Will Infineon's power IC gambit pay off?
As most European chip vendors find themselves trimming down to the bare bones of the glory they enjoyed in better times, Germany’s Infineon Technologies has shifted focus and continued to thrive. But how?

Obviously, the markets where Infineon plays today are much more narrowly defined. But the twist in this saga is that the company’s core business — power electronics — is flourishing because of Infineon’s manufacturing prowess.

EE Times’ recent visit to Infineon in Munich and Dresden reveals the German company’s renewed focus on power semiconductors and their production.

Against several of the financial community’s shibboleths (get out of manufacturing, get rid of fabs, sell businesses with product development that demands endless investment), Infineon not only kept its fabs but upgraded them. The company turned an old 200-mm fab in Dresden into the world’s most highly automated. Infineon also made its 300-mm fab in Dresden the first high-volume fab for power semiconductors worldwide.

Will Infineon's power IC gambit pay off?

Infineon’s Dresden facilities. Far left is 300mm fab, the rest are 200mm fabs.

In doing so, Infineon proved that going fabless is no sure route to salvation.

Investors often urge chip vendors to bring “focus” to their business. Translation: Sell divisions with product development that is expensive, stick with segments where you’re already winning, and take no risks.

Many semiconductor companies have taken this advice, chopped themselves into pieces, and turned lean and mean. The result has often been a shrunken chip vendor with shrinking business.

Infineon, a spinoff from Siemens AG, sold its wireless business to Intel in 2010, just after unloading its wired business in a deal with Lantiq. These reductions followed the decision in 2006 to split Infineon’s memory business and form a separate company called Qimonda (which is now defunct). Today, Infineon’s substantially narrowed businesses are down to only a handful of areas: automotive, industrial power control, power management, and chip cards.

The questions now: How are the remnants of Infineon is doing today, and how sustainable is the company’s business strategy over the long term?

Infineon in 2013 generated close to 45% of its revenue from automotive, 26% from power management and multimarket (power supplies for PCs, servers, and mobile devices), 17% from industrial power control (renewable energy generation, industrial drives, traction, and home appliances), and 12% from chip card and security.

Infineon’s revenue split by segments in FY 2013 (Source: Infineon)

Of these segments, Infineon sees power electronics as a common thread. It sees its future as a leader in the global power electronics market.

Since Infineon is already one of the world’s most prominent power semiconductor vendors, this outlook seems like a no-brainer.