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Good morning, everyone. Welcome to the conference call for analysts and investors for Infineon's 2020 Fiscal Fourth Quarter and Full Year Results. Today's call will be hosted by Alexander Foltin, Executive Vice President, Finance, Treasury and Investor Relations of Infineon Technologies. As a reminder, today's call is being recorded. This conference call may contain forward-looking statements based on current expectations or beliefs as well as a number of assumptions about future events. We caution you that the statements that are not historical facts are subject to factors and uncertainties, many of which are outside Infineon's control that could cause actual results to differ materially from those described or implied in such statements. Listeners are cautioned that Infineon's actual results could differ materially from results anticipated or projected in any of these statements, and they should not be pushed undue reliance on them. For a detailed discussion of important factors that could cause actual results to differ materially from the statements made on this conference call, please refer to our quarterly and annual reports available on our website. At this time, I would like to turn the call over to Infineon. Please go ahead.
Thank you, Simon, and good morning, and welcome, ladies and gentlemen, to our 2020 fiscal year-end earnings call, digital and safe as ever. The entire Management Board is on the call: Reinhard Ploss, CEO; Helmut Gassel, CMO; Jochen Hanebeck, COO; and Sven Schneider, CFO. Following our usual procedure, Reinhard will start today's call with some remarks on group and division results, market developments and business highlights. Sven will then comment on key financials, followed by Reinhard again updating you on our guidance for the 2021 fiscal year and its first quarter. The illustrating slide show, which is synchronized with a telephone audio signal, is available at infineon.com/slides. After the introduction, we will be happy to take your questions, kindly asking you to restrict yourself to one question and one follow-up. A recording of this conference call, including the aforementioned slides, and a copy of our earnings press release as well as our investor presentation are also available at our website, infineon.com. Reinhard, the stage is yours.
Thank you, Alexander, and good morning, everyone. Today, we are reporting on our 2020 fiscal year, which we concluded a little over a month ago, and we venture a look into 2021. Two main themes shamed our 2020 fiscal year: the acquisition of Cypress and the coronavirus pandemic. We have managed both well, thanks to the agility of our organization and the resilience of our business. Since our last earnings call at the beginning of August, the picture in several of our key target markets has brightened considerably. Areas that were most impacted by COVID disruptions initially, such as Automotive and Industrial, have rebounded more strongly than most anticipated. Some structural trends like electromobility and renewable energies received an additional boost. At the same time, work-from-home tailwinds supporting data centers, communications, infrastructure and IT equipment have proved more sustainable than expected as digitization is irreversible. Hence, we experienced an ongoing demand recovery in conjunction with improving supply dynamics. In recent months, suppliers, distributors and end customers have been forced to rapidly adjust to changing supply chain issues and market conditions. In our view, this has worked reasonably well and not at the expense of excessive buffer stocks. Therefore, the near-term environment looks positive. However, strongly rising infection rates in Europe as well as continued U.S.-China trade tensions remind us of the risk ahead. I will comment a bit more on those in my outlook section, but let's first look at our actual numbers. The September quarter was the first in which we consolidated Cypress for a full 3-month period. Revenues came in at EUR 2.490 billion. Former Cypress contributed almost 1/5 to this figure. Compared to the midpoint of our guidance, we achieved higher sales of EUR 40 million despite slight currency headwinds. The average U.S. dollar-euro exchange rate for the quarter was $1.17 compared to the $1.15 as had assumed. The segment result amounted to EUR 379 million, equivalent to a segment result margin of 15.2%, a bit above our original forecast, mainly driven by slightly higher revenues. In addition, some COVID-related extra charges could be reduced somewhat quicker than thought. Our book-to-bill ratio at the end of the September quarter stood at 1.2. Meanwhile, the integration of Cypress is following its script. Despite travel bans, we are consistently growing together as a company. More and more customers start to benefit from our enlarged product and solution offering, and we are making progress on our synergies road map. Before we go into the divisional overview, let me quickly summarize our annual figures for the 2020 fiscal year. Revenues amounted to EUR 8.567 billion, including 5.5 months of Cypress contribution of around EUR 850 million. The segment result came in at EUR 1.170 billion, corresponding to a segment result margin of 13.7%. Organic free cash flow amounted to EUR 911 million. All in all, these figures clearly demonstrate a solid level of business and margin resilience in a highly challenging year. But now to our divisions and their performance in the September quarter. Beginning with Automotive. The segment revenue surpassed the EUR 1 billion mark within a quarter for the first time and came in at EUR 1.052 billion. A bit over 20% was contributed by the former Cypress businesses. Even considering that Cypress had only been consolidated for 10 out of 13 weeks in the previous quarter, the sequential increase in revenue is very significant and confirms that the June quarter had marked the low point. Since then, car markets around the world recovered more or less strongly. This positive momentum has