Alexander Foltin - Head of Investor Relations Reinhard Ploss - Chief Executive Officer Dominik Asam - Chief Financial Officer Helmut Gassel - Chief Marketing Officer Jochen Hanebeck - Chief Operations Officer

Achal Sultania - Credit Suisse Janardan Menon - Liberum Capital Aleksander Peterc - Société Générale Amit Harchandani - Citigroup Jérôme Ramel - Exane BNP Paribas Adithya Metuku - Bank of America Merrill Lynch Johannes Schaller - Deutsche Bank Stéphane Houri - Oddo BHF Tammy Qiu - Berenberg Bank

Good morning, everyone. Welcome to the conference call for Analysts and Investors for Infineon’s 2018 Fiscal Fourth Quarter and Full-Year Results. Today’s call will be hosted by Alexander Foltin, Corporate Vice President, Finance, Treasury and Investor Relations of Infineon Technologies. As a reminder today’s call is being recorded. This conference 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 statements are not historical facts and are subject to factors and uncertainties, many of which are outside of Infineon’s control and 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 the results anticipated or projected in any of these statements and they are not put undue – not to put undue reliance on them. For a detailed description 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 report available on our website. At this time, I’d like to turn the call over to Infineon. Please go ahead.

Good morning also from my side and welcome, ladies and gentlemen, also on behalf of the entire Management Board of Infineon. Reinhard Ploss, our CEO; Dominik Asam, CFO; Helmut Gassel, CMO; and Jochen Hanebeck, COO. This is the 75th quarterly earnings call on Infineon’s history. Following our usual procedure, Reinhard will start with some remarks on group and division results, market developments and quarterly business highlights. Dominik will then comment on key financials, followed by Reinhard again, updating you on our guidance and also providing some color on the acquisition we announced this morning. As an additional service, as mentioned in our invitation, we will illustrate those introductory remarks with some slides that are being shown live and in sync with this call at infineon.com/slides. Again, the link is infineon.com/slides. After Reinhard’s and Dominik’s introduction, we will be happy to take your questions. As usual in order to allow broad participation, we kindly ask that you restrict yourself to one question and one follow-up. A recording of this conference call, including the aforementioned slides and a copy of our 2018 fiscal fourth quarter and fiscal year earnings press release, as well as our investor presentation are also available at our website. Reinhard, please go ahead.

