Jürgen Rebel - Corporate Vice President, Investor Relations Reinhard Ploss - Chief Executive Officer Dominik Asam - Chief Financial Officer Arunjai Mittal - Member of the Management Board, representing Region, Sales, Marketing, Strategy Development, and M&A

Sandeep Deshpande - JPMorgan Kai Korschelt - Merrill Lynch Gareth Jenkins - UBS Jérôme Ramel - Exane BNP Francois Meunier - Morgan Stanley Janardan Menon - Liberum Andrew Gardiner - Barclays Johannes Schaller - Deutsche Bank Achal Sultania - Credit Suisse Günther Hollfelder - Baader

Good morning, everyone. Welcome to the conference call for analysts and investors for Infineon Technologies, 2015 Fiscal Second Quarter Results. Today's call will be hosted by Dr. Jürgen Rebel, Corporate Vice President, 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 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 the results anticipated or projected in any of these statements, and they should not put undue reliance on them. For a detailed discussion of important factors that could cause actual results to differ materially from the statements made in the conference call, please refer to our quarterly and annual reports available on our website. At this time, I'd like to turn the call over to Infineon. Please go ahead. Jürgen Rebel: Good morning, ladies and gentlemen. Welcome to the conference call for analysts and investors to Infineon Technologies 2015 fiscal second quarter results. With us today, we have Dr. Reinhard Ploss, CEO; Dominik Asam, CFO; and Arunjai Mittal, Member of the Management Board, representing Region, Sales, Marketing, Strategy Development, and M&A. We will start with an introduction by Dr. Reinhard Ploss, then the entire management board will be happy to answer your questions. A recording of this conference call and a copy of our 2015 fiscal second quarter results and earnings press release will also be available on our website at infineon.com. As we are providing some more explanations with regards to the first time consolidation of International Rectifier today. The introductory remarks by Reinhard and Dominik might take a bit longer than usual. Reinhard, please go ahead.