helped ATV return to the black in terms of profitability.The segment result amounted to EUR 62 million, resulting in a segment result margin of 5.9% after minus 2.9% in the quarter before. The margin improvement was somewhat dampened by the fact that to a large extent, we used inventories on hand to satisfy customer demand. This has caused stock levels to normalize, but underutilization charges have stayed fairly stable. The book-to-bill ratio for the September quarter was 1.3, following 0.2 in the June quarter, a clear sign that the market picture has substantially brightened. Car markets in China and also South Korea started the recovery early and showed V-shaped snapbacks to monthly levels higher than a year ago. We also noted strength in the auto sales in U.S. and in Europe. For both regions, September were the first month with year-over-year growth after the pandemic struck. Even more important than such near-term improvement is the acceleration of the long-term structural trend towards electromobility, in particular, in Europe since summer, following the introduction of sizable EV subsidies in country such as Germany or France. Here, the share of plug-in hybrid and full battery electric vehicles among car registration has more than doubled in the first 9 months of 2020 compared to 2019 to levels of 6% to 7% on average. Clearly, government actions like stimuli, the onset of CO2 regulations and charging infrastructure investment pushed the markets. But recently, genuine customer sentiment appears to be improving as well. Also in China, EV momentum is gathering steam again, with almost 150,000 new energy vehicles sold there in September. In addition, China has joined the U.K., France and California in announcing plans to ban the sale of combustion engine vehicles from 2035 to 2040 time frame. Having said this, we are still in the early innings of EV penetration, and this bodes well for Infineon. With our unrivaled portfolio of power components, be it discretes, modules, power ICs, microcontrollers or sensor, we offer our customers fully capable solutions for all types of vehicle electrification. This, of course, includes silicon as well as silicon carbide component, and it is this breadth of our offering, together with our reputation to deliver superior automotive quality that makes us successful in the marketplace. Especially regarding silicon carbide, we have started to ship CoolSiC modules for our customer CV volume production. Furthermore, and as already mentioned, our divisional update at the beginning of October, we will be able to secure a triple-digit million euro lifetime design win with a new EV OEM with our HybridPACK drive platform of IGBT and silicon carbide for main inverters. A comparatively new field for us, a battery management system. With our recently introduced cell balancing IC, we are beginning to see good traction being now able to offer comprehensive solution. Besides xEV, we feel well placed to participate in and benefit from any ongoing automotive recovery. The road ahead can well be bumpy, with IHS Markit currently predicted an overall production level of 83 million light vehicles for 2021, which would be around 6 million below 2019. Still, the content opportunities for us are undiminished as are the possibilities for growth and margin expansion. Now to Industrial Power Control. IPC has been quite resilient throughout the crisis, but as anticipated, did not see the seasonal upswing that is usually typical for a September quarter. The segment booked revenues of EUR 349 million, 5% less compared to the previous quarter. The decline was mainly driven by traction, partly offset by a revenue increase in industrial drives coming from a low level. In spite of lower revenue, the segment result improved to EUR 69 million from EUR 63 million in the quarter before, which had been burdened by some additional COVID-19-related charges. The segment result margin correspondingly increased from 17.2% to 19.8%. Book-to-bill stood at 1.1 at the end of the September quarter, reflecting an overall improving market backdrop. Micro data points like Purchasing Manager Index readings have rebound sharply from their lows, initially led by China, but now broad-based. The headline PMI increased to 52.3 in September, remaining in expansion territory for the third straight month after the 5 straight months in contraction before. All geographies are now above or near pre-COVID levels. Against this background, we expect to continue to benefit from our broad portfolio with leading positions in attractive markets. This setup is making our industrial business highly resilient. Take our 2020 fiscal year as a case in point. In a global crisis of historic dimension, our revenue was stable compared to the 2019 level. We were able to compensate declines in areas like drives or home appliances with strength in other parts such as wind and solar. Going forward, we expect to enter growth territory again. This is based on continued uptake of renewable energy, structural opportunities like electrifying, commercial and agricultural vehicles or expanding the charging infrastructure for electric cars and recovery across our target areas. In the case of home appliances, shipment run rates are back to their seasonal pattern. Growth will be driven by the air conditioning energy efficiency program in China, partly offset by channel inventory levels still being on the high side. Other areas like drives and traction are expected to follow with a delayed recovery throughout 2021. With respect to silicon carbide, where we have established a leading market position for industrial application and where we are seeing automotive rapidly following, we are happy to report an expansion on our supply base. As you might have seen from our separate release this morning, we have signed a supply agreement for silicon carbide boules with GT Advanced Technologies. The contract has an initial term of 5 years and supports ambitious silicon carbide growth plans for the IPC and ATV divisions, making use of our existing in-house technologies and core competencies in thin wafer manufacturing. Turning to Power & Sensor Systems. Despite headwinds from the weaker U.S. dollar, the segment saw strong sequential growth and recorded revenues of EUR 759 million. The former Cypress business of USB connectivity solution contributed less than 10% to this figure. Components for smartphones, accessory and variable witnessed strong positive momentum, including MEMS microphones. 