Thank you, Alexander, and good morning, everyone. Infineon has closed its 2018 fiscal year with a strong September quarter. Our revenues crossed the €2 billion, and €2,047 million, up 5% quarter-over-quarter. But at constant U.S. dollar exchange rate, we would have grown by 4% year-over-year, currency-adjusted growth was 12%, an acceleration compared to the June quarter. The segment result for Q4 was €400 million corresponding to a segment result margin of 19.5%, which was slightly ahead of our guidance, even when taking the tailwind from the U.S. dollar appreciation into account. For the full 2018 fiscal year, group revenues came in at €7,599 million, an 8% increase over the previous year. Assuming a constant U.S. dollar exchange rate, our annual growth rate would have been 12%, significantly in excess of our original expectation of 9%. The segment result for 2018 was €1,353 million equivalent to a 17.8% segment result margin. With this, we have increased revenues and profitability for the fifth-year in a row and concluded a very successful year. We want our investors to participate in this development and will therefore propose a further 8% dividend increase to €0.27 per share for the next shareholders meeting. While we see certain smaller buckets of deceleration, the majority of our business, in particular, most of our predominantly in-house produced differentiating power and radar products, continued to enjoy healthy demand and remain in allocation. In these areas, customers continued to place orders with longer lead time. Therefore, our book-to-bill ratio remains at a very elevated level of 1.5 for the September quarter. This ratio contains a backlog of confirmed orders and external customer forecast, for example, for consignment stock with rolls. Not included our unconfirmed orders. Please see also the appendix of the slides that shown. In order to capture market opportunities and to continue to benefit from structural growth, we keep our efforts to ramp capacity and to debottleneck certain supply limitations. At the same time, we are closely monitoring demand trends to modify our ramp plans if and when we see tangible signs of changing picture. Now to the divisions. Automotive revenues were €867 million for the quarter. This represents a 4% quarter-over-quarter increase caused primarily by high power products for electro-mobility. Year-over-year, we have grown at a staggering rate of 18%. Currency fluctuation do not play a major role in this comparison, as the U.S. dollar exchange rate was almost the same in the September quarter 2017 and 2018. The segment result increased to €127 million from €120 million in the previous quarter. The segment result margin stood at 14.6%. Once again, the increasing relative share of electric drivetrain products weighed on margin development. Within this category, however, we see clear signs of improving profitability. The combination of macroeconomic uncertainties, global trade tension and industry-specific issues has created a stream of negative auto news in the recent months. Car unit growth appears to almost come to a halt worldwide. The several key region even seeing declines. While we are not unaffected by this, our automotive business is driven to a much larger degree by increasing content per car, which is fueled by structural trends as xEV and ADAS. Products for both these two applications accounted for 15% of segment revenue in the fiscal year just ended and made about half of the growth of this segment. Take xEV in China as an illustration. In September, the total number of cars sold there declined by 10% compared to 2017. Over the same time, the number of so-called new energy vehicles grew by 55%. In Europe, the reduction of the existing CO2 emission targets by 35% until 2030 was proposed by the EU Secretaries of the Environment. Developments like these create ongoing demand for our products and solution, evidenced by a book-to-bill ratio of 1.5 at the end of the September quarter. Moreover, we could record important design wins, a major European Tier 1 selected an Infineon chipset for their onboard charge of a large European OEMs modular electric drivetrain platform. This award shows the strengths of our system solution in different xEV-related application. It includes an IGBT, a silicon carbide diode, several power MOSFETs, a system-based chip and other small signal components. Also, in more traditional applications, we see good traction, confirming the strengths of our system competence. A North American Tier 1 selected a full Infineon chipset consisting of an Rx microcontroller, power MOSFETs, DC-DC converter, driver IC and angle sensor for their main electronic power steering platform. Finally, in August, our joint venture in China with SAIC successfully started manufacturing and shipment of the first HybridPACK IGBT modules to the domestic automotive market, further strengthening our position in the world’s largest EV market. Industrial power control recorded another all-time high quarterly revenue of €361 million, an increase of 3% over the previous quarter. Year-over-year growth was 10%. In particular, industrial drives went in traction, contributed to this positive development, whereas solar and home appliances remained flat quarter-over-quarter. While the steadily expand manufacturing capacity, several product classes continue to be in allocation. The book-to-bill ratio stood at 1.4 unchanged from the prior quarter. The segment result for the September quarter was €73 million, compared to €71 million in the previous quarter, resulting in a segment result margin of 20.2%, virtually unchanged from the previous quarter’s 20.3%. The additional margin contribution from higher revenues was offset by increases in operating expenses. Overall, the market sentiment with regard to industrial applications is clearly getting less optimistic. For our own business, we see a reversion to mean, which means towards long-term trend line growth. Our product portfolio addresses many different applications and we benefit from several structural drivers. In home appliances, the ongoing inverterization increases the content per unit providing some offset against an expected seasonal decline in units. In wind power, especially for offshore installations, we can leverage our expertise in high-power module manufacturing. The same applies to traction, in particular, high-speed, but also metropolitan trains. For industrial drives, on the other hand, we currently see a stabilization of demand and cautiousness leading to higher levels of inventory. Let’s put a spotlight on China, which in total accounts for about half of the segments revenue. Our exposure to a number of infrastructure-related initiatives with a long lead time horizon makes us confident about the resilience of our business in the now running fiscal year and beyond. Train networks are being expanded within and between cities. The Belt and Road Initiative calls for more and more electrified freight locomotives. The Made in China 2025 program leads to upgrades of factory automation, an increase of the official target for renewables and the overall energy mix from 20% to 35% by 2030 is in discussion. The deployment of e-buses will be a key measure to limit pollution in metropolitan areas. Let’s come to Power Management & Multimarket. Revenues were €651 million, the sequential increase of 12% over the prior quarter. A stronger U.S. dollar provided some tailwind, but even on a currency-adjusted basis, quarterly growth rate was still a strong 10%. Compared to the same period last year, revenues grew by 13% at constant exchange rates. All product areas within the segment contributed to this strong dynamic. The power business benefited from addition manufacturing capacity, the headset-related business saw a typical strong seasonal demand. The segment result came in at €181 million, yielding a segment result margin of 27.8% after 23.6% in the previous quarter. Apart from higher revenues, profitability was driven by a favorable U.S. dollar development. Also, our pricing initiatives are bearing fruit. Order entry is currently stabilizing on a high level, resulting in a book-to-bill ratio of 1.7. Also, in this segment, several power product categories will remain supply constrained in the foreseeable future, as we continue to see strong demand drivers across a multitude of application. For example, we observed significant growth in hyperscale data centers. The high power levels lead to additional demand for power semiconductor components. Artificial intelligence and big data create an ongoing demand for servers optimized for machine learning algorithms. The rollover of Intel-based servers from VR12.5 to VR13 platforms provides a boost for our DC-DC power stages. Furthermore, wireless networks world-wide are being upgraded from 4G to 4.5G in preparation for the upcoming 5G standard. 5G will be a double positive for Infineon. On the one hand, it means much denser networks of base station for which AC-DC power supplies are required. On the other hand, demand for low-voltage and mid-voltage MOSFETs base station will go up as significantly more antennas need to be powered to enable massive MINO and beamforming. Also, our power IC business is progressing well. We recorded a business win at a major Asian handset OEM with our XDP digital controller. Each of their current flagship phones will be delivered with a 40-watt fast charger. On the other hand, there are some signs of market softening in areas such as low-voltage and medium-voltage MOSFET. However, we see unabated momentum for our more differentiated solutions and system bundles. Now to Digital Security Solutions. As of December – October 1, we have changed the name of the segment Chip Card & Security to Digital Security Solutions. The new name reflects what we do since a long time, securing the link between the real and the digital word, providing solutions across smartcard and embedded application. The name change has no effect on the organizational structure, the strategy or the business scope. For the September quarter, the segment recorded revenues of €163 million, a decline of 7% compared to the previous quarter and minus 10% year-over-year. Demand was softer in several business areas, including government ID, where we experience project-specific fluctuations, classic SIM cards and contact-based payment, partly offset by growth in authentication and embedded SIM. The book-to-bill ratio stood at 0.9. The segment result came in at €24 million. The segment result margin stood at 14.7%, driven by the decline in revenues. In general terms, the segment is navigating in a challenging market environment. Some smartcard applications are declining, for instance, classics SIM cards and contact-based payment. Some applications are becoming more price-sensitive, others so strongly fluctuating demand patents. The transition to higher value solution that there is more complete offering, including software is ongoing. But it will take time for the impacts to materialize. There are encouraging sign. Our recently launched Security Solution for payment application secure a pay is gaining wider adoption by customers across different regions. Our IoT Security Solutions are gaining further ground with key design wins at leading OEMS in the automotive, infrastructure and ICT markets. For example, we recently introduced the first trusted platform module called OPTIGA TPM, especially for automotive application to the market to add cybersecurity to the connected car. With this, I would like to hand over to Dominik, who will lead you through our key financial figures.