Thank you, Jürgen. Good morning, everyone and welcome to the telephone conference of our second quarter fiscal year 2015 results. This is our first quarter about Infineon and International Rectifier are one group. We are very happy to welcome the employees of International Rectifier as part of Infineon once more. The teams has been growing together from day one. As usual, I will begin today's call with some remarks and group division results on market developments and our achievements during the quarter. Dominik will then comment on financial before I conclude with the outlook. After that, we will be happy to answer your questions. The excellent traction we saw in the first quarter of this fiscal year continued through the second quarter. For the new Infineon group, sales were €1.483 billion up 31% from the previous quarter. This increase was not only driven by the consolidation of International Rectifier's business but also by the typical seasonal pickup tailwind from the strengthening U.S. dollar and significant market share gains by our Chip Card & Security business especially in payments. Segment result for the new Infineon group was €198 million. The relatively low increase in segment result compared to the increase in revenue quarter-on-quarter is a consequence of several effects. In the first quarter, we had a positive one-time effect from improved financing conditions for our Campeon corporate headquarters. Furthermore, second quarter segment result was negatively influenced by the yearly price exchanges materializing at the beginning of a new calendar year and higher provisions for employee bonuses, a consequence of the excellent business traction. These impacts were partially offset by the more favorable exchange rate of the U.S. dollar against the euro and a strong increase in segment result from our Chip Card & Security division. Also, International Rectifier contributed positively to the segment result. There was an expected dilutive effect on margin. Consequently, this resulted in the segment result margin of 13.4%. In addition to the strong sales and absolute earnings performance, bookings were very solid. The book-to-bill ratio for the second quarter of the 2015 fiscal year came in at 1.2 for an absolute bookings figure of almost €1.8 billion. We will now take a look at the division starting with Automotive. Automotive revenues were €598 million for the quarter. The quarter-over-quarter increase of 15% was driven by the typical seasonal pickup, positive contribution from the appreciation of the U.S. dollar, and also the consolidation of International Rectifier's automotive business. The continued strong demand for German premium brands and the healthy car markets in China and the U.S. and Western Europe supported the seasonal pickup. Bookings were strong during the quarter that the book-to-bill ratio coming in at almost 1.2. The segment result dropped to €64 million from €72 million in the preceding quarter producing a segment result margin of 11%. This was due to the absence of the corporate headquarter lease effect present in the fiscal first quarter and the typical impact of the yearly volume price agreements offsetting the second quarter of the fiscal year. On top of this, it has to be noted that in contrast to other divisions, the segment result of the automotive business does not really benefit from an appreciation of the U.S. dollar against the euro. This is a consequence of the high revenue share in Euros of our automotive business. I'm very proud to announce that Strategy Analytics ranked Infineon again second in the annual survey of the Automotive semiconductor market for 2014, narrowing the gap to the number one by more than half. The distance is now only 1.5 percentage points compared to 3.7 percentage points in 2013. Including International Rectifier, Infineon held 10.5% market share in 2014. We also increased the distance to the current number three in the market significantly. Excluding the market share gain from the International Rectifier acquisition, we organically added more market share than any of the top five competitors. Moreover, we further strengthened our system leadership in advanced driver assistance systems. We bought a small stake in the Vienna-based TTTech Computer AG. TTTech is an engineering service provider to the automotive and aviation industry, who were the key development partner for Audi regarding [indiscernible] and autonomous driving. For example, TTTech was a partner for Audi to develop the sensor fusion control unit for Audis autonomous driving prototype shown at the CES in Las Vegas. We are proud that Infineon's AURIX microcontroller makes this sensor fusion control unit 100% reliable as not all key components are automotive grade and need a little help from our AURIX. This collaboration nicely complements our highly reliable automotive products in sensors, power and microcontrollers. We also strengthened our leadership in automotive power semiconductors. We are now the first company worldwide manufacturing Automotive Power MOSFETs on 300 millimeter thin-wafers. The 40-volt OptiMOS 5 MOSFETS qualified on 300-millimeter thin-wafers are optimized for CO2 reduction applications. Let me now comment on Industrial Power Control. The March quarter saw €241 million in revenue, up €51 million from the previous quarter. This increase is driven mainly by the consolidation of International Rectifier's industrial business, the favorable effect came from the appreciation of U.S. dollar and a normal seasonal pickup. Sales were supported by healthy demand in major home appliances and the better-than-expected seasonality in renewables, driven by China ahead of an announced reduction in feed-in-tariffs in June 2015. We saw a healthy order intake during the quarter with a book-to-bill ratio improving to almost 1.2. The segment result was €20 million declining quarter-on-quarter by €8 million. This is a consequence of the absence of the favorable Campeon headquarter lease effect in the first quarter and the effect of the consolidation of International Rectifier's industrial business, which has been lacking economies of scale to date. In combination with the other intelligent power module business we have, we will achieve a much better cost position due to the economies of scale as part of the integration plan. This plan is supported by recent design wins in the major home appliances market during the quarter. Infineon's module and the former International Rectifier's IRAM, intelligent power modules complement each other. Consequently, we won business with the IRAM modules at major air conditioning customers and with Infineon modules kitchen white goods manufacturers. Furthermore, we bought the remaining shares of Korea-based intelligent power module maker, LS Power Semitech, now we're the sole owner of the company. I'm very pleased to report that after increasing our stake to majority and consolidating the company since June 2014, the segment result margin we now generate on LSPS revenues is accretive to the IPC segment result margin, demonstrating our potential to grow profitably in modules-provided goods. We are confident that we will repeat this success for International Rectifier's intelligent power module business in combination with our own IPM business, we can achieve better. Another highlight is that the design wind momentum for traction and drive in the first quarter continued during the second quarter. Moving on to Power Management & Multimarket. Revenues for the fiscal second quarter increased €474 million from €280 million from the preceding quarter. This significant increase is a result of the consolidation of the majority of the former business from International Rectifier, but also from the appreciation of the U.S. dollar against the euro and a good seasonal upturn. With this, we saw a strong seasonality in high-voltage and medium-voltage MOSFETs. We also saw strong demand in RF power amplifier for base stations, and essentially all components we sell into smart phones. This includes silicon microphones, RF CMOS switches, and low-noise amplifiers. The segment's book-to-bill ratio for the fiscal second quarter came in, again, at about 1.1. It had been above 1 for five quarters in a row. As a result of the strong revenue increase, the PMM segment result increased to €82 million, up from €48 million in the previous quarter. The result in Segment Result Margin increased 1 percentage point over fiscal quarter one to 18%. I'm proud to highlight a first example of the combined strengths of Infineon in International Rectifier. Already in the first quarter as one team, we jointly achieved to design in at major telecom equipment customer combining an Infineon DC-DC digital power management controller, the power stage from International Rectifier exactly matching the desired feature set of the customer. This shows the strength of our system leadership in power semiconductors significant design wins for L&As and RF Siemens switches at major and rising global mobile phone OEMs were achieved. The design win momentum for RF power amplifiers at major telecom equipment OEMs continue to serve the ongoing roll-out of LTE. I'm very happy to come to Chip Card & Security now. We saw revenues increase to 38% to €182 million from €132 million at the previous quarter. The strong growth of €50 million was mainly driven by strong demand and payment, mobile security and mobile communication. Certainly, the favorable euro-dollar exchange rate development helped as well. As usually, you know, Chip Card & Security has no contribution from International Rectifier. As such, we are very pleased with the volume increase. Order momentum was again very strong during the quarter with a book-to-bill ratio recording at 1.5. Increasingly, you saw longer-term orders coming in. The segment result jumped by around 80% quarter-on-quarter to €32 million from €18 million in the preceding quarter resulting in the segment result margin of 18%. We are pleased to highlight that our payment business grew by close to 60% year-over-year. With this, the fiscal second quarter marks also the first quarter in a row of a year-on-year growth for our payment business in the range of 40% to 60%. This momentum underlines our still growing market share in the U.S. and growing market share in China. Heading to this, we saw business wins for Infineon's coil on module based payment products. A major highlight for us is that we are delivering the embedded secure element into Samsung's new flagship Smartphone, the Galaxy S6 family. This supports our few - that mobile payment must ultimately involve hard-based security. On top of this, we saw a continued design wins, momentum in government ID projects in Asia and South America. We strengthened our leadership and crafted computing with the design win for Infineon's OPTIGA trusted platform module for Microsoft's Surface Pro 3 tablet. Trusted platform modules are a key component for the coming Internet of Things. Ladies and gentlemen, this concludes the business review. Let me now hand over to Dominik who will comment in more detail on second quarter financials.

