Hello, and welcome to Virtual Investor Conferences. On behalf of OTC Markets, we are very pleased you have joined us for the AI & Technology Virtual Investor Conference. The next presentation is from Infineon Technologies. Please note you may submit questions for the presenter at any time. You can also view a company's availability for one-on-one meetings by clicking "Book a Meeting." At this point, I am very pleased to welcome Daniel Györy, Team Lead Investor Relations of Infineon Technologies, an OTCQX Best 50 company, which trades under the symbol IFNNY, and on Frankfurt Stock Exchange under the symbol IFX. Welcome back, Daniel.
T hank you for having me. Good morning, good afternoon, everybody. My name is Daniel Györy, responsible here for the IR team of Infineon in Munich, Germany, and it is a pleasure today to present to you Infineon Technologies as a company. I want to give you maybe two or three things during this presentation. The first one is I will give a general introduction on semiconductors, then for sure tell you a little bit more specifically about Infineon and its current business, and then we can go into Q&A. Even if you are not right now investing in Infineon, hopefully then you can take home with you at least some additional knowledge on the field of semiconductors. Let us jump right into it. What are semiconductors? For sure, that is a rather complex question, but let me try to give an easy answer.
From a technical point of view, a semiconductor is a material that can easily be manipulated in either conducting or not conducting. This is actually very helpful because we can use those properties of the material to construct little switches, and these little switches you will call the transistor. Semiconductors are built out of those transistors, and from a technical point of view, you can see it here. The base material is, in many cases, or the primary base material is silicon. That is, by the way, the name Silicon Valley coming from. It looks very easy here on the slide, but actually it is quite a number of complicated processes which we need to produce actually out of the silicon such a wafer, as you can see it here, with the little rectangles, which are actually chip dies.
If we continue to process those, the little chip dies are cut into pieces and packaged, and then finally you have a chip. For sure that, as I said, implies quite a number of different processes in between. There is material added, like metals or insulators, and there is materials removed. But from a very basic perspective, that is how semiconductors are being built up. I want to give you a little more overview on the field of semiconductors because there are quite a number of different types of semiconductors. This semiconductor tree gives you an overview on the different type of semiconductors, and I think it is very important to look at that to understand where the unique business properties of Infineon lie.
If we start at the very bottom, the first transistor I mentioned, it was invented shortly after Second World War, and today we have quite a number of different semiconductors. Let's go through it, maybe starting on the right-hand side. Power semiconductors are built of a very limited number of transistors, actually. In many cases, just one. But they have the unique property of being able to switch physical currents and physical voltages. They are not just doing logic, they are actually able to switch something on and off, for example, in your household appliance, in your car, in an industrial installation. And that is actually possible because those semiconductors are larger than the logic semiconductors you will see on the upper side. And today they do consist even more than just out of silicon.
They use different materials to enable better properties, like gallium nitride or silicon carbide, and those materials allow the power semiconductors to become even more efficient and have less losses on the heat and dissipation side. It makes them more efficient. Then if we move further on the integrated circuit side, we have a very important category, obviously, which is memory. There are different types of memories which you might have heard, NAND, DRAM. The memory is obviously necessary to store information, so it is not doing calculations or anything, it is just storing information that can be volatile or non-volatile. But it is a major category and obviously also quite of interest in the current times with prices of memories having surged quite a bit, and then there are further integrated circuits. Probably the most famous semiconductors you know. For example, microprocessors and microcontrollers.
On the microprocessor side, you would have CPUs and GPUs, or today even, let's say, more specific accelerators like TPUs or ASICs. All of those have in common that they use a large number of transistors, which are primarily focused on doing rapid switching and calculations. Those semiconductors would not be able to switch a physical current or to interact with, let's say, the real world, but they are very fast in doing calculations. And in those semiconductors, you have quite a massive number of transistors in. Not just billions, but several dozens of billions in a single chip. And here it is obviously very important to scale the semiconductors down. We here have reached now, I would say, a size of 2 nm, which is really, really small, just a couple of atoms, actually, thick. And this is the structure on which those semiconductors operate in.
They are produced usually at large foundries because the machines are very, very expensive and designed by company names like You know them probably, NVIDIA or Intel or AMD. A very famous part of the semiconductor branch. There are furthermore semiconductors like very interesting niches actually, like analog mixed-signal. Those semiconductors are in between the logic semiconductors I just described, and then semiconductors that actually can do physical switching like power semiconductors. In a way, they form a connection from just a logic semiconductor to a power semiconductor that can switch a physical current like for a motor or lightning or any sort of device, even a robotic device. Whatever have you, that is actually acting in the real world needs this connection between just logic and an actual physical actuator.