24-gigahertz automotive radar benefited from recovery in global car markets. For products going into service computers and gaming console, all areas that received a boost from stay-at-home regulations in spring and summer, we saw different dynamics. Whereas AC-DC demand slowed down, DC-DC components grew yet again. Here, some COVID-19-related supply constraint vanished that had affected us in the June quarter. The smaller positive impact also came from customers willing to build certain inventory cushions in the face of potential future supply constraints and U.S.-China trade tension. PSS posted a segment result of EUR 209 million, resulting in a very strong segment result margin of 27.5% driven by strong operational performance in manufacturing and the fallaway of COVID-related additional charges. The book-to-bill ratio stood at 1.2 at the end of the September quarter. As a consequence of the coronavirus pandemic, digitization has pulled in by several years, providing a tailwind to several of the application areas that PSS serves. Cloud IT infrastructure spending is one example, driven by a rising number of connected devices, a proliferation of cloud services for enterprise and consumer and accelerating AI usage. Another example is communication, where on the infrastructure side, long-term drivers from 5G deployment are intact. However, trade tensions are generating some uncertainties around the rollout speed in China. On the handset side, we expect a strong rebound, driven by economic recovery and the migration towards 5G-enabled phones. Furthermore, battery-powered tools continue to show strong momentum. And with the USB controllers from Cypress, we are significantly strengthening our position in the area of chargers and adapters. Our high-precision sensor solutions give IoT devices human sensors, enabling them to react intuitively to their surroundings. Going forward, we will more and more combine our large selection of power semiconductor, radio frequency and sensor components with Cypress connectivity and control products into system solutions to make electronic devices smaller, smarter and, above all, more energy-efficient. Now to Connected Secure Systems, where a bit more than half of the business is coming from the former Cypress area of general-purpose microcontroller and wireless connectivity. In the September quarter, the segment recorded revenues of EUR 326 million. Several end markets like identification documents or ticketing continue to suffer from travel bans and people reluctance to use public transport. On the flip side, COVID restriction leads to increasing demand for applications like home health and home fitness, remote controls, gaming consoles and also contactless payment. The segment result of CSS amounted to EUR 39 million, equivalent to a segment result margin of 12%, the same as in the previous quarter. The book-to-bill ratio improved to 1.1. The secular trend towards even more connected devices continues unabated on the automotive and industrial as well as on the consumer side. Consequently, connectivity is becoming a core competency, and we are encouraged by key design wins in this field. Our Wi-Fi/Bluetooth combo chipsets have been selected for a next-generation smartwatch and for printer devices from leading OEMs. Additionally, we have won the socket for a new generation of variable devices at a major player with our Bluetooth Low Energy solution. Furthermore, in car Wi-Fi is seeing good traction and is poised to benefit from the ongoing automotive recovery. Connectivity has to go hand-in-hand with processing and security. Infineon has launched a new solution combining PSoC 64 Secure Microcontrollers with Trusted Firmware-M embedded security, the Arm Mbed IoT operating system and the Arm Pelion IoT platform to securely design, manage and update IoT products without the need for custom security firmware. The solution makes it easier for device manufacturers to connect, manage and update their products by integrating state-of-the-art security with open source firmware, thereby accelerating time to market. Now over to Sven who will comment on our key financial figures.
Thank you, Reinhard, and good morning, everyone. In my part, I will focus primarily on quarterly numbers but in some occasions also comment on full year figures. Let me start with some details on the margin development in the fourth quarter of the concluded 2020 fiscal year. Gross profit amounted to EUR 793 million. Correspondingly, the gross margin improved to 31.8% from 27% in the previous quarter. Excluding non segment result effects, the adjusted gross margin came in at 36.6%, 70 basis points up compared to the previous quarter. Included therein are underutilization charges of around EUR 150 million, bringing the total for the fiscal year to around EUR 570 million. As you will recall, these figures square well with what we had guided as our fab loadings were, as expected, in the 75% range. At the same time, our revenue for the September quarter came in somewhat better than anticipated, especially when adjusting for a slightly unfavorable U.S. dollar movement. From this, you can infer that we saw a meaningful reduction of inventories. I will come back to this point after commenting on our OpEx development. Research and development expenses as well as selling, general and administrative expenses each amounted to EUR 308 million in our fourth fiscal quarter. R&D expenses included EUR 11 million of non segment result charges, SG&A expenses, EUR 68 million. The net other operating income was EUR 5 million. Overall, quarterly OpEx were a bit lower quarter-on-quarter