Thank you, Reinhard, and good morning, everyone. The new Infineon group posted revenues of €1.483 billion, a sequential increase of €355 million or 31%. Included in this top line development is again, a significant benefit from strengthening of the U.S. dollar against the euro. The average U.S. dollar-euro exchange rate for the quarter was about $1.13. From closing through quarter-end, International Rectifier has contributed €199 million to group revenues. Gross profit, research and development, and selling, general and administrative expenses were mainly influenced by the effects of the consolidation and integration of International Rectifier. Gross profit was €408 million, R&D expenses were €180 million and SG&A expenses stood at €214 million. Included in these numbers are €102 million of acquisition-related amortization and other charges which you can find in the bridge from operating income to segment result in our press release. Of that amount, €54 million hit our cost of goods sold of which again, €35 million are a result of inventories we had to step up to fair market values. While the effect of that step-up should be substantially digested by the end of this fiscal year, we expect to see charges and cost of goods sold also in coming quarters particularly due to our recently announced decision to exit manufacturing in International Rectifier's Singapore wafer-building facility and the Newport 8-inch fab. We anticipate that it will take us until the end of calendar year 2017 to complete the transfer out of Newport. Hence, we will continue to see charges over this time period in the non-segment result. In R&D and SG&A we booked acquisition-related charges of €6 million and €42 million, respectively. These predominantly include amortization of acquisition-related intangibles, special retention plans during the integration phase, restructuring and other integration expenses. Segment result for the second quarter came in at €198 million an increase of 17% quarter-on-quarter whereby the segment result margin was 13.4%. Although the consolidation of International Rectifier's business had a diluted effect on the segment result margin, the business contributed positively in absolute terms pretty much in line with our expectations. As in the first fiscal quarter, the segment result also benefited from the stronger U.S. dollar-euro exchange rate. They were balancing some of the negative effects highlighted by Reinhard already. As we are already realizing synergies on both sides as part of our integration plan, a detailed breakout of the segment result contribution could be misleading from our perspective. As an example, we have not replaced or built up certain previously-planned head count for activities we knew International Rectifier could take care of after closing with our existing staff. We've started consolidating our respective product portfolios very quickly. In fact, we've already decided which products will no longer be available for new designs wins. Revenue development will therefore also be a reflection of portfolio decisions. The only discontinued product on one side, if we are confident we can capture the corresponding revenues with an equivalent product on the other. We therefore focus our controlling efforts on the combined segment result margin of the business lines affected by the integration. We track the integration process on a very granular operational level to ensure we hit the target we've set for the combined activities. Our progress so far makes us confident that we can bring the incremental segment result margin from the acquisition of International Rectifier at least to our own target margin level of 15% through the cycle at the latest by fiscal year 2017. We can therefore confirm the target that we've set for ourselves and communicated the designing in August of last year. The operating income was €85 million as non-segment result came in at negative €130 million. This was mainly due to the acquisition-related expenses which amounted €202 million, which I've already commented in detail. Let me add some words on depreciation and amortization. Depreciation and amortization was €199 million, up from €141 million in the previous quarter. Within the increase of €58 million, €33 million are related to the purchase price allocation. This number does not include a €35 million non-cash impact on COGS stemming from the step-up of International Rectifier's inventories, which I had mentioned earlier. The financial result was essentially driven by the financing expenses for the acquisition of International Rectifier and showed a negative figure of €16 million. Within this figure, there is a negative one-time effect of about €7 million from the refinancing of the euro-denominated bridge loan via two euro bonds successfully placed in March. A €500-million euro bond with the term of seven years and a coupon of 1.5% with interest payments always due in March, and a €300 million euro bond with a term of 3.5 years and a coupon of 1% with interest payment always due in September. The second major contributor is the recurring expense for the $934 million term loan. Going forward, we expect a recurring negative financial result of about €10 million on a quarterly basis. Given the record low interest rate environment, and the very successful refinancing of the bridge, this is lower than what we had assumed at the time of signing last August. Continuing with tax, we recorded an income tax expense of €2 million for the quarter. Net income from continuing operations was €69 million, down from the previous quarter's €130 million. This is again a consequence of the acquisition-related expenses within non-segment results as explained before. The net income from discontinued operations was negligible. Basic and diluted EPS was €0.06 for the fiscal second quarter, down from €12 in the fiscal first quarter. As these metrics are heavily distorted by acquisition and integration-related effects, we are introducing an adjusted earnings per share measure which eliminates all effects recognized in non-segment results and related tax effects. This is to show the operational performance of the combined business on a more comparable basis, the adjusted earnings per share, which is fully diluted were €0.13 for the March quarter compared to €0.11 in the March quarter one year ago. This reflects the strong business performance of the old Infineon and the already accretive effect of the acquisition of International Rectifier. Free cash flow from continuing operations for the March quarter was negative €1.880 billion after a negative result of €171 million for the December quarter. Of course, the high negative number in the March quarter is almost entirely due to the payment of the purchase price for the acquisition of International Rectifier. In the prior quarter, the EU Antitrust final and partial settlement with the Qimonda insolvency administrator had negatively affected free cash flow. Please note that net cash provided by operating activities stood at €135 million, given the very strong organic component of growth we had to invest in the required working capital. Actually if you eliminate the dollar effect in International Rectifier, the old Infineon, so to speak, has grown at about 9% in the March quarter, sequentially compared to the December quarter. Furthermore, our activities to integrate International Rectifier in an expedited session require additional cash outlays. The payment of the purchase price and the financing thereof had a significant impact on our liquidity. At the end of the March quarter, the gross cash position stood at €1.656 billion, declining from €2.107 billion at the end of the December quarter. The cash drained by the payment of the purchase price and a dividend payment was only partially offset by the positive operating cash flow and the bond issuance. Consequently, our net cash position declined from €1.917 billion at the end of the December quarter to a net debt position of €176 million at the end of the March quarter. We are confident that by the end of the fiscal year, we are, again, well in positive net cash territory, fulfilling our structural financial target of zero or positive net cash. As you know, our other capital structure target, a gross cash of 30% to 40% of revenue then gross debts of maximum two EBITDA turns. All these targets are fulfilled or will be by the end of this fiscal year. Finally, let me address our after tax return on capital employed or ROCE. It stood at 7% for the second quarter after 18% in the December quarter. The decline in ROCE is mainly driven by acquisition-related effects. Firstly, the capital employed showed a steep increase by €2,233 million to €5,202 million. The increase in capital employed reflects the increase in net working capital, as well as the increase of total non-current assets from both property plant and equipment, and from goodwill and intangible assets. Secondly, the net operating profits after taxes, or NOPAT, decreased in the second quarter due to acquisition-related charges in non-segment result. We calculate ROCE by annualizing this quarter's NOPAT by multiplying it by 4, which always states certain acquisition-related costs on an annualized basis. Consequently, this year's recorded ROCE is distorted by this effect. Let me now hand over back to Reinhard who will comment on our outlook.

