What a difference a couple of quarters make. While I think a recovery in semiconductor demand was widely expected, the pace of that recovery, particularly in the auto sector, has caught the industry flat-footed, leading to soaring bookings and lead times. This intense demand is going to create some headaches for Infineon (OTCQX:IFNNY) (OTCQX:IFNNF) and its peers in the short term, as there is certainly double-ordering going on, but the long-term demand outlook remains bright on growth in autos, automation, high-performance motors, IoT, renewable energy, and other markets.
When I last wrote about Infineon I said that I preferred STMicro (STM) – that was the wrong call, as Infineon has outperformed STMicro by a noticeable amount since then. On the other hand, Infineon has “only” modestly outperformed the growth of the SOX (I say “only” as that’s still over 30% price appreciation in five months) and other auto-leveraged chip names like ON Semi (ON), NXP (NXPI), and Renesas (OTCPK:RNECF) (OTCPK:RNECY) have done even better, while Texas Instruments (TXN) joins STMicro among the laggards.
The investment case for Infineon today has a lot to do with your timeframe and tolerance for volatility. Long term, I think the return potential is decent (in the mid-to-high single-digits on an annualized basis), but I do think there will be turbulence in the near term as orders and lead-times normalize and some of the more extreme bullishness gets washed out.
Read more here:
Infineon's Torrid Order Growth Won't Last, But The Long-Term Story Is Still Positive
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