Thank you, Reinhard, and good morning, everyone. Let me start by casting some additional light on our revenue dynamic. The average U.S. dollar exchange rate in the 2018 fiscal year was $1.19 compared to a rate of $1.11 over the prior year. As already commented by Reinhard, this implies an annual growth rate of almost 12% at constant currencies. In U.S. dollar terms, the currency most of our peers report in, we would have grown at almost 16%, which we believe compares very favorably to the market and our peer group. Gross profit in the fourth quarter increased to €840 million for gross margin of 39.8% after 38.2% in the June quarter. Excluding non-segment result effects, the adjusted gross margin stood at 40.6%. Research and development expenses and selling, general and administrative expenses came in at €223 million and €227 million, respectively. The net operating income amounted to €6 million. The non-segment result amounted to minus €30 million, almost entirely related to amortization and other charges resulting from the International Rectifier acquisition. As you can see on the chart, of that amount, €18 million hit our cost of goods sold; €2 million R&D; and €14 million SG&A. Our strong revenue growth is enabled by continuous investment to expand and upgrade our manufacturing landscape. Our total investments into property, plant and equipment, intangible assets and capitalized development costs for 2018 amounted to €1.25 billion. This is equal to an investment to sales ratio of 16.5%, in line with the updated formula we provided at our Capital Markets Day in June, when compared to our revenue increase at constant currencies. Depreciation and amortization, including non-segment result effects went up from €219 million to €226 million. Included in this figure are €26 million and €25 million, respectively, related to the administration and depreciation of fair value step-ups from the purchase price allocation from International Rectifier. Hence, the portion of depreciation and amortization, which hits our segment result has gone up from €193 million to €201 million, reflecting the upward trending capital expenditures already referred to, which we expect to continue in the coming quarters. Continuing with tax, in the September quarter, we had an income tax expense of €54 million against €49 million in the previous quarter. For the entire 2018 fiscal year, the income tax expense was €193 million, implying an effective tax rate of around 14%. Our cash tax rate was 15%, a level we expect also for the 2019 fiscal year. In the fourth quarter, we recorded a loss from discontinued operations of €159 million, which is related to adjustments of provisions in connection with the ongoing Qimonda Litigation. In September, the court appointed independent expert provided an interim report on the preliminary evaluation of the memory business that Infineon contributed to Qimonda in 2006. While we cannot disclose details about the report and the proceedings at present, there are two important messages. Firstly, as you can see from the provision we have taken, the results of the interim report on the preliminary evaluation is a fraction of the claim of €3.35 billion made by the insolvency administrator. Secondly, in principle, we are open to an out-of-court settlement on reasonable terms. While we cannot ascertain at present if and at what terms such a settlement might be possible, we have accrued provisions based on a range of our best estimates as to the order of magnitude at which we believe we could potentially settle the case now that the interim report on the preliminary evaluation is available to both parties. Coming to free cash flow from continuing operations, it came in at €227 million in the September quarter after €192 million in the quarter before. For the entire fiscal year 2018, we recorded €618 million, including the proceeds from the sale of the largest part of our RF power business to Cree. In September, we repaid our outstanding €3 million bond, which we had issued in 2015 to refinance part of the International Rectifier acquisition. Following this, our gross cash position as of September 30, 2018 amounted to €2.5 billion. Net of financial debt of €1.5 billion, our cash position stood at €1 billion. Our reported after-tax return on capital employed came in at 20.0% in the September quarter. For the entire year, the figure was 20.5%. Let me now hand back to Reinhard, who’ll comment on our outlook.