And then there's furthermore families, for example, radar is also based on semiconductor these days, even for your transmission. So you have radio frequency semiconductors. Then there's another big family, which is sensors that allow you to gather environmental information that can be temperature, pressure, gas, magnetic of sorts, even a microphone. So, that you are hearing my voice now over the screen is possible via a semiconductor-based sensor. Technically speaking, a microphone is a pressure sensor recording the different pressure we have in the air through my voice, and this ultimately then translated into a digital signal. Last but not least, also optical semiconductors exist, which is also a family, for example, that can be used in data transmission these days. If you have data transmission via fiber optics, that is an application of optical semiconductors. As you can see, many different type of semiconductors.
Obviously, the most interesting question now is which type of semiconductors does Infineon do? Actually we do a number of them. Infineon is the number one provider of power semiconductors. We do have a large portfolio of microcontrollers ranging from roughly 12 to 130 nm. Actually also the number one company in the microcontroller space. We do also have analog mixed-signal, which is, as I said, important also to connect power and logic chips. We do also have sensors and some RF components. That is what Infineon focuses on, and I want to really stress that we are absolutely leading in those areas, which are also very critical components in the semiconductor world. Let's dive into our portfolio, on the next slide. As I said, basically our portfolio consists of three major categories, control and connectivity.
Here you have, for example, the microcontroller, but we do also have other chips like Wi-Fi and Bluetooth chips and Ethernet, especially embedded Ethernet that is used in cars or future robotic applications. Then we do have analog and sensors, also roughly one third of our portfolio. Here I do have a few product examples for you, like an eFuse. A very interesting application actually, that is more and more replacing traditional electromechanical fuses. As I mentioned, the sensors. Then there's the gate driver, which is that component that you actually need to steer or to drive a power semiconductor, like you have them in a physical application, as you can see here, a kind of a household appliance robot.
F or sure, there is many more applications which you use today. Be it anything electric in your everyday use in the car, industrial, like a washing machine or a coffee machine. Anything you use that is having a motor or electronics usually would use such kind of technology. Last but not least, we have the power semiconductors here, not only the discretes, so the very small packages, but also specific modules. This again, is a very large field. You can have large power modules that are used either in industrial applications or as an inverter in an electric car, but also very small, very specialized modules, for example, you use for powering data centers and AI specific chips like GPUs or TPUs, and those are very essential in powering the large data center chips.
Because thinking back of what we had on the previous slide, those large logic chips require a large amount of power, and this power is actually provided by our semiconductors. Which is very challenging because the power needs to be concentrated in a very small space with very low voltages, and then it can also rapidly change. All of a sudden that chip needs less power, then it needs more power. All of that needs to be converted by the respective backbone of the power conversion chain, and that is what our semis do. It is also currently our fastest growing business. We have reached, specifically in the AI powering space, revenues of around $1.6 billion this year. It is going to be slightly above $1.6 billion per our current guide, coming from just a little bit above $700 from last year.
More than doubling of the AI specific revenues, and you will find that Infineon is by far the most important company in the space of powering AI data centers. Let us move one more slide ahead. Just to give you a quick overview on our financial model, we have so-called target operating model, which is basically our formulation of mid to long-term targets through the cycle, not fixed to a certain year, because we do not think that you can forecast the years, but you can forecast over a typical cycle, which is always going up and down. But moving along the boundaries we have here in the target operating model with an average growth of more than 10% per year, with a standard aside margin of roughly 25%, which can range from high teens to high 20%, and an adjusted free cash flow margin of 10%-15%.
At the same time, Infineon continues to be exemplary on the sustainability side. That means our factories usually operate with the highest standards towards sustainability, with our target to achieving CO2 neutrality by 2030. I already mentioned AI, I do not want to make my presentation too long so that we can have a little bit more room for questions. Let me just show you two more slides. I mentioned already powering AI data centers. I want to tell you this story even further because obviously today we have the most growth on the data center side. But it is very obvious that if you pause for a moment and think what is the missing piece between, for example, a physical AI application like a humanoid robot or a self-driving car and a large language model today, which can process tokens. The missing link is actually our portfolio of semiconductors.
Analog semis and power semis are what is required to allow a token processing model to actually do something in the physical world. That means receive information via a sensor or act via a gate driver or so on. That is actually what is required to enable those kind of physical AI applications. Therefore, we are pretty excited about upcoming business opportunities in the space of humanoid robotics or self-driving cars because they will need a ton of our semiconductors to make it very short. Why can we provide so many semiconductors? This will be my last slide, showing you here some of the recent developments we had at the company. Just about this summer, we opened a new large fab, our so-called Smart Power Fab in Dresden, Germany.