Thank you, Dominik. Let me now come to the outlook for Infineon including International Rectifier. Based on an updated exchange rate of 1.1 for the U.S. dollar against the euro, Infineon expects revenue to rise between 7% and 11% sequentially for the third quarter of the 2015 fiscal year. All division should contribute higher turnover. At the midpoint of the revenue guidance, the segment result margin should come in at 15%. For the full 2015 fiscal year, we now expect revenues to grow at a rate of 36% year-over-year plus or minus two percentage points. At the midpoint of this revenue outlook, we expect segment result margin to come in at 15% of sales. We want to emphasize that this only includes the figures of International Rectifier from January 2013 to September 2013. As you know, we define investments as the sum of outlays for property, plant, and equipment and intangible as well as capitalization of R&D spending. For fiscal year 2015, our budget has increased to around €800 million to account for a stronger U.S. dollar, the investment needs of the consolidated business of International Rectifier, and the strong demand of our better than anticipated growing business. For the combined business, we expect depreciation and amortization of approximately €750 million for the fiscal year 2015 therein included approximately €100 million related to the purchase price allocation. Ladies and gentlemen, in our last telephone conference in January, I highlighted the tremendous potential that the combination of the businesses of Infineon and International Rectifier present. For this, I was very pleased to highlight first successes on the market already today. This was the design win at a major telecom equipment provider of a system solution for the total power management comprising of an Infineon DC-DC controller and International Rectifier power stage. Moreover, we already offered to one of our Automotive customer and Infineon power MOSFET in a package from International Rectifier. This demonstrates that the combined entities we cannot rest the needs of our customers in unprecedented way. We are also progressing as planned with the integration, a major success of the complete integration of the two sides in distribution organizations effective at the beginning of March ahead of schedule. Since then, all our customers have been served by one phase of the new organization. As a combined company, we offer a broader and product portfolio. Portfolios are highly complementary in areas where we have identified overlap, the consolidation of product portfolio is progressing quickly as we have already decided on which products are to be continued, on which side, and which products are not to be continued. An important aspect is the integration of International Rectifier's manufacturing footprint. The key principle of our manufacturing strategy has been that we only manufacture products ourselves, we can differentiate in terms of cost or performance. Following this guiding principle, we have already taken decisions on the future manufacturing footprint of the combined businesses. We will discontinue manufacturing operations at Techview in Singapore by the end of calendar 2015. We also will phase out the front and wafer production in Newport, Wales in 2017. Therefore, we have started looking for buyers for the Newport facilities. As Dominik already mentioned, we anticipate that certain plant head count on Infineon sites could be filled by staff from International Rectifier, thereby, realizing first synergies. As a consequence of the combined nation of the two businesses, certain functions or tasks are redundant and the affected employees will have to leave the company. Both effects will contribute to the planned synergies we outlay in terms of selling, general and administration, and research and development expenses. We want to reiterate that we are fully committed that International Rectifier's margin contribution is at least in line with Infineon's target of 15% segment result margin over the cycle. At the latest, in fiscal year 2017, we are convinced that we are well on track. We have also shown that the acquisition is accretive from day one if adjusted for acquisition-related charges by combining the strength of our three pillars, system leader in automotive, number one in technology, leader in power semiconductors, and leader in security solutions. We are confident that we'll continue to deliver an 8% long term growth in revenues in a 15% segment result margins through the cycle. We are really excited about the future of our business. Ladies and gentlemen, this concludes our introductory remarks. We want to open the call for your questions. And with this, I'll give it back to Jürgen.

Thank you. Our question-and-answer session will be conducted electronically today. [Operator Instructions] We will now take our first question from Sandeep Deshpande of JPMorgan. Please go ahead, your line is open.

Yeah. Hi. Could you possibly comment on the Chip Card segment. You're seeing significant growth in chip card. What is happening on the product segment there in terms of why there's such a strong growth which we have never seen in the chip card segment before? And then if you can give a comment on the PMM business. You've seen growth in PMM outside the integration of IRF. Could you make comments on that and the longevity of that growth? Thanks.

Yeah, Sandeep. Reinhard, speaking. The chip card, I will make some general comments, and then Arun will go into details. I think, for a long time, we have been working very strongly in the design-ins and the payment card on a global basis. And we have, after some years of challenges in our portfolio, renewed our portfolio very strongly with a lot of I would say dual-interface cards and the high-level of security we can provide with our new technologies there. This after sometime has been accepted quite nicely in the market and we now see the significant growth as well in the absolute business development. And the chip card market is growing the last time, but we have an outstanding business when compared to the market and could gain some significant market shares especially in U.S. with the handover - or the turnover from magnetic stripe to chip-related payment cards, but also on a global basis. So, that is a major driver. But the rest of the business was also doing quite well and Arun now will go into some details there.