Thank you, Dominik. Assuming an exchange rate of $1.15 for the U.S. dollar against the euro, we expect revenues to grow by 11% year-over-year plus or minus 2 percentage points. Breaking it down by division, ATV growth will be – exceed group average. For PMM, we’re seeing growth at above the group’s average rate, whereas IPC should come in a bit below. For DSS, we project revenues to decline by a mid single-digit percentage. At the midpoint of the guided revenue range, we expect our segment result margin of 18% of sales. Growing our business strongly goes hand in hand with consistently expanding our manufacturing capacities. For investment, which include also capitalized development cost, we expect an annual amount between €1.6 billion and €1.7 billion to exploit market opportunities also in the medium and long-term. The implied investment to sales ratio will be about 19.5%, but will be in line with our target value of 15%, if adjusted for above trend line revenue growth. Investments into major buildings of €200 million, including the new clean room in Villach, as well as about €100 million for incremental revenue opportunities and structural changes in the revenue mix. Our guidance for depreciation and amortization for the fiscal year 2019 is around €1 billion, sequential increase being driven by growing investments. Now to the first quarter of the current fiscal year. We expect revenues to seasonally decline by 4%, plus or minus 2 percentage points, again, assuming a U.S. dollar exchange rate of $1.15. For PMM and ATV, the expected decline is slightly less and group average. IPC and PSS revenues are expected to decline more than group average. At the midpoint of the guided revenue range, we expect the segment result margin of 17.5% of sales. Now a bit more color on the Siltectra acquisition. The company has developed a technology called Cold Split, which allows to cut silicon carbide crystals very precisely and efficiently nearly without any losses, especially compared to sawing. This technology can be used in two ways. One, for wind wafering, which means to cut the boule into wafers using significantly more wafers than the conventional approach. The other use case is to lift off a very thin layer from the top of the wafer at the end of the chip manufacturing process and to use the remaining wafer once more. The sin layer, which contains the active device is finished applying our special thin wafer technology know-how. This two-out-of-one concept is very important as wafer supply would be a limiting factor even longer-term, especially in silicon carbide where ramp in a larger-scale in the field of electro-mobility. Siltectra is thus a perfect example of our acquisitions strategy combining strategic, financial and cultural fit. We will work on industrializing Siltectra’s technology in the coming years at their site in Dresden and at our fab in Villach. Over the time, further application for the Cold Split technology might emerge, such as boule splitting or the use for other materials than silicon carbide. To be clear, however, we have no intention to step into the manufacturing of raw wafers. Ladies and gentlemen, let me summarize the key points. Infineon has completed a very successful 2018 fiscal year. Our business grew above the historical trend line and we could combine this momentum with increased profitability. Based on a careful assessment of all indicators available to us currently, we adopt to a cautiously optimistic stance. Looking forward to 2019, we reckon that we can deliver another year of double-digit growth. The demand situation in core power business, while not as frothy as maybe a quarter ago is still remarkably resilient at present. Infineon does not immune against market forces. Our activities are not be covered from the economic growth. Our predictions are predicated on the view that trade tension and geopolitical uncertainties will not to lead to a significant deceleration of global economic growth. We continue to scrutinize order backlog, inventory levels, lead times and other indicators for signs of possible slowdown in order to adapt our plans in case of prolonged phase of slower dynamic oil downswing. We are not seeing such a scenario unfold at that time. Above all, we are confident with regard to the fundamentals of our business. We will keep executing along the pillars of our strategy founded on technology and quality leadership, strong manufacturing capabilities, as well as application and system understanding. Ladies and gentlemen, this concludes our introductory remarks, and we are happy to take your questions.

Thank you. Our question-and-answer session will be conducted electronically. [Operator Instructions] And we will now take our first question from Achal Sultania from Credit Suisse. Please go ahead.

Hi, good morning. Just a question on the industrial business. You talked about some softness in certain areas. Can you provide us more color as to what you have seen in –like recent changes in the last couple of months? Is it like industrial drives? Is it broad-based weakness across industrial, or is it more about factory automation, any color around that would be helpful? And then secondly, on the margins in PMM, obviously, very strong margins partly held by top line. But can you talk about, like how was pricing evolving in that PMM business? And usually, as we go into the March quarter, you basically have new pricing agreements or the pricing gets reset every year from what I understand. So can you talk about that how we should think about that trend as you go into March quarter?

Achal, thank you for your question. The question about IPC will be taken by Helmut. Briefly let me comment on the margin of PMM. We have adopted prices also already being effective in the last quarters and in the current quarter mainly. General – in general, PMM to a large degree, is following closely the market prices. Nevertheless, as we have already strong portfolio and there is a lot of demand in the market, we have achieved a lot of agreements with customers on demand and pricing on the longer run. So we do not see any specifics for the March quarter, except the market would be turning significantly.