despite the fact that Cypress was consolidated for an entire quarter for the first time only in our Q4. The main factors behind this were lower expenses related to the Cypress acquisition on the one hand and higher received R&D funding on the other hand. The non segment result for the quarter amounted to minus EUR 197 million, significantly better than the minus EUR 313 million we had recorded in the previous quarter. The key difference pertains to Cypress inventories that were stepped up to fair market values as part of the original purchase price allocation. In the June quarter, the effect of such step-ups for those inventories that were sold had amounted to about EUR 170 million, where in the September quarter, the figure went down to about EUR 45 million. By now, all Cypress inventories that had existed at the first-time consolidation in April are sold. Therefore, we expect a quarterly run rate of non segment results, impacts coming from the Cypress acquisition, including PPA-related depreciation and amortization of around EUR 120 million. The financial result for the September quarter was minus EUR 28 million after minus EUR 79 million in the previous quarter. The significant change is due to several onetime effects. On the one hand, the June quarter was burdened by the impact of unwinding interest rate hedges for Cypress-related refinancings as well as the effect of the early repayment of our acquisition bridge facility. On the other hand, the September quarter saw the release of a deferred tax liability and the reversal of interest accruals related to it. Talking about taxes, income tax expense amounted to EUR 33 million for the fourth quarter of our fiscal year. As it is typical for year-end, the amount is influenced by adjustments to deferred tax assets and liabilities. Therefore, a look at the annual figures is much more meaningful. Income tax expense for our 2020 fiscal year was EUR 52 million, equivalent to an effective tax rate of 12%. Cash taxes amounted to minus EUR 94 million, resulting in a cash tax rate adjusted for PPA effects of 11%. For the next fiscal year, we expect this rate to be around 15%, primarily as a result of the existing German tax loss carryforwards. We expect to benefit from these tax loss carryforwards for another 5 years. At the end of that horizon, the cash tax rate should be close to our expected long-term effective tax rate of about 20% to 25%. Following my remarks on various P&L items, I will now focus on our free cash flow, starting with inventories. As indicated by Reinhard, we took the positive business momentum as an opportunity for inventory management and brought down stock levels, both our own as well as those in the channel. Our own inventories came down by around EUR 160 million quarter-over-quarter, the DIO now being a healthy 109 days. In distribution, thanks to strong sell-through, stock reach came down by around 2.5 weeks to under 10 weeks overall. All regions and all segments contributed to this positive development. Free cash flow correspondingly benefited from inventory depletion. Our investments into property, plant and equipment, other intangible assets and capitalized development costs in the September quarter were EUR 332 million after EUR 266 million in the quarter before. This brings the total for fiscal '20 to EUR 1.099 billion inside of our last guidance of around EUR 1.2 billion, also helping our cash flow generation. Depreciation and amortization, including non segment result effects, amounted to EUR 379 million for the quarter, the annual total being EUR 1.260 billion. Free cash flow from continuing operations for the September quarter was EUR 387 million. The annual figure amounted to minus EUR 6.7 billion, containing the purchase consideration for Cypress. Adjusting for it and related cash outs as well as cash acquired, the figure goes to plus EUR 911 million, evidence of strong organic cash generation in challenging times. Our reported after-tax return on capital employed or ROCE stood at 3.5% in the fourth quarter, the annual figure being 3%, excluding bookings related to the acquisition of Cypress and International Rectifier, in particular, goodwill, fair value step-ups and amortization as well as deferred tax effects. The adjusted ROCE for the fourth quarter is around 20%, for the 2020 fiscal year, around 16%. At the end of my section, I would like to talk about liquidity and financing. The pillars of our capital structure management remain firm and clear: investment-grade rating, strong liquidity position and a clear commitment to deleveraging. Walking the talk regarding the latter, in September, we repaid USD 555 million, a part of the term loans from our acquisition financing 2 years ahead of the original maturity, taking advantage of the strong free cash flow generation. After this, our gross debt position at the end of our 2020 fiscal year amounted to EUR 7 billion. Using illustrative figures for last 12 months EBITDA for the combined company, our gross leverage is equal to 3.7x, which we intend to bring down to below 2x over the midterm. Our gross cash position corresponded to EUR 3.2 billion. The resulting net debt of EUR 3.8 billion correspond to a net leverage of 2x. Preserving liquidity and retaining financial flexibility in times of heightened macro uncertainties is paramount for us. We live in exceptional times. The coronavirus pandemic had considerable negative impacts on our markets, and our profitability and substantial risks remain going forward. Taking all this together, we plan to exceptionally deviate from our dividend policy, which normally calls for at least a constant amount year after year. To our next Annual Shareholders Meeting in February, this first virtual one in our history, we will propose a reduced dividend of EUR 0.22 per share. Our view is that this fairly balances the burden of the corona year 2020 among all affected stakeholders, also considering that our share count has increased by a bit over 4% over the year. I will now pass back to Reinhard again who will comment on our outlook.
