Jürgen Rebel - Corporate Vice President, Investor Relations Reinhard Ploss - Chief Executive Officer Arunjai Mittal - Member of the Management Board Dominik Asam - Chief Financial Officer Jochen Hanebeck - Operations Helmut Gassel - Sales & Marketing, Regions, Strategy Development and Mergers & Acquisitions

Sandeep Deshpande - JPMorgan Securities Kai Korschelt - Bank of America Merrill Lynch Janardan Menon - Liberum Capital Ltd. Pierre Ferragu - Sanford C. Bernstein & Co. Francois Meunier - Morgan Stanley & Co. International Johannes Schaller - Deutsche Bank Tammy Qiu - Joh. Berenberg, Gossler & Co. Lee Simpson - Stifel Nicolaus Europe Ltd. Günther Hollfelder - Baader Bank Stefan Slowinski - Haitong Securities

Good morning, everyone. Welcome to the Conference Call for Analysts and Investors for Infineon Technologies 2016 Fiscal Third Quarter Results. Today's call will be hosted by 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 facts that could actual results to differ materially from the statements made on this conference call, please refer to our quarterly and annual reports available on our website. At this time, I would like to turn the call over to Infineon. Please go ahead. Jürgen Rebel: Good morning, ladies and gentlemen. Welcome to the conference call for analysts and investors for Infineon Technologies 2016 fiscal's third quarter results. With us today, we have Reinhard Ploss, CEO; Dominik Asam, CFO; Jochen Hanebeck, member of the board responsible for Operations; Helmut Gassel, CMO; and for the last time, Arun Mittal. We'll start with an introduction by Reinhard. Then the entire management board will be happy to answer your questions. A recording of this conference call and a copy of our 2016 fiscal third quarter results and earnings press release will be available on the website at infineon.com. Reinhard, please go ahead.

Thank you, Jürgen. Good morning, everyone, and welcome to the telephone conference of our third quarter fiscal year 2016 results. As usual, I will begin today's call with some remarks in group and division results, on market development and on our achievements during the quarter. Dominik will then comment on third quarter financials before I conclude with the outlook. We will then open the call to your questions. Before we talk about business, I would like to thank Arunjai Mittal for his 24-year long dedication to Infineon and his restless effort to make us more successful. Arun played a pivotal role when we acquired and integrated International Rectifier. He decided to pursue a new path in life for family reasons. We respect his decisions with sadness. We all wish him all the best for his future. Arun, if you want to say a few words to our analysts and investor community?

Yeah. Thank you, Reinhard. I am very proud to have been part of this fantastic company for so long and see it prosper into the position it is today. This is to a great extent due to the focus we have had on the three segments, Energy Efficiency, Mobility and Security were also due to the ability to balance out the turbulences one might experience at one or the other micro segments, for example, the smartphones. We have not just grown organically, but also delivered along the promises of M&A. I would like to thank our analysts and investors for their professional reflection on our progress. I have always enjoyed the interaction during the earnings calls and conferences. And to all who have dialed in today, thank you very much and stay healthy. Reinhard?