Well, thanks, Reinhard. I think you covered most of it. If I were to just summarize it, I would say payment, we see a very good gain in share, U.S. as well as in China. In mobile security, Reinhard mentioned about our design win in one of the new flagship models of mobile phone as well as in the standard mobile communication area where people are moving their SIM cards to mid and high-end SIM cards. Also, there we see traction. This was regarding the segments. And regarding the regions, of course, we see great pull from China here because of our gain in market share there, driven by two factors. One, growth of our European customer base and their success in China as well as our own penetration wire distribution and direct customers in China. So, this kind of summarize the growth in Chip Card. So, it's not a one-time thing. I think it's here to stay if that is the intention behind your question. PMM, you asked about what seasonal trend we see there, this is the classical power kicking in as compared to the rest. Q2 and Q3 calendar years tend to be better or the best quarters for PMM seasonally spoken. So, we see that coming in for power.

Thank you.

We will now take our next question from Kai Korschelt of Merrill Lynch. Please go ahead.

Yeah. Hi. Thanks for taking my question. My first question was on FX. It does look like some of the changes certainly on an underlying basis on your segment guidance is driven by FX. So, I'm just wondering if you could maybe update us what the new pro forma for the acquisition FX sensitivity is for any additional change in the rates that would be helpful. And then the second question was just on the organic growth rate, I couldn't find it anywhere in the statement. Can you break out for us what the organic growth for the combined pro forma business would have been on a year-on-year basis? Thank you.

Okay. So, before I hand over to Dominik, just two general comments. I think, even so, the dollar helped us a lot, we had a real strong organic growth for the Infineon old business. And, here, we see a very strong momentum to continue. But maybe Dominik can go into more details on the various effects.

Sure, Reinhard. First of all, on the U.S. dollar sensitivity, we see that basically the impact on revenues is a little bit higher than previously anticipated. We are talking about maybe €6 million more for every euro cents per quarter that's revenues. If you look at the segment result, margin, we have been previously guiding between €1 million and €1.5 million is now a little bit more than that so somewhere between €1.5 million, maybe €2 million that's the kind of sensitivity for every cent per quarter that is. Now, with regards to the organic growth, if I look at the euro-denominated revenues of course, also there are some nice growth both on the premium side and International Rectifier because of the strong dollar appreciation and the organic growth in the Euros, if you take out the €199 million contribution from International Rectifier and the kind of contribution from revenues, it's about 9% and this is now the sequential one from the December quarter to the March quarter, so that's better than normal seasonality. So we did have also adjusted for all these effects, a very, very strong revenue quarter in the combined company.

Thank you.

So we mainly commented on Infineon old business. We also saw that the business of IR stands very solid, all these and also continues growth as expected. Maybe Dominik also can elaborate on this.

One think you should not forget is that the €199 million because of sale in some research report people saying that might be low. We missed a couple of weeks so this is not a full quarter. There will be some kind of full quarter effect in the June 10.

Okay. Thank you, Dominik.

We will now take our next question from Gareth Jenkins of UBS. Please go ahead.

Yeah, couple if I could, thanks for taking the questions. Firstly, I just wonder whether you could give a bit more detail around the divisional splits for IRF, so how much revenue is contributed for each of them. I understand the segment income is a lot harder than maybe some revenue side. And secondly, it sounds like you're extracting revenue synergies perhaps ahead of your original plan. Could you talk about the discontinued products and whether those will maybe offset some of the synergies going forward or whether do you expect those synergies to be on a net basis a positive overall? Thanks.

So I think you - Arun will go into the details, which we can communicate.

So Gareth, I think we have agreed that we stay with the total picture because the divisions have already integrated International Rectifier into their numbers. So to give you an indication, what I can say is that PMM is affected the most by the integration of International Rectifier, and the next, ATV and IPC are roughly in the same order of magnitude that they are affected. So, if I had to split this €199 million, which Dominik was saying, a majority, more than 60% to 70% will be PMM-related, and the rest is split half-and-half between IPC and ATV. In terms of discontinued products versus new opportunities here, just to be really clear, the discontinued products are not something we stop selling. It's just what we put as not for new designs. This means as long as these products are in our manufacturing, we will continue to make revenue out of them. So, please do not calculate with any dissynergies associated with these discontinued products. They are not to be discontinued in a sense of stop manufacturing, they are just for not for new design, that's all. So, we will fulfill all customer obligations, which IR had before and give them alternative recommendations. We are also, of course, positive about small overlay of the portfolio. It's low-single digits where we see this overlay of the portfolio in terms of products, and this is something we will manage without any dissynergy effects.

All right. Thank you.

We will take our next question from Jérôme Ramel of Exane BNP. Please go ahead. Jérôme Ramel: Yeah. Good morning. Could you help us modeling the OpEx going forward? How much of synergy in terms of OpEx do you still expect to implement in the coming quarter? Because if I look at your guidance, it seems that assuming that the OpEx could stay more or less flattish or slightly increasing. But you're going to have a significant increase of the growth margin maybe almost to 40%. So, I just like to understand the math to reconcile with your 15% segment profit margin.

Jerome, your question will be taken by Dominik.

Yeah. If you - good question. If you look at the kind of full-year guidance, the 15% margin, you actually see that there needs to be some nice sequential improvement in segment result over the June and even the September quarter. If you look at the guidance for the June quarter, you'll see that there's already some significant improvement. And then, further in September if you back-solve from the total a year 15%, you'll see that you need to be at 16% plus to get to that 15% midpoint of the guidance for the full-year. So, where did it come from? Yes, there is a good lift in OpEx. We actually have very interesting situation in the March quarter that our productivity was running quite well. And we normally then adjust the inventories to the newer cost so to speak. And there was a pretty strong productivity push. And while that is kind of weighing on our March numbers, this is then an upside in the June and the September quarter. So, yes, there is a good margin expansion and gross margin coming in the coming quarters. We have not seen a full OpEx synergies in our OpEx yet. However, given that the business is growing quite fast, don't expect that OpEx is going down or something. But you can see it kind of grow more moderately than usual with that type of growth because we are going to also take out some costs. We've actually had a week ago or so what we call Day 100 where we really kind of put the new organization in place and there were some redundancies included in over time, these redundancies will exit our P&L, so there is some upsides there. Jérôme Ramel: Okay. Thank you very much. And maybe I have a follow-up. Could you update us on your initial view of shifting from capacity from International Rectifier to fulfill your 300-millimeter fab? So, what time or write-on would you put on 2017? How long will it take to qualify your product? And how much of revenue that we're talking about? Is it like $300 million to $400 million? Just to give you an idea of where the process stands?