Thank you, Sven. The current and near-term recovery of key markets and our assessment that inflection points for several of our structural drivers are moving closer give us reason to be optimistic. Take the risk of rising COVID infection rates ahead of winter in the Southern Hemisphere and geopolitical uncertainties such as trade tension or Brexit into consideration, we come out cautiously optimistic. Starting with the currently running first quarter of our 2021 fiscal year. Typically, we would expect a sequential downtick in line with our usual seasonality. For the actual December quarter, however, we anticipate revenues to slightly grow compared to the September quarter and to come in between EUR 2.4 billion and EUR 2.7 billion based on an assumed U.S. dollar exchange rate of the $1.15 to the euro. For our ATV segment, we expect a quarter-over-quarter revenue increase of a mid- double-digit million euro amount; whereas, for the other segments, IPC, PSS and CSS, we expect an essentially flat revenue development. At the midpoint of the guided revenue range, the segment result margin is expected to be around 16%. The increase in profitability will be mainly driven by gross margin expansion due to improving utilization of manufacturing facilities. Current business momentum points to some upside to the profitability level, but uncertainties around rising COVID infection rates, especially in Europe, remain. For the full 2021 fiscal year, any outlook is framed by considerable macro uncertainties and has to leave some room for unforeseen turns of events. The coronavirus continues to pose massive challenges for global economies and societies. And even if we have found ways to live with the pandemic, there may still be negative repercussions. Nevertheless, the call for reconstruction for making a new start with greater sustainability is loud. Sustainability has long been in the DNA of Infineon, and we see a number of structural opportunities coming closer. The shift towards electric vehicles is accelerating, the proportion of renewables in the energy mix will continue to increase, digitization has been giving a tremendous boost in all areas of life, a far wider range of useful IoT application will be enabled with an accelerated expansion of communications infrastructure and data center capacity, demand for data protection and IT security is increasing. In front of us is an exciting year one following our acquisition of Cypress. The additional product and competencies are already greatly strengthening us. In any case, it will be essential to stay resilient and quickly adapt to fast-moving market developments. For our 2021 fiscal year, assuming, in particularly, there will not be blanket lockdowns disrupting entire economies again, we expect revenues of around EUR 10.5 billion, plus or minus 5%, based on a U.S. dollar-euro exchange rate of $1.15. This revenue level would be about EUR 2 billion higher than in the 2020 fiscal year, considering the first full year consolidation of Cypress. Of this incremental amount, we expect more than half to come from ATV. The remainder will be contributed by PSS and CSS, with roughly an equal share coming from each. For IPC, we expect a small amount of additional revenue. The strong increase in Automotive revenues is taking the mentioned IHS production forecast of 83 million cars in 2021 a starting point. Additionally, we expect continued semiconductor content growth driven especially by accelerating xEV penetration. At the indicated revenue level, we expect a segment result margin of around 16.5%. Let me put this into perspective. In the light of improving business momentum, we expect that fab loadings will increase step by step. Therefore, cyclical underutilization charges should go down over time. For fiscal '21, we expect an improvement in the area of EUR 300 million to EUR 350 million. The addition of Cypress for a full year is a further margin tailwind. In addition, we expect cost synergies to increase compared to the previous fiscal year to a high double-digit million amount. In contrast, we deployed rigid cost-saving measures like hiring freeze, keeping salaries flat and short-term work throughout the 2020 fiscal year. The savings linked to a number of these measures will not be recurring, and we expect a headwind of around EUR 100 million to EUR 150 million. However, we will need to strengthen our development resources now in order to create the system solutions underpinning the expected revenue synergies from Cypress acquisition in the future. We stand by those, admit to long-term targets as well as by our target operating model. We are seeing highly attractive future growth opportunities, especially once COVID is behind us. Therefore, we plan investments in property, plant and equipment, other tangible assets and capitalized development costs in the 2020 fiscal year of around EUR 1.4 billion to EUR 1.5 billion. Included therein is equipment we will bring into our new 300-millimeter facility in Villach. Depending on the market conditions, we expect the start of production there at the end of the 2021 calendar year. Depreciation and amortization are expected to be between EUR 1.5 billion and EUR 1.6 billion, including amortization of around EUR 500 million, resulting from the purchase price allocation for Cypress and, to a lesser extent, still related to International Rectifier. Free cash flow, we estimate to come it at more than EUR 700 million. Ladies and gentlemen, let me summarize the key points. The Cypress acquisition and the coronavirus pandemic made the 2020 fiscal year a historical one for Infineon. We concluded it successfully with just under EUR 2.5 billion of revenue and a 15.2% segment result margin in the fourth quarter. Annual organic free cash flow amounted to over EUR 900 million, allowing us to pay down some acquisition debt swiftly. Retaining financial flexibility in difficult times is critical, hence, our proposal for a measured dividend reduction to EUR 0.22 per share. At present, we are benefiting from the recovery of some of our key end markets, most notable, the automotive sector. However, with rising COVID cases globally, uncertainty remains around the pace of recovery. With the resilience of our business proven and the Cypress integration progressing, we feel well positioned to perform even under challenging conditions. Furthermore, several of our structural growth drivers, established ones like electromobility, new ones like IoT, are receiving a boost from accelerating adoption rates. With our outlook, we are cautiously optimistic and remain conscious of risk. We do not foresee the usual seasonal dip in the December quarter. And for the full 2020 fiscal year, we expect revenues of around EUR 10.5 billion, with a segment result margin improving to around 16.5%. Margin expansion will be driven by lower idle costs and harvesting synergies, to some degree, offset by the reversal of cost containment measures. Infineon is future-proofed for the 2020s and beyond. Ladies and gentlemen, this concludes our introductory remarks, and we are now happy to take your questions.
[Operator Instructions] We'll now move to our first question over the phone, which comes from a Johannes Schaller from Deutsche Bank.
Yes. I mean a lot of the growth in automotive next year is slightly coming from the electric vehicle market, and you kindly break out the EV contribution in your Auto business. Can you firstly give us a quick update how big the EV exposure, xEV exposure is in your non-auto divisions, including also charging infrastructure? And then secondly, just as we think about 2021, how should we expect that aggregate xEV business to grow? And what's your underlying assumption on xEV units? And then I got a follow-up on the GT Advanced deal.
Thank you, Mr. Schaller. So first of all, yes, EV is a dominant element, and Helmut will go into more details on this. On the other side, the always mentioned elements of assisted driving and the basic electronic element in the car is still ongoing. So we see momentum from all areas of application. But now a little bit more details to the EV section, Helmut, please?
