Infineon Technologies AG (IFX) - Comprehensive analysis
Narrow-moat Infineon Technologies is among our top picks in the technology sector. Our fair value estimate of EUR 43 provides an attractive margin of safety for long-term, patient investors. We remain optimistic about the long-term secular tailwinds in the automotive market, as Infineon is poised to benefit from increased chip content per vehicle, particularly in electric vehicles (EVs). Additionally, we appreciate Infineon’s green industrial power business and its involvement in renewable energy.
However, we do observe some warning signs in the broader EV market, including tariffs, excess inventory, competitive pricing among original equipment manufacturers, and potentially slower growth than anticipated. Despite Infineon's leadership in power semiconductors for EVs, we expect chip content per vehicle to continue rising over time. We believe that these near-term risks are already reflected in current market prices.
Looking ahead, we are not overly concerned about the expansion of trailing-edge chip manufacturing equipment and capacity in China, as domestic car manufacturers may increasingly opt for Chinese-manufactured chips in their vehicles. We believe that Infineon’s extensive product portfolio and the high switching costs associated with its products will enable the company to maintain its relevance in the Chinese market and likely in most other global markets in the long run.
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