So, Jerome, very simple. We've -first of all, check about the outsourcing strategy which has been started by International Rectifier where we want to use at best in order to balance our CapEx for this. We also both decide and very clearly only on those products which will significantly benefit from this 300-millimeter footprint. Regarding the transition, when - assuming that the Singapore facility can be ramped down pretty quickly without significant invest to be taken and merged into our Kulim manufacturing for the [indiscernible] we have already there. So, the CapEx here will be extremely moderate, while on the ramp down on the Newport facility, we have still to make our own assessment where the products will finally end up. On the other side, we have in 300 millimeter I think set up quite nicely already. So, we can integrate most of the technology, several technologies from there. So, just to give you one number, about 50% of IR chips are made in Newport, so when complete the transfers that means what we will have to operate as a transfer project. Jérôme Ramel: Thank you very much, and congratulations. Thank you.

We will now take our next question from Francois Meunier of Morgan Stanley. Please go ahead.

Yes. Thank you. The first question is regarding the margins in Automotive. I understand that in terms of rectifiables, it's not very good in terms of margins. So, probably like it was 100 bps of dilution. But this quarter you printed 400 bps of decline in margins. So, is it related to low market share gain where you have to spend more R&D to win customers? That's my first question.

Yeah.

Yes, Dominik here. Yes. Don't forget that in - first of all, you have to understand that the dollar effect is not helping ATV on margins, because then we have a high share of euro-based revenues, and if you then offset the cost, which is also partially U.S. dollar-based, the only segments in our business which is not benefiting in margin, they do benefit, of course, in absolute segment result and in revenues, but not on the margins side. Secondly, they're the segment where the kind of annual price reductions are really very concentrated around the 1st of January, so you see that clearly happening. Then lastly, they're also strongly affected by this effect I was just mentioning on the inventories where we had very good productivity on our power technology, and therefore, there was some dip because we had to adjust, basically, the cost base of the inventories, which is then giving you better gross margin in quarters to come. So, the good news is, you will also see a recovery on that margin. We clearly see a trough here, and yet there was also diluted effect of the acquisition of International Rectifier, and we have very clear plans how to fix that.

Okay. Thank you. Well, I'm not sure if you can disclose that obviously because it's - I think it's very complicated this morning with all those numbers. But you said €199 million revenues for International Rectifier. Is it okay if you could tell us what's the EBIT would have been?

I mean, I said, I cannot really tell you. The one thing I can say is that it's pretty much in line with our planning. And if you do the math, and do some back of the in-road calculation, you actually can guess that you have to be in kind of low-double-digit territory already.

And for the year, I think before you were guiding for 8% growth for Infineon ex FX. Is it possible to give us an idea of what it is today, ex FX and ex International Rectifier?

Actually, ahead of the 8%. I don't want to give you more specific data, but we are slightly above that. So, we have done also organically without FX better than we had initially planned.

Okay. I would have guessed a bit higher, but I wanted to have a bit of more details. That's all right. Thank you.

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

Thanks for taking the question. You used the word at least when you're talking about reaching the Infineon's level of margins for the International Rectifier in 2017 quite a few times, and you are sort of at a combined 15% guidance this year itself. So, having sort of sunken deep into International Rectifier in the last few months, do you think that, that was - that is a conservative assumption number that you could squeeze out even more from International Rectifier over the next two years given that you are progressing quite nicely on the synergy front. And if so, what are the puts and takes there that could make that happen or not make that happen? And my second question is on IPC, obviously, there was a benefit from international rectifier. But it was quite strong 27% sequential growth, then you talked about industrial and renewable being strong. Can you give us a bit more detail on which part of industrial, either industrial automation, is it recovery you're seeing the organic nature and renewable? Can you just tell us what's happening there and how sustainable these trends are?

Well, Janardan, yes, the intentionally said at least, but give us some time for the next quarter to understand how the integration will take place. And you are seeing some segments which have more to do in order to consolidate the business and as we said for instance in IPC, we have to merge the two business and achieve the same margins as we, for instance, already had within Infineon. And there are quite some of these bits and pieces which will come together. After just having the merge of the organization, you definitely have to watch how fast we can now execute on the concepts we had and we will come back on that in the next quarter. But now, it's a little bit premature to promise more but the aspiration definitely is there. So, let me say that with this - I would say more general statement, but we will be more detailed in the next quarter. Regarding the IPC, Arun will go into details.

Okay. Janardan, hi. In general, there has not been a big change in the shift of the revenue. So, 40% of IPC still comes auto drive, 20% from renewables. And the home appliances is still one where we are seeing a very high traction, one data point there, about in 2011, 2012, we had about 20% penetration of inverterization in home appliances. This is expected to go up to 40% by 2016. And also in the U.S. you'll see some legislations kicking in from September of last year. That in combination with great performance we see with our LSPS activity in Korea, particularly in Korea but also in China for home appliances makes us very optimistic that the share of the hope appliance business in IPC will rise. Adding to that, the digital power management capability which we get from IR will give a nice boost to this part of IPC's business. Renewables, I think Reinhard mentioned that there is a pull-in until June due to some tariff changes in China which we are experiencing. So, there is some upside there which are enjoying right now. But having said that, both the emerging economies have big plans for increasing their share of renewable energy as part of total electricity consumption and therefore we plan with a trend or a share of renewable IPC staying flat going forward.