Yes. Let me first comment on the question on non-automotive. Electromobility revenue is basically in the IPC area on the charging infrastructure, whereas in the PSS on the -- for the onboard charger. I don't have that figure perfectly on top of my head. I would say it's somewhat in a lower percent -- mid- to -- low to mid-percentage range of those divisions. So I don't know, we'll probably have to add maybe EUR 100 million in 2021 for total. Now to EV, very strong pickup again in China for -- coming up right now, but even stronger in Europe, definitely high double-digit growth rates for '21 as compared to '20. If you include even mild hybrids, where we see tremendous growth even more than doubling from '21 to '20, that leads to a significant growth opportunity in '21, predominantly driven out of Europe and China.
So the question about the PSS and IPC's content?
We will have to pick up the number, sorry, but I gave you some hint as to -- it's not being super significant.
I think it's -- I can give you a flavor. It's each single-digit percentage. So it is on a very -- on a lower range, but we have to consider it in total. So you had another question, Mr. Schaller?
Yes. Just on the deal you signed on silicon carbide boules. I mean there wasn't really maybe that much of a market for silicon carbide boules historically. So just generally speaking, how should we think about this going forward? Do you expect more other suppliers also to ship boules to you? And given you have a lot of in-house technology on cutting and splitting, how should we think about the cost structure for you if you purchase a boule and do the splitting in-house? And what could that do to the profitability of your silicon carbide business, if we really think a bit longer term?
So Helmut -- Jochen will take the question mainly, but one short comment on it. We definitely expect that the supply of the -- in the wafer area of silicon carbide will grow and broaden. We might not see the same competition as on silicon, but this was always the expectation, especially as the demand from automotive is something which fuels a lot of expectations. Jochen, you might please take the rest.
Yes, Mr. Schaller, you are correct that the bull market is, to our belief, now opening up. And with our splitting technology, which we intended to use for both wafer twinning, so making 2 out of 1 wafer, as well as the boule splitting, we have now a way to use this technology to very efficiently cut the individual substrate wafers from a boule. And therefore, we are pretty excited about this partnership with GTA team. For the foreseeable time, we will, of course, also buy substrate wafers from the regular market, and we believe this way we can reduce costs or reduce the waste by making the slicing more efficiently significantly over time.
And should we expect that to have a significant impact on your cost structure on the silicon carbide side?
Over time, it will because you get a lot more wafers out of a boule. But we said that we will industrialize these technologies in '22, '23, and we are on this road map.
But Mr. Schaller, short addition to it, we believe that our advanced technology capability of trench-based silicon carbide MOSFETs yielding to slower -- smaller chips. There's also a significant portion of our, I would say, strengthening our silicon carbide position, and we are moving on with technology. So it's not only the substrate, but both contributes.
[Operator Instructions] We'll now move to our next question over the phone, which comes from Achal Sultania from Crédit Suisse.
Just a question on how should we think about seasonality beyond December quarter. If I look at your December quarter guidance of EUR 2.55 billion, that just -- it kind of assumes that there is very little seasonal growth into the March, June and September quarters to get to the full year guidance. So just trying to understand how much caution or conservatism is already built into that full year guidance. And should seasonality be very different this year from what we have seen in the past?
Yes. Achal, thank you for your question. The reason for the different than usual seasonality is that we have a pretty strong December quarter, which normally would be quite a bit lower than Q4. But this year, it's moving forward and is stronger than the Q4 we have seen. From there, we expect -- I would call it in a certain way a typical pattern. We should not forget that we have seen in some of the quarters in the last fiscal year extremely strong push from digital. So we are cautious on the further development of the following quarters.
Maybe if I can just add, Achal. Sven speaking. You asked for the revenue side. But I mean, just the answer to the revenue seasonality, on the profitability seasonality, although we don't want to guide now for Q2, I mean you are all aware of the typical pattern that, for example, repricing always happens in Q2. Just to give you one additional information.
We'll now move to our next question over the phone, which comes from David Mulholland from UBS.
Just to follow up on the margin point on fiscal '21. Just looking at the guidance you're giving for fiscal Q1, where it's essentially a 16% margin but then essentially very limited pickup through the year to get to the 16.5% for full year '21, I understand there's some headwinds to that. But can you possibly clarify what the net synergy will be from Cypress, considering some of the potential reinvestment you'll need to make? And then on the back of that, just can you explain really why there's not more leverage through the year-end margins even with some of those cost headwinds coming in, given how big the underutilization recovery as such tailwind will be?
Thank you, David. Sven will take that question.
Yes, David, thank you. I mean you mentioned already a couple of elements which are very important. So in this quarter, if you look at the underutilization charges, they went down from EUR 150 million to EUR 70 million already. We are now guiding for a, let's say, give or take, EUR 250 million number for the full year. It could be EUR 220 million, it could be EUR 270 million, but let's call it EUR 250 million. You see we are already on a nice run rate in Q1. That's one answer. Secondly, as I mentioned in the previous answer to Achal's question, please do not forget about the seasonality for Q2. And yes, then we expect some uptick in Q3 and Q4 coming from various trends, revenue side, also from the synergies, as you mentioned. You asked to the net synergies. If we follow the pattern, which works according to our plan so far, we said EUR 180 million of synergies should be achieved 3 years after closing, which would be end -- which would be mid of 2023. So this means EUR 60 million, EUR 120 million, EUR 180 million. So if you want to go year-over-year, you can add, give or take, EUR 60 million. I think that's a reasonable assumption for the time being.