Yes, good morning. Helmut Gassel here. As far as the industrial market is concerned, yes, you’re right, there is a certain slowdown in the industrial drives business. We see a stabilization that – of demand and that leads to slightly higher inventory levels in this sector. And overall, I would say, the – we see a reversion to mean. So meaning, from a very high growth above long-term average, we’re coming back to long-term average growth rate with a slight growth of our market share in this area. Yes, industrial drivers is mainly the reason.

Okay. Thank you.

We will now take our next question from Janardan Menon from Liberum. Please go ahead.

Hi, good morning, and thanks for taking my question. I just want to – perhaps, Dominik about the margin. You’ve seen a strong growth in revenues, but your margin is going up slightly. If you could just break that from a headwind point of view between the increase in depreciation probably a headwind from strong growth of EVs, which has got a lower margin, as well as perhaps any start-up costs that you may be taking on the fab, which may also be getting a model. Can you just give us some of the factors, which are negatively hitting your margin in FY 2019 versus the positive impact coming from the revenue stream? And I have a brief follow-up on Siltectra, if I can.

Okay, Janardan. So you have mentioned most of them, except for one which is still continued wafer price increases. We will see the wafer price increase at a similar rate as we have witnessed in 2018. Otherwise, you’ve already mentioned, the rolling-off depreciation, which we’ve talked about a lot and we invest a much higher percent of revenues than our current depreciation is. That delta will continue to drive a certain uplift in depreciation, and these are the main factors we talk about. I think, what we have to offset that is, of course, a certain assumption about the pricing we already talked about PMM, which by the way is a division where the pricing tends to be more gradual over the year as opposed to 1st of January. There we still see some opportunities in general, and this is how we came up with the 18% guidance for the now running fiscal year 2019.

And is the fab start-up, because you’re obviously accelerating a number of the fab quite aggressively. Is that a big part of that and – versus the effect on 2017 – I’m sorry, in FY 2018 with the 2019 hit from that to be bigger or smaller?

Well, the ramp is continuing, of course, in Dresden. As we still are in allocation in several product categories, we try to do as much as we can there. But we’re not having any ramp-up cost, for instance, of Villach, of course, because we start – just start building and then it would be kind of buildings on a construction and no deprecation at that point in time. So you should not expect this kind of maybe mid double-digit millions of ramp-up cost you’ve seen when we ramp Dresden any – anytime soon.

And as a quick follow-up on Siltectra. By – when do you think that you will be able to industrialize this? And at that point in time, will that mean that you will have a cost advantage on silicon carbide versus your competitors?

I think here the primary direction is to have the availability in material. And you can assume that when you can use of wafer two times that, of course, saves money on the – wafer cost on the other side. Of course, we have quite some extra processing steps required to do so. So please give us sometime in order to industrialize the technology, which is today extremely manual in an earlier phase. Nevertheless, we will use it as soon as possible, but we can comment on this and I would say, sooner or later. But again, you may have seen that the supply is the biggest concern, which is generating the market, and this is our primary focus on – nevertheless, we assume that there will be a productivity potential moving forward, which brings us into a good position in silicon carbide market.

Yes. Thank you very much.

We will now take our next question from Aleksander Peterc from Société Générale. Please go ahead.

Yes, good morning, and thank you for my question. Just a quick follow-up on the acquisition Siltectra. Could you maybe share with us how long it will take for you to industrialize the solution, so that will see an actual product you ship to your customers this innovation? What is the kind of ballpark we should expect in terms of productivity gains? Are you looking at maybe 20% to 30% competitive edge versus the rest of the markets? And then secondly, just maybe briefly on the order intake, we still see very, very – sorry, levels of book-to-bill across all areas. How’s the linearity in this respect? Has it stayed very, very strong, or has it slightly deteriorated would you say versus the previous quarter? Thanks.

So, Siltectra, well, let’s talk about both of the options, the wafering and the two out of one concept for the finished wafers separately. The cutting of boule into wafers can be done much quicker, but this is something where we today do not see a market of boules being available. This may change over time. We may consider to you – do here a certain service to the silicon carbide wafer manufacturers in order to industrialize this step. First, I said before, very close to getting it used. On the other side, even here, we expect that building a machine will take more than one year – a year or two years until it becomes productive. The other part making two out of one, we will start up as soon as possible, but there you have to, I would say, get to learn how to manage the rest of the process. We have tried this out prior to the acquisition that works well, but nevertheless also here it takes time here. But assume at a high volume production will be within the next three to five years being done in our site in Dresden and Villach. Until then, you will ramp the manual production, which is already, I would say, an advantage. Longer terms productivity gains, while difficult to say. You can assume that today you lose on the boule, 50% of the boule regarding sawing, but this is nothing which we would spend with directly from we would most likely benefit in-directly from. This two out of one, I think here, we are hesitant to give to date numbers. But we believe that is a range, which – maybe is not in the high number you mentioned, but in the lower number it can be an opportunity for the longer-term. But again, given the time in order to make the process in total running smoothly on industrial level. Yes, Helmut will answer the second question.

