we are assuming a recovery in the second half of the year. There's also data points underlining that, but that's definitely the big point, right? If that accelerates, we have an upside. If it decelerates, there's just a bit of pressure on the forecast to be, you know, very short about this.
Right, one question from France, Lucie Noel.
Zum Ersten, China investiert-
Number one, China is, of course, investing severely in microcontrollers and power semiconductors, areas where European companies like Infineon are leading. What do you think of this threat? Then two questions, two follow-up questions:
Die Frage,
Does Infineon consider using SmartSiC substrates from Soitec in France? The third question is: What is your midterm goal? What's the targeted revenue in three to five years?
Okay. Also.
Okay, so our market position in China is largely shaped, of course, by-
Unser weltweites Produktportfolio-
Our global product portfolio, with more than 300 product families. So we have a very resilient jump-off point. And based on that, of course, we want to evolve and develop further by continuing to be tech leaders and then also having a systemic approach together with our product, and really offering the best possible solutions for applications. Now, in fact, Chinese manufacturers are massively investing, especially, of course, also with-
Restriktionen. Wir sehen das
... an eye on the American trade restrictions. We do see that, but at the end of the day, it's not that easy to just, you know, put a semiconductor industry on its feet. It's not just at the head of one person. No, you need people who perfectly know, you know, the machinery. That you need people who know the processes in the factories. Then you also need individual people who align the individual processes. Then you need people who design products, who are able to do it in a, in a good way. And then you of course, also need people who can design products into applications. So you can see the know-how in the semiconductor industry is something that is borne by many shoulders. And, of course, there's a certain risk.
We are a bit paranoid, I would say, but it is not something that is going to completely erode our business when it comes to, you know, a flood of Chinese competitors.
Standard oder älteren,
Maybe for more standard or older technologies, that may be something that can materialize in the future, but otherwise, we're not hugely worried. Then Soitec in France, yes, this is a potential procurement partner, but we also have other approaches. We're also getting substrates from all kinds of different suppliers, while keeping an eye on approaches like Soitec offers. And then the third question was the long-term revenue forecast. We can-
Unser Umsatzwachstum nach dem-
Say that our revenue growth after the target business model is supposed to be larger than 10% per annum, through the cycle, of course, and this year we're going to have a lower growth rate. But if you break it down across five, six, seven years, you will definitely get to EUR 30 billion in revenue easily, which we will see materializing on our books. Yes.
Ja, ja, schon.
Absolutely.
So hatte ich das verstanden. That's how I understood it. There was a follow-up question, Lucie Noel. Infineon is one of the big five SiC players who are not vertically integrated with internal source of SiC substrates. To what extent is this an obstacle to growth in this market, and how do you plan to close that gap?
Yes, we looked at it very closely some years ago. We tried to take over Wolfspeed, but the American authorities prevented that. And at present, we are thinking very carefully about whether we want to take a holding there. We said, "No, the substrates are going to be cumulated probably in the next 10 years." That was back in 2017, now it's 2023, and we see ourselves well on the right way. We see a lot of players on the market in China.
There were more than 50 last time, our purchasing department counted, 50 players in China who want to make these substrates. And again, many of them won't succeed, some will. Even today, we have a large proportion or a good share of silicon carbide substrates from China in manufacturing for automotive and industrial applications across the board. And we don't see any need for this. The market, as we see it, will develop, just as the silicon substrate market did. No one would have the idea there, and we don't see it as a strategic benefit to produce ourselves there, but we'd rather use the funds available to expand the other stages of the value-added chain, to become the biggest, most competitive silicon carbide 200-millimeter foundry, which is being formed in Kulim at present. There's one last question from the web, nothing from the people present.
If you want to ask another question while the last question is being answered. So this is the last question to begin with. It's from Evan Gardner from Polyscope. "You see strong growth in semiconductor production, and invest plans underscore this, and the question of human resources comes into play. How is this felt by you, the shortage of skilled workers, and what steps have you taken in order to counter it?"
We can go straight into production, and then I'll hand over to Mr. Wijburg for the answer. All in all, we are faced with the same shortage of skilled workers as others. For some time now, we've had a task force in a calmer market environment, and we are trying, to a great extent, to address university graduates. We are broad-based worldwide.
We have more than 50 R&D design centers, so we can also address local markets in this respect. As far as the young people are concerned, it is very popular. We have a purpose with decarbonization, digitalization. Everyone can identify with that, and therefore we're very attractive. And regarding manufacturing specifically, Mr. Wijburg will explain.
Yes, of course it is a challenge. Even so, we are very happy that we have been able to get a lot of very skilled young people with us. First of all, as Mr. Hanebeck said, it's got a purpose, also Infineon is a good company to work for. In addition, there are special programs to attract people, for example, by the project for trainees in Dresden, for example. In this fiscal and the last fiscal year, we managed to hang on to more than 20 people.
It costs more energy than the past, but I'm very happy that we're still very successful in production, not just in Germany, but also in Malaysia and other countries.
Thank you. I see no further questions from the web and no questions from the audience present, and therefore, we'd like to thank all the journalists here on the spot and those who are listening to us, for your interest, and we shall meet again at the latest in three months for the next quarterly results.