And just a small follow-up on the home appliances, if I remember right, Infineon stand-alone was not perhaps strong on home appliances outside of the induction cooker area or has that changed or is that International Rectifier trend more than the Infineon trend?

I think both put together, so, as Reinhard indicated, we - both sides have been gaining very good traction because home appliances is a very broad term, it goes from air conditioners, washing machines to kitchen appliances in terms of microwave oven and rice cookers, induction cookers, so all put together I think the portfolio is growing overall. I think more than that, I don't have any more details like - yeah, Reinhard is whispering that LSPS, I should stress, has been outstandingly and out proportionately growing particularly in Korea with penetration of variable speed drive in air conditioners. And I would like to add one thing on the profitability. There's always this kind of assumption in the financial market that we cannot make money in this business. The acquisition of LSPS has now demonstrated that we can. As Reinhard mentioned, it's actually accretive to our IPC margin and that's a very big success. And honestly, on the International Rectifier side, this is the biggest challenge - not a challenge in a sense, it's difficult, but we really, really have to do it and it's a very significant margin uplift potential if we bring the corresponding International Rectifier business to what we have just implemented at LSPS and this is very feasible.

Thank you very much.

We will now take our next question Andrew Gardiner of Barclays. Please go ahead.

Thank you. Good morning. I just have another question around the OpEx side of things, and perhaps you can shed a bit more light in terms of the potential timing of the integration plan. Looking in the slide deck you've presented, I mean, we can clearly see the step-up in SG&A and R&D for the quarter. You're also highlighting in there sort of the targeted range over time, SG&A coming down from where it is at the moment from sort of 14% to 15% in the quarter to low teens, and R&D actually looks like it might be rising over time. Can you just explain how you think those are going to trend over the coming quarters and how quickly we might be looking for you to get into those targeted range? And also add another one on FX. We've seen a number of companies this quarter see, some of the benefit in terms of top line or margin but often give some of it back in terms of the hedging given just the extreme fluctuation in FX during the quarter. You didn't really highlight anything there during your comments, Dominik, not that I caught, in terms of hedging impact. Are you seeing sort of the full benefit of FX tailwind or is that something that lag as well due to the hedging? Thank you.

Well, all questions for Dominik.

So starting with the hedging, there is of course a little bit of a delay because we have accounted two months to three months hedging window, but we're not going out as long as maybe some of our competitors are doing. So, there is always some clear benefits crawling in. There's a little bit more upside. There was, of course, a slight hedging loss in the kind of financial derivatives and from that perspective, yes, it helps and you've seen that we have taken the assumptions for the U.S. dollar-euro exchange rate to $1.10, and that also helps the margin. So, the second point was on the development of R&D and SG&A. I just wanted to reiterate that in these numbers you see, we have acquisition-related charges included, so, there was - as I mentioned, €6 million acquisition-related charges in R&D and €42 million in SG&A, and maybe this is also a good opportunity to again puzzle together these acquisition-related expenses of €102 million because I've also seen some of the feedback we got, that people who had questions about it. I have mentioned the numbers, but let me try to do it in a way that it's easier for you to write it down basically. We have €102 million total and, of that, €35 million alone were these inventory step-ups, which are entirely hitting costs of goods sold. And another €33 million is amortization-related to purchase price allocation. So, that's also - both of these items amounted to €68 million are obviously non-cash items affecting all cost positions, but predominantly COGS, cost of goods sold. That means two-thirds of €102 million is in kind of non-cash PPA effect. The remaining third which is about €34 million is really everything related to restructuring, retention and also transaction fees. So, in that remainder of €34 million, which is cash at some point in time of course. And there is a good chunk in there, which is really driven by the closing of the acquisitions like the M&A success fee. So, you should see that number coming down over the coming quarters, too, because we will not have all these closing related expenses anymore. So, you'll see more of a low-double digit million restructuring/project cost for the integration. And now, with the split I have given you in the intro statement on the OpEx and the COGS, you can kind of get a clearer view on where we are. And yet, as I mentioned before, there are still a little bit more room for improvement on OpEx, because of the redundancies we have announced, and more redundancies cannot be excluded at this point in time as we integrate further and the bulk of that OpEx where should be completed by the end of next fiscal year. And this is why we have been very confident on saying that we want to bring International Rectifier by fiscal year 2017 to that target level of 15% through the cycle.

Thanks very much. That's much clearer.

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

Yeah. Hi there. Thanks for taking my question. Two if I could. I mean, firstly, on the auto side, it looks like that in Western Europe, we now kind of going into this quarter. We're coming out of a phase where sales have actually led production by quite a big margin, and now production seems to be picking up in April from some of the data points we see. I mean, the order intake that you've seen in the quarter also seems to suggest that. Could you maybe comment a little bit on that situation? And then also on your capacity on the auto side, if you have enough capacity really to deliver into a potential production uptick here. And then also as a second question, just could you remind us now with the integration of Rectifier on the exposure to PCs and servers where we've obviously seen mixed data points with weaker PC, stronger servers, just which one is more important and how have we actually seen that the PC part of your business trending? Thank you.

Yeah. Arun will take those two questions.