As to the book-to-bill ratio for the September quarter, it was 1.5 numbers, almost equal to the June quarter and both of them actually higher than any quarters before. So yes, it is standing at a higher level still.

Thank you.

And we will now take our next question from Amit Harchandani from Citigroup. Please go ahead.

Good morning, ladies and gentleman. I’m Amit Harchandani from Citi, and thanks for letting me on. First, if I may, I just wanted to go back to the FY 2019 outlook and understand it a bit better. My understanding was that you were so confident on delivering more than 10% growth at an FX rate, assumed FX of 1.2 that – it would have needed a significant GDP slowdown to get you below that number. Here we are at 11%, which probably adjusted for FX equals to 9% at midpoint. And you necessarily aren’t expecting GDP growth to slowdown dramatically. So I’m just trying to square those data points and again figure out what has really changed in the last couple of months? Because your order book still seem quite solid, do you expect greater element of double ordering in there, or what’s driving this increased caution and outlook versus the previous statements and versus what still look like very healthy order book? And I have a follow-up. Thank you.

Yes, Amit, Dominik will answer the question.

Yes. I mean what has changed frankly, since we discussed it is that, we have now baked in higher likelihood of a slowdown in our kind of probability weighted revenue guidance. You mentioned the appreciation of the dollar, I think, this is a little bit of a result also of the weaker outlook for economies outside the U.S. The U.S. is still doing quite well in terms of GDP growth. So I would argue that these two are a little bit of communicating tubes. It’s a little bit unfair to just pick the kind of currency impact, while completely neglecting the fact that, that is a higher likelihood of a slowdown. And to some degree, we have to kind of probability weight that is not one single scenario, but a certain spread of scenarios in our guidance here. And we thought that if you guys in the capital markets have such a strong conviction that things will slow down, it would be not wise to take a certain haircut for that.

Okay. And secondly, if I may, with respect to the part of the business that are looking to you at allocation at the moment, what is the degree of confidence in terms of lead times, because you’ve talked about lead times still stretching. Looking at the order books, it does seem like it’s very strong out there for this market. Would it be fair to say that we shouldn’t expect lead times for these businesses and allocation to come back anytime in the next fiscal year? Or put it differently, when do you expect the lead times for your overall business to normalize? And what would be your best guess at this stage?

Well, Amit, I think this is a very difficult question, because overall business we have today and we even appreciate that in automotive, a large portion of our business is normal. We do – are not in allocation for microcontrollers and quite some of the smart power business, while we are for MOSFETs and IGBT modules. In PMM, we expect that it will continue to stay up. It is very difficult to give an estimate on this, but we expect –we even hope that the capacity increase will helps us to come back to more normal lead times, let’s call it like this, in the timeframe of the March to June quarter.

Thank you, gentlemen.

We will now take our next question from Jérôme Ramel from Exane BNP Paribas. Please go ahead. Jérôme Ramel: Yes, good morning. Quick question on automotive. You’re guiding for Q1 revenues to be – the decline to be stronger than the rest of the group. But for the full-year, you expect automotive to grow faster than the other division. So could you help us to understand why are you so confident to a very strong acceleration in the second-half of 2019? Is it specifically due to some ramp-up of EV Europe or if you could shed some light on these dynamics? Thank you.

So, Jérôme, thank you for your question. The ATV will be answered by Helmut.

Yes, Jérôme, I think the decline – sorry, the decline in the first quarter for automotive is pretty much in line with the group. So I’m not sure how you deduct that. It’s going to be higher. Nevertheless, it’s a seasonal decline that we always have. And in the last quarter of the calendar year that also is true for automotive. On a year-to-year comparison, automotive still show significant growth in the first quarter of our fiscal year.

But on the other side, Jérôme, we always see that in the year’s end the automotive, at year-end customers, let’s say closing their stores. And therefore, stocks – and therefore, we expect that the number of revenue in those days in quarter one are not so many.

We will now take our next question from Adithya Metuku from Bank of America. Please go ahead.

Yes, good morning, guys. Two questions if I could. Firstly, just on the Siltectra acquisition. Can you talk a bit about how unique this technology is? Who else has this in the market? I just want to get a sense of – I mean, is this going to give you some kind of structural advantage, or is this – I just want to see how this changes your competitive position three to five years out? And secondly, just – I was just looking at ON Semi’s recent slide deck. And it looks like, they’re also talking about 300 millimeter investments. I just wanted to hear your thoughts on what the thinking might be there? You always said that ON Semi doesn’t have the capacity to invest in 300 millimeter. Any thoughts around that? And any thoughts around how what your competitors are doing on 300 millimeter would be super helpful? Thank you.