It took a little bit less than three years to fully construct it, and this fab will be the largest Smart Power Fab, having the capability to produce either power semiconductors or analog mixed-signal semiconductors, which are exactly what is needed right now in growing in the spaces of not only automotive and industrial, but also specifically powering AI data centers and providing the materials for physical AI. That makes us very unique, I would say, in our field, also versus potential peers. Because if we think about the two dimensions, portfolio and capacity, I would say Infineon is the only company in the world right now that has a portfolio that is very much skewed towards AI and physical AI applications.
At the same time has coming up a large amount of new capacity, which will allow us to ideally grow in this environment over the next couple of years. With that, I would like to close my short presentation. Let's see if we already got some questions here in the Q&A. Happy to answer them now, so just give me a second. Yeah, so there is a number of questions. Trying to answer them one by one. The first one, "Your backlog is near EUR 30 billion. How much of it is AI related and how much converts to revenue over the next 12 months?" That's a good question. The so-called order backlog is a KPI we are disclosing on a quarterly basis, which gives you an information how much of potential customer orders we see or have received.
I would say about 2/3 of those is due to the next 12 months. AI related is a good portion of it. We have never disclosed what is the exact split. You would actually need to also consider that different types of orders are placed at different times. For example, in automotive, there's a very long order backlog. Some automotive customers order two, three years ahead. I would say in the space of AI, in all fairness, it's a little bit short-paced. I would say the visibility also given the design cycles in AI are roughly one to two years, which also means that the order backlog on the AI side is concentrated more on the short-term. In any way, as I said, roughly EUR 20 billion would be due to in the next 12 months.
It's very important to understand that a backlog is not the same as a revenue guidance. The backlog might include double ordering. It might include ordering from products where we do not have enough capacity to deliver to a single customer. So this number will always be just an indicator. Don't forget, the order backlog number that we communicated is the number as per last closing of the quarter, so it's not forward-looking. Whatever happens, if we see more orders, if customers want more material or if price changes occur, that is all not visible in the backlog. So it's just an indicator, but I think still it's a strong indicator that obviously right now interest is very high.
If I look at what we hear from customers, if you think about what we have upcoming on the capacity side, I would not see a reason why this number should go down or should weaken significantly. I think it's a good sign of confidence. Okay, the next question. "We just opened the Bangkok site. Investment, how much capacity does it add, and how does it improve resilience?" It's a very good question, thank you. Indeed, we just had a press release out this morning that we opened a new backend site in Bangkok, which will also be very crucial. There's always two things on the semiconductor production side. You have the front end, which is actually producing the wafer, and you have the backend, which is then packaging the wafer into the right package and which allows it to be used by customers.
Our backend site in Bangkok is a new site. It's very scalable, so it will allow us to be very cost-efficient. As of today, the investment in the Bangkok site is just a little bit over EUR 100 million. We haven't reached the EUR 1.4 billion. This is, I would say, a certain optionality as of today because we can expand the fab as necessary. If we see very good order intake, if we see a huge customer demand, we would be able to scale the site, which is a very important criteria. We have not disclosed the capacity it does on the backend side, but it is clearly important to improve our resilience, so it will allow us to control the backend process. I would say the country is very good for, let's say, geopolitical stability.
All of that has been very carefully considered, and that's the reason why we opened this new fab. Next question. "Which are the conditions to reach your operating model, level of sales or other topics do you think you can deliver it in fiscal 2027?" It's a good question. As I said, our operating model is valid through the cycling, so that doesn't necessarily mean that it needs to be pinned to a certain year. I cannot give you yet a guidance of our fiscal 2027 year. This guidance will become due on November 10th. But I think it's fair to say that we have seen a strong margin progression, especially if you look at the calendar year 2026. So our margin has moved up significantly from the high teens area to the, let's say, low to mid-20% area right now.
I think that is a good indication and a good sign that we are closing in on the current target operating model. Next questions. I see many questions coming in here, so I'm really trying to be as speedy as possible. Infineon's Industrial Analytics unit just launched OPTIFICIENT for HVAC efficiency. Does the software becoming meaningful add on to your hardware? That depends on the product category. As I said, Infineon basically has three major product categories, power, analog, and control. Obviously, those are very much connected because they form actually a chain. So whenever you have a control unit, you need to convert it into a signal via analog device, and then that is obviously connected. It's true that on the control side, especially, software is also a key criteria.
On the microcontroller side, Infineon has a software portfolio which is skewed towards that kind of technology, and it allows us two things. First of all, it allows the customer to build the right software and to produce the right things. The second is obviously, if you think about OPTIFICIENT, it is about also smart technologies and actually even AI-supported algorithms, but not the high compute AI you know from a data center, but very energy-efficient AI applications you use near the edge. For example, recognizing a signal, or if you have a smartwatch that is actually monitoring your heartbeat or blood pressure, this does happen without sending all the data into the cloud, it happens locally. You have a device which recognizes the standard pattern, and if there is a deviation, then it triggers an alarm for further analysis, and this is happening on software.