We'll now move to our next question over the phone, which comes from Adithya Metuku from Bank of America.
Yes. So 2 questions. Firstly, I just wondered if you could talk a bit about how you see automotive Tier 1s and OEMs using second sources for silicon carbide. There were some -- one of your competitors recently made some comments around second sources being unlikely. So any -- your thoughts around this would be helpful. Secondly, you have had a lead in trench silicon carbide MOSFET for some time now. And your main competitor here, STM, is moving to trench as well. Can you talk a bit about how you see your lead in trench as you started with that architecture earlier than competitors? Any color around this would be helpful.
I think here, this topic of a customized silicon carbide, I think silicon carbide products will arrive, of course, between the various suppliers. But it is not too difficult to adapt to it. We have seen this in the normal IGBT module and MOSFET area, and we are very confident this will also be in the silicon carbide area. We, ourselves, also stated that the IGBT and think here, the competitor also said there will be, I would say, changes in the market shares based on second supplies. Most likely, it will more start that the Tier 1s and OEMs use for various platforms, various MOSFETs. But from a certain size on, it is most likely that they will choose various suppliers, especially when you consider car platforms. So the question is how we lead in trench. Well, the answer is pretty simple, we have it. Others don't have it. And the advantage of a trench MOSFET is that you have a lower chip size. And we have seen that there is a significant technology learning required in order to make it happen. And basically, we are the first in the market with these type of trench MOSFETs besides a Japanese supplier, and we believe that we are very strongly positioned with our broad portfolio here.
Understood. And maybe just a quick clarification on that. So you -- when you talk about lower chip sizes, one of the things I'll add is that from, again, one of your competitors at this chip size is not particularly relevant at this stage, but they may become more relevant going forward. So can you talk a bit about how your customers see chip sizes, the relevance of chip sizes? Are they particularly focused on this at the moment?
Not sure if I understood precisely the question. Here, it is very clearly, the first-generation CoolSiC, as we call it, have the lowest losses, and you can see it in the press release added also at the slides. The customer fuse here is, I would say, very different. But after some time, where they were using silicon carbide as leading technology, everybody wants to have very reliable silicon carbide product, and we believe that we are the supplier of the most dependable solutions here. And it is more and more of relevance that this is a feature also required. And we see that competition has also modified the specification towards our position as, obviously, there were some needs in order to go from the extreme -- overly extreme edge into the normal specification area and achieve reliable. IR is, of course, happy to follow up in more detail.
We'll now move to our next question over the phone, which comes from Matt Ramsay from Cowen.
A couple more questions on the automotive market. I think the first one from me is there's been some discussion on this call about the importance of the development of your silicon carbide road map going forward. I wonder if you might also touch on how you see the importance of, I guess, what we've referred to a little bit as hybrid modules that combine silicon carbide and IGBT into the same type of modules, whether specific modules or combining the 2 modules and a solution for the customer and how -- what that might mean to your business going forward. And are you maybe better positioned than competitors into that angle? And then just a quick clarification. I think, Reinhard, you mentioned 83 million light vehicle units as sort of an industry number. If you guys have any detail on what you're assuming for hybrid and full EVs within that number for 2021, that would be helpful.
Great. Thank you, Matt. The EV and the other numbers, Helmut will comment on. I talk about briefly on the technology. We see that depending on the way the customer is doing its solution and where the customer is positioning in relation to efficiency, reach of battery capacity and so on, the ways how to solve it is extremely different. Some Japanese OEM even go for the most comprehensive silicon-based technology. So here, various mixtures of, I would say, can be observed. Some people are using silicon for the boost type when you have a 4x drivetrain, a 2x drivetrain, a 4-wheel drivetrain, and for standard, the silicon. This gives you a cost advantage without losing a lot of efficiency. Currently, the majority is using the silicon, and we see various approaches to more effective overall drivetrain. The hybrid way is that typically you use IGBTs together with silicon carbide diode, which already gives you quite some advantage of the system. So you can choose, like, from, I would say, the biggest catalog in town for such type of products, value position. And we also see that silicon will continue to develop, and the supply base here in silicon is also very substantial. Currently, we see that the -- more and more OEMs are deciding. And here, please keep in mind the announcements on Tier 1 decisions are not reflecting the real use case on the car level. And Helmut, what's about the car use case?
So the battery electric vehicle, and you were asking about share in the 83 million total car, market for '21 is going to be about 5.4 million, 5.5 million BEVs and plug-in hybrids. If you add the mild hybrids, you're ending up at more than 10%, so about 9 million roughly total globally. Of course, there is a big difference between mild hybrid and battery/plug-in hybrids in terms of technology and value content.
We'll now move on to our next question over the phone, which comes from Sandeep Deshpande from JPMorgan.
Yes. I have a question on your Automotive business again. I mean when you look at your margin in Automotive, it is much lower than it has been prior to 2018. I mean is this because of the mix driven by EV? Or is there something else driving this Automotive margin, which is substantially lower? Clearly, there is this underutilization impact this year, but this has been a continuing effect, which was not there to the rest of your division as such, really. And then, I mean, just overall, in the Automotive business going forward, I mean as the EV goes up as a percentage of your revenues, would this be a continuing drag? So that's my question.