Okay the first one was on Auto Western Europe. Yes, indeed, Johannes, you're right. We have seen very good traction in the first quarter, January to March, actually just the March figures alone in western Europe talk about a double-digit year-on-year growth in that month. So, that's behind us, of course. And going forward we see also a very good traction for the coming quarter. Typically, as you know, the August month quarter is the one where we are a bit careful because of the summer holidays, but at the moment there's a quarter before that ahead of us, which we see very good traction, 100%. I don't see too many restrictions in capacity. We are delivering to, in most cases, to the demand, order has been placed. Only in one other case, for example, in sensors, we might run into some challenges in the sense of long-term orders are starting to be placed. So, the 1.2 book-to-bill which was mentioned by Reinhard earlier indicates, too, also tendencies in terms of securing capacities from customers. So, that was on... And the second one I was slow to write it down. I think it was IR exposure, whether that increases our exposure to servers and PCs. If that was the question, yes, it does increase our exposure to servers particularly, but not so much in PCs. I think PCs has not been impacted as much.

If you just - sorry, maybe the combined exposure now to PCs and servers. I think servers are substantially bigger for you than PCs. If you could just update us on that for the combined company. Thank you.

Well, we haven't gone into that detail for this call. What I can tell you is that in PMM, we have the biggest impact of the IR integration, and therein, we see about 50% of the revenues after adding IR's numbers of PMM which are coming from Power, and a big portion of that is driven by servers, but not only servers. So, there is something maybe Jürgen can follow up with you later if you're interested in more details on that.

That's helpful. Thanks, Arun.

Thank you.

We will now take our next question from Achal Sultania of Credit Suisse. Please go ahead.

Hi. Thanks for taking my question. One - Dominik, one for you on the gross margin. If I remember correctly, I think you mentioned that there was a €54 million one-off charge in your gross margin. So, if I add that back, I think gross margins were about 36%, which was down about 200 basis points quarter-on-quarter. So, I'm just trying to understand, was it more about impact from International Rectifier acquisition or was it more about the pricing decline that you talked about? Because typically the decline from December to March is usually much lower than 200 basis points. And then I have a follow-up as well.

Okay. Very good question and the answer is it was more than really decline and if you say it's normally lower, don't take last year's number as a yardstick because in last year's numbers, we had in the March quarter some special effects, which we also clearly announced to the market, which were very significant on the inventory side, positive effects. So, what is happening in the March quarter is the usual kind of annual price resets and this time around, as I mentioned, there were some specific productivity improvements related to raw material purchases, which resulted in some revaluation of the inventories which gave us actually a charge because we wrote down everything that's there within kind of lower new cost, and that will give us an increasing gross margin in the coming quarters. And you're right, if you adjust for the €54 million purchase, so PPA-related topics, and the inventory step-up I was mentioning which by the way will be a short-term phenomenon so to speak and the matter will be a short-term phenomenon, we were at 36% margin.

Thanks. And one for Reinhard, if I look at the International Rectifier and correct me if I'm wrong, I think they had about seven manufacturing sites globally. And now you're talking about taking actions on two of their sites outside the U.S. I'm just trying to understand like, with this business which has about €800 million, €900 million of annual revenues, does it still make sense to have five manufacturing sites globally long term or is it something that you're obviously going to take a closer look at some point later in the integration phase?

Well, pretty simple. You're right the number of manufacturing sites, which and within the seven sites definitely some I would say more R&D types sites or we will have a very close look and see how we move forward. On the other side, the Tijuana and Temecula sites for instance, have exposure to HiRel and Automotive business which of course longer-term strategies are required. The Mesa site is something - the site which mainly produces the substrates, this [indiscernible] it's not really a front-end site and some other minor sites we will consider as consolidation of the R&D part. HiRel is two sites which is very specific and I would call it, handicraft business which we will remain as is and they do not add a lot of complexity there because it's not really a front or back and it is more a head-on manufacturing which is already having a reasonable scale of economy as the size it has now.

Thanks. And just one thing, I missed that number, did you give the book-to-bill ratio for your PMM business for this quarter?

Yes. But now, maybe somebody or the colleagues have it in mind. Arun?

Yeah. It's 1.1.

Thank you.

Thank you.

So, we've already overrun a little bit. But for today's call, we allow one more question, please.

We will now take our last question from Günther Hollfelder of Baader. Please go ahead. Günther Hollfelder: Thank you. I have two follow-up on Automotive. In the presentation, you highlighted the AURIX concerning the autonomous driving. So, given your dominant position also in 77-gig radar with Bosch, what's the potential regarding autonomous driving for you in terms of installer content? And the second question would be, I think you said that you qualified an automotive MOSFET on 300 millimeter. Was this with a distributor targeting the automotive market or with a Tier 1 and OEM? Thanks.

Yeah, Mr. Hollfelder ,it is currently very difficult to give very precise numbers on the automotive content for advance driver assistance system. I think when you look into this area, then we believe that the car being able to drive under any means even without communications is the crucial element to enter autonomous driving. So, what we believe that the sensors, power semiconductors as well as the ability to complement today's ECU with AURIX or other microcontrollers we have is will help a lot there and we believe that our growth potential is the highest but not to forget the CO2, we definitely see that there will come more and more demand on the high power side. So, the market growth is expected to be higher in power and sensors, 6% in micros, which is 11% in the sensor and power and 6% in micros. But I believe the specific growth here for RF may be higher especially as we will not only say micros, we will support the customers with total architectures in the corporation with TTTech. So, here, I think the market still has to look into how we have to analyze further on but we believe we are sitting in pole position there. 300-millimeter MOSFET, there's a big demand in electrification of many parts of the cars. Therefore, this 300-millimeter MOSFET is something that will go across the whole market demand, but the major focus, of course, are the big tier ones, not so much distribution. Günther Hollfelder: Okay. Thank you. Jürgen Rebel: So, thank you, everyone for your questions. With this, we would like to conclude this conference call and for further questions, please feel free to contact our investor relations team here in Munich. And thank you very much and have a nice day.

That concludes today's conference call. Thank you, everyone, for joining us. You may now disconnect.