Is software becoming a meaningful add-on to our hardware business? It depends how you define meaningful. It will become, let us say, especially for the microcontrollers, it is a crucial part, also part of our differentiation. But for sure, this is only part of the portfolio. Yes, software is an important part, and it will also grow. Thank you for that question. Next question. "Great presentation. Thank you for that. Infineon closed the ams OSRAM signal deal on July 1st. How does it help robotics and automotive?" We actually bought the sensor portfolio of ams OSRAM, which is, I would say, in two ways helpful. It is extending or expanding our current sensor portfolio, which is already quite strong. Then it is adding another leg, so to say, on the medical sector, which is also very interesting and attractive business.
For sure, especially on the broadening of the portfolio, it is helpful for robotics and automotive because in a humanoid robot, you will have many different sensors. For example, the entire actuation or movement of the joints, you do not only actually have the capability to move. You will also need to understand in which position the current joint or configuration of the robotic device is. Therefore, sensor, magnetic sensor, movement sensors, gyroscopes are very, very important part of that kind of transformation. We do believe that this strengthening of our sensor business is a very helpful pillar in also further extending our footprint in the robotic space. Then we have a couple of more questions coming in right now. The new 3,000 W SiC module for EV inverters runs up to 205 degrees Celsius, which automakers are most interested. That is true.
One property, for example, we talked about power semiconductors. One very advanced type of power semiconductor is silicon carbide-based ones. They do have very good properties for electric car inverters because they allow for great heat without any meaningful problems. As you can see, they still can operate with 200 degrees Celsius. I do not know what it is in Fahrenheit, but it is very hot. This is super helpful to have robust devices which require less cooling efforts overall, makes them more efficient. The same technology can also be applied in solid-state transformers, which are used in converting power on a data center site, for example, converting power from grid in a power supply unit to the rack. You are asking about specific automakers. Unfortunately, I cannot yet disclose customer projects here, but for sure our high voltage business is exactly driven by that.
We do not want to be a player here in the, I would say, medium performance space. For example, Chinese IGBTs or IGBTs for Chinese cars is maybe not the area where you can earn a lot of money. But we want to focus on specialized applications like those high-end SiC modules for very high power or very small form size. This is where we can shine, and therefore I am very proud that we have disclosed this 205 degree SiC module. Next question. "Dresden received about EUR 1 billion in EU chips aid support. Does that give you a cost around the advantage over rivals?" Well, it is a fair question. The honest answer is, it is probably just reducing the disadvantage. It is very obvious that in many areas of the world, semiconductor industry has been supported.
That is also, I would say, to some extent, the result we currently see in the semiconductor landscape with certain concentrations in certain areas is probably the result of those government interventions. Let us be very clear. We, as Infineon, would prefer a market policy. That means from our point of view, government intervention is not necessary. We do have a very, very competitive portfolio. We do have very great R&D, great production capabilities. If there is no, let us say, government intervention or government support at all, it would probably be the best scenario for us. But given that in most regions currently, the government is indeed interfering on the semiconductor side, we see that also as important to have that support here, for example, from the European Union.
We do also get support in other parts of the world where we do build new fabs or install new machines. I think this investment is very helpful, and ultimately it aligns with the political target of the European Union to be more important on the chip side. That is basically then the enactment of this policy. And for sure, we as a company following our fiduciary duty then for sure take also advantage of that kind of support. But I would not say that it is giving us a massive advantage. It is just using what we have at our disposal to continue to be a leader in our markets. Then next question. "Thailand opens with an initial investment above EUR 100 million." That is correct. "Do you see APAC as a major growth region for Infineon?" Absolutely. We are basically present globally.
As a number one semiconductor player for automotive, for power semiconductors, for microcontrollers, we actually do play in all major world regions. And yes, also APAC is a key growth region for us, be it in the automotive markets or the industry markets, or even also in data center markets. Thank you for that question. And there is one more. "The U.S. and China have just agreed to cut tariffs. Does easing trade tensions help your China industry exposure?" Well, I would say we are not terribly touched by those trade tensions. But for sure, as I just said, we always prefer to have fair market practices, level playing fields. In a way, for sure, having less tariffs is helpful for us. I would say we have probably reached end of time. Thank you very much for all the questions.
Yeah, if there's anything left, for sure you can also contact us, contact the Infineon IR team. You will find contact information on our website. Just enter Infineon Investor Relations in your web search, and I am sure you will find it. We are looking forward to further question. For sure, thank you for your attention and have a great day. Bye.