So, Adithya, thank you for this question. Jochen will take the question on semi.

Yes, hello, this is Jochen Hanebeck. Yes, we do hear some announcements here and there. In China, two, three groups talking about 300 millimeter you quoted on as we cannot really comment on their plans. But we feel very confident that with our capacity and our capacity already available and planned, we are here in a clear lead situation. Thank you.

So the Siltectra, the – how unique is the Cold Split. I think, Siltectra, the only approach, where you can do the process at the end of the wafer process, I mean the chip manufacturing. There are other ideas in the market and you can read a lot. We have tried out many, I would say, considered all of these be prior to our acquisition. I think here this process is very advanced compared to any others. Maybe there is one, which could be used for wafering. That’s I think everything to be commented. Here the advantage we believe is while anyhow you have to grind back a silicon carbide wafer at the end of the process. So this cutting it off, saves a lot of money even potentially in the process, but again, it’s – it is adding quite some effort also. So we believe it will – similar as in 300 millimeter thin wafer technology at a significant competitive edge in the manufacturing capabilities. Performance-wise, I think you can achieve a good silicon carbide MOSFETs in many ways. But here we will have an advantage in material efficiency and device performance for sin layer.

Understood, very clear. Just one quick follow-up, if I could. Just on CapEx for 2019, you’re saying CapEx will be €100 million higher – well, €100 million of the €300 million will be for revenue upside. So it seems a bit like you haven’t given much color on the revenue upside, but you are already factoring in higher CapEx and you’re giving us color on that. So that seems a bit conservative. I just wondered if you could give us some color on what the revenue upside should be we should think by that as we go through 2019? Thank you.

Yes, Dominik, please.

Yes, you might recall in the Capital Markets Day, for example, we basically had three buckets. We had the linear formula, which is, I think, well known to everyone by now. We said there is a certain investment budget for major building investments that includes front and clean rooms, as well as major office buildings. And last but not least, we mentioned a low triple-digit €1 million amount for exactly what you referred to in your comment. So what we basically do is, we use sum of all these three buckets. We basically stick to that linear formula. We add then a couple of hundred million for the building investment. And then we also basically have to get ahead of the curve again and make sure we debottleneck. And yes, you’re right, we never can plan exactly where our revenues come out, and it’s very detrimental if we lose certain upside revenue opportunities and this is why we always need to have a certain idea about creating some flexibility and this is embedded here. But obviously, we cannot guide for that kind of upside scenario, but it’s of course very much dependent on the macroeconomic environment.

Understood. Thank you.

We will now take our next question from Johannes Schaller from Deutsche Bank. Please go ahead.

Yes. Good morning. Thanks for taking the questions. You talked, I think, in the past about the amount of unconfirmed orders you had on top of your book-to-bill, maybe I missed that. But can you just give us an update on that to give us a sense how big the order intake could potentially really be? And now that you’ve actually talked about some customers canceling orders. Can you talk us a little bit through how the process then worked to replace this – with demand from other customers? Was that relatively smooth going from one customer to the other, or did you actually then face a lot of other cancellations as you try to kind of allocate that capacity to other customers? Any kind of experience to get a bit of a feeling kind of how real the order book really is that – would I think be quite helpful? And the second question just on time of flight. I mean, we’re nearing the beginning of next year Mobile World Congress coming up. Can you give us any sense of how you’re thinking about design wins here in the Android camp for next year? Thank you.

Mr. Johannes, thank you for your question. The topic of unconfirmed order basically we – in the total, we have not seen a significant change in the total amount of unconfirmed orders in the last time. So I think here, no big changes. I think, we never comment on the total amount of the unconfirmed orders here. Regarding cancellations, I would say, we have seen some cancellations in the last quarter. For us, it is a little bit difficult to differentiate between those who had been coming due to the price increases results who may even have been affected by, I would say, the business – changes in business environment. So we believe currently, we do not see a significant cancellation. We see the typical ship outs, which we have pretty normal, expecting those – expect in those areas, which we mentioned for IPC regarding the automation area. The – what we definitely see is a very common picture on the year-end. The – I do not want to increase inventories. So we have a certain overlay by this very normal, I would say, behavior. The time of flight design wins will be commented by Helmut.

Yes. I think, we’re very – in a very early stage of time of flight. We always said it’s something of a wild card of our business and it remains like that. So while we are heavily working with some of the phone makers to define use cases and right products for it, it is still in an early stage of the development of this market.

Johannes, I think to iterate one. The – we are successful in getting in, but the question of the use case is something which we have to wait and see how well this is adopted by the end consumers. So it is not a matter of technology only.

Thank you. That’s clear. Just a question, maybe a follow-up on the cancellations. I mean, generally, do you find it easy in case where you actually have cancellations to allocate that capacity to another customer? I think, that was my actual question.