So Sandeep, the first answer is Automotive has a substantial manufacturing base and power, and the underutilization charging is, of course, hitting ATV quite significantly, which, over the time, with the increased amount of outsourced chip production, will become more advantageous. But that is a major reason. The other one is the question about the EV. Will this continue to go up? Well, at least, this is the assumption. There had been an ATV call with Peter Schiefer in October, and there is a 17% share for ATV in 2 years. So we believe it will continue. But we have seen in 2019, everybody expected China to grow, but then it stalled. Nevertheless, the number of incentive schemes and the drive for our CO2-related reduction, we believe that this will continue with varying speed. What's interesting is as charging infrastructure increases, the consumers' acceptance also rises. So we believe, yes, but it is very difficult to say at which speed.
We'll now move over to our next question on the phone, which comes from Janardan Menon from Liberum.
My question is more on the IPC division, where you have -- you're guiding at a flattish trend or slight growth in this fiscal year, fiscal '21. I'm just wondering what are your assumptions there for the various parts of that business in terms of, if I could break it up, as your drives business, renewable energy, traction. What -- could you just break it down as to where you're seeing -- you expect weakness versus growth? And if I could quickly slip a follow-up, where exactly would you be spending the EUR 1.4 billion to EUR 1.5 billion of CapEx in this fiscal year?
Okay. So IPC, we see a very small recovery from low levels for factory automation. We see continuous weakness in trains. The area of the white goods is, I would say, still characterized by a reasonably high inventory, and it will take time until this comes back. Most likely, it will come back through the air conditioning segment. The, I would say, renewable area, solar will continue to be strong on the other side. I think also here, we have seen strong growth in the last fiscal year, so it's very difficult to estimate how this will move forward. And inventory have seen a little bit soften, more softened trend, but it's more related to installation than basic technology. The -- I think with this, Sven, the investment, please.
Yes. Just to add to that, and maybe also Jochen can comment on the investment as well, so as you are now used from us, we have included in the full investor presentation 1 page per division, where we show the end markets and the growth expectations. So you can look at that as well on top what Reinhard just said. And on the investments, I mean, Jochen will comment, but I think majority, as in the past, goes into the front end. Jochen, maybe some details from you.
Yes. Thank you, Sven. So out of this EUR 1.4 billion to EUR 1.5 billion, in terms of CapEx into the factories, it's around EUR 1.1 billion. And out of that, half of it goes into 300-millimeter, whether Villach or Dresden, Dresden equipment, Villach, of course, finishing the building and the initial equipment set.
Understood. And would you -- would this investment take Dresden to sort of full capacity?
No, not yet. With this capacity step, we think that we will be in 1 year's time frame around 70% of the capacity in terms of clean room area. When -- then in addition, Villach kicks in.
And this is a great opportunity because that allows very much production flexibility and adding capacity in the various step longer term.
Ladies and gentlemen, due to time, we have time for one last question. If you do have any unanswered questions at this time, please follow up with the IR team. Our last question today will come from Andrew Gardiner from Barclays.
I just had 2 quick follow-ups really. Firstly, on the industry forecast you've referenced for the automotive market, as you said, at IHS, I think you're at 83 million now. I'm just wondering whether your underlying assumption, your guidance is based on that? Or given the recent level of improvement in the automotive market that has come ahead of the industry analyst forecast, are you now assuming a slightly more optimistic underlying market for auto? And then a quick one for Sven. On the FX assumption of $1.15, normally, if I remember rightly, Infineon's normally taking a more conservative approach when thinking about the FX implied within the budget, meaning we would set it at an area where if the spot remained, it would be a tailwind. Today, spot is above what you've guided to. It looks like a slight headwind. So I'm just wondering why you've taken that approach for this coming fiscal year.
Yes. The first question will be answered by Helmut, and the exchange rates, Sven will take.
Yes, you're absolutely correct, Andrew. The forecast is based on the 83 million as reported by IHS. Yes, we do see good momentum into the running quarter on our orders buildup. But it's the beginning of the year, so I think we're very well set with the 83 million.
And I think it's a very good question, and I don't want to pretend that I can forecast the dollar rates. It's hard, and we have seen this huge volatility. Hopefully, the biggest volatility we have witnessed from Q3 to Q4, moving from $1.10 average to $1.17. Now there is some U.S., I would say, vola post the election. It was a debate internally. But instead of going now to $1.175, we said we do either $1.15 or $1.20. We decided to go to $1.15. And you are right, the rule of thumb is EUR 14 now per $0.01 on the revenue side and $0.04 on the profitability side. So yes, currently, that would be a headwind if we would come out with a weaker dollar.
Ladies and gentlemen, this does conclude today's Q&A session. I would like to turn the call back over to Infineon for any addition or closing remarks.
Yes. Not much to say, just time to wrap up. Thanks very much for all the questions. We are aware that we couldn't answer all of them within the call. Please feel free to contact us in the IR team here in Munich. Other than that, stay safe and optimistic, and have a good day. Thank you very much. Bye-bye.
Ladies and gentlemen, this does conclude today's call. Thank you very much for your participation. You may now disconnect.