Well, it depends. The structural changes in manufacturing are the limiting factor. And within the MOSFET camp, you can reallocate reasonably well. When we just talk about power, when you have IGBTs to MOSFET shifts, then the reallocation is significantly more in – challenging and also drives to a certain level, the invest that we can balance better with these shifts. Of course, the higher integration part are not in the area of being exchangeable, but the majority of our very high integration part in the outsource. But within, I would say, there is – we are working on improving that ratio and the flexibility in the fabs.

That’s very helpful. Thank you.

Ladies and gentlemen, this does conclude today’s question-and-answer session. Now I would like to hand back to our speakers for any additional or closing remarks.

Okay. I think we have room for one for question, So I see there’s a little queue, so please take on one more question, operator, please.

Perfect. Thank you, sir. We’ll now take our final question from Stéphane Houri from Oddo. Please go ahead. Stéphane Houri: Yes. This is Stéphane Houri from Oddo. Actually I’m very lucky today. So this is a question about Qimonda, because you’ve booked a new provision. So I understand that you confer a lot more on the story. But can you just remind us how much in cumulative you booked in terms of provision? And what are the next steps and the timeline according to you? Thank you.

So, as I mentioned, we have basically taken a loss related to that of €159 million in Q4. There were some provisions already on the balance sheet. And you will see it in the annual report that there was basically – there will be about €180-plus million in total that includes all the related topics, which are not necessarily only related to that impairment of capital topic. We’re till battling with the insolvency administrator. So the reason why we changed, I might highlight that is that really we changed our assumption from – with regards to the likelihood of finding a settlement. Before it was clear that there’s a very significant huge bid ask spread between us and the insolvency administrator, which made it remotely likely that we could settle at some point in time. And basically, the reason why with the new expert opinion, we have now taken a different view is that, that expert opinion give some indications to both sides. They need to consider, so we’re not kind of in that total vacuum of potential outcomes anymore. I have to say, though, that there are some points still open, the expert opinion does not cover all the points. So there will be discussions back and forth going forward. But for the time being, we felt it’s prudent to assume that a settlement is more likely than not at a reasonable valuation. Stéphane Houri: Okay. So just to make clear the €180 million do not include the €159 million?

They do. I just wanted to mention, there are some other topics related to Qimonda, because there was different legal entities affected for some we’ve already settled. So this is why I don’t want to go into more details about that. Stéphane Houri: Okay. Thank you very much, Reinhard.

We do have time from one further question from Tammy Qiu from Berenberg. Please go ahead.

Hi, thank you for taking my question. So you mentioned that China’s new energy car has been seeing strong demand from here. So I’m just wondering, what your market share status in China? Because lots of internal rights has been working on some of the solution. And also, at the same time, going forward, because Chinese economy is currently a little bit uncertain, so what’s your view of that market demand going forward, because government subsidy may happen at a very lumpy basis? Thank you.

Thanks, Tammy. I hand over to Helmut with these questions on the market

Yes. Thank you, Tammy. As to our share in the new energy vehicle market, I would say, generally, we have a very high share in the new energy vehicle market without going into very specifics there. So we are benefiting significantly from the high growth rate of that market. There’s something like a 55% growth in the September quarter, again, in the new energy market in China and we are strongly benefiting. What we have stated before is that eight out of 10 large volume platforms globally based on our products. So that gives you a certain indication without going to details too much. With respect to China overall market, yes, there is a prediction of the GDP growth in China going down to some extent in the next year –or has come down sort of in the current year to 6.2% in – it will really come down to 6.2%, sorry, in 2019 after 6.9% in 2017. So – and definitely China is a very important market for us as it consumes roughly 50%, 47% of the global market of semiconductors. Nevertheless, with respect to our very important applications like new energy vehicles or infrastructure projects, as also mentioned by Reinhard in his intro statement, we remain confident that China will be a good growth market for us.

And not so very good, Tammy, a lot of the semiconductors are more or less exported again based on electronics worldwide. So I think, this is not a one-to-one relation.

Okay, thanks for the answer. And the second one I would like to ask is, from a silicon carbide perspective, today you did this new acquisition. I’m just wondering what’s your setting of the silicon carbide product portfolio? Do you need to do more M&A or partnership with the others to further improve the portfolio to be competitive enough, therefore, keeping your market share in power semi?

Well, we’re pretty strong in the portfolio. We have been setting up running according the priority of applications. One is, of course, the automotive segment. The other is the renewable energy. We believe that we have already a pretty profound portfolio there. We will extend it to higher voltage. But to be make it short, we don’t need acquisitions to strengthen our silicon carbide portfolio. We have a very good expertise there in order to do this by ourselves.

Okay. Thank you.

And this does conclude today’s question-and-answer session. I would now like to hand the call back to Infineon for any additional or closing remarks. Thank you.

So thank you very much to everybody for the questions. We do indeed conclude our fiscal year-end conference call with that. For further questions, please feel free to contact us in the IR team here in Munich. So once again, thank you very much, and have a good week ahead.