Thank you, Arun. In the third quarter, we experienced a challenging environment in some end markets. Nevertheless, revenues came in 1% better compared to the March quarter. That's €1.632 billion. They were driven by continued structure strength in automotive as well as a seasonal strong demand from renewables and power supplies. However, Chip Card & Security faced some inventory overhangs in the payment card market leading to a sequential decline. Demand for components for mobile communication was flat, a stark contrast to the typically strong seasonal pickup that we saw in prior years. Segment result was up with €254 million, representing a segment result margin of 15.6%. This means a sequential increase of 11% compared to the March quarter. The book-to-bill ratio for the third quarter came in at 1.2. The absolute booking figures stood at a solid €2 billion. Let us now take a look at the divisions. Automotive revenues climbed by another 1% to €676 million for the quarter, up by €6 million, the highest quarterly revenue in Automotive ever posted. Demand for electric drivetrain solutions continue to be very strong. Demand for radar solution soared. The car market in North America, Western Europe, and China continued to show strength. The Premium segment continued to do well. The book-to-bill came in at 1.5. This figure includes a large long-term order by one of our top customers. We saw the same pattern about a year ago. Without this long-term order, the book-to-bill ratio is still above 1, supporting a good outlook for Automotive in the quarters to come. The segment result increased by 11% quarter-on-quarter, coming in with a record €104 million. This compares to €94 million in the March quarter. The segment result margin stands at 15.4% over the back of a higher sales and better productivity. In terms of radar solutions, the quarter saw not only strong demand for our existing 77 gigahertz Silicon Germanium product, but also advancement of future radar solutions. If you might remember from our London ADAS presentation, we believe that CMOS radar might make some inroads for short-rim applications in a couple of years. Example could be automated parking or blind spot detection. Therefore, we had started a 79 gigahertz CMOS radar development for this area by teaming up with a renowned advanced semiconductor research center, Imec, a few years ago. We are developing a solution that hits the right cost performance point. Safety-critical applications such as the cruise control and highway assist will remain the realm of Silicon Germanium-based radar. At the core of our strategy lies the Product-to-System approach. It is a process where we combine our core competency through a system understanding and the ideal way to optimize the system for the benefit of our customer. Based on this principle, we won almost the entire bill of material for transmission control unit for a leading North American OEM. The Product-to-System approach not only ensures winning additional business, but also optimized system solutions typically lead to better margins compared to selling individual components. Let us now turn to Industrial Power Control. IPC generated record revenues of €280 million, compared to €265 million in the March quarter. This marks again a 6% increase quarter-on-quarter. The seasonal upswing was mainly driven by renewable, whilst major home appliance and drives were essentially flat and traction showed a sequential decline due to some project delays. The book-to-bill ratio stood at one in the June quarter, pointing towards a flat to slightly up September quarter. The segment result improved strongly to €42 million, compared to a €26 million in the March quarter. This represents a segment result margin of 15%. The increase in segment result comes from an advantageous product mix, higher sales and productivity improvements. Our leading position in both solar and wind inverters proved essential for the performance of IPC. A lot of the demand was driven from China on the back of an upcoming change, the Feed-in Tariffs scheme. However, we see this demand from China to persist, as Chinese vendor will have increased bandwidth to hunt for global sockets thereafter. We continue to see strong demand for our silicon carbide diodes and hybrid modules. Once the intended acquisition of Wolfspeed closes, we expect a lot of traction in silicon carbide product from the end users during 2017. Besides, we very pleased with the recovering demand for inverter solution for electric buses in China. We expect very high year-on-year growth rate from this segment going forward. Let us now make a look at Power Management & Multimarket. Revenues of PMM increased by 3% to €509 million, €13 million up from €496 million in the March quarter. The whole Power business experienced a strong seasonal upswing across the board. In AC-DC, demand from China for our 650-volt power MOSFET for xEV charging station remained very high. In DC-DC, shipments into VR12.5 server platforms continued on a high level. Likewise, low-voltage drives continued to be in application, showing high demand for our low and medium voltage MOSFETs. The broad market business through distribution showed normal seasonality. The business with components for cellular handsets increased quarter-on-quarter. However, the upswing was softer than normal. On the positive side, shipments into Chinese handset OEMs rose further, gradually balancing our customer portfolio. Future handsets will bear more and more sensors for novel use cases. You recall the barometric pressure sensor that we introduced a year ago, and that is being employed in handsets soon. Last year, Infineon's 3D imager, REAL3, made its debut in automotive with a driver surveillance system by Kostal for true level-3 automated driving. Now, this Infineon 3D Imager enables Google's Tango technology employed in Lenovo's next smartphone, PHAB2 Pro. Lenovo is the first vendor worldwide that brings Google Tango technology to the market, enabling new, augmented, reality use cases. Demand for RF Power Amplifiers from cellular base station customers was down. However, we are very positive on the cellular infrastructure market going forward as you might recall from our communication on the intended acquisition of Wolfspeed two weeks ago. The book-to-bill ratio for PMM came in at 1 in the fiscal third quarter. The PMM segment result improved in line with higher sales by €5 million to €79 million. This translate into a segment result margin of 15.5%. Now, let me make comment on Chip Card & Security. Revenues declined by 4% quarter-on-quarter to €172 million compared to €180 million in the March quarter. The decline is primarily a result of the known slowdown of the payment card market. We are seeing an inventory overhang in the market that is transitioning more into a replacement market. But overall, unit shipments into payment should continue to increase on a two to three years' horizon. We expect the market to remain very competitive. Our leading position in the embedded security controller market was supported by strong demand for authentication solutions and further IoT design wins. We won further home and enterprise IoT projects with our OPTIGA trusted platform module device at leading players. Future growth in government identification will be supported by project wins in Asia, Europe and South American countries like Peru and Colombia. We are also very pleased with the latest market data for 2015 for the smart card ICs market published by IHS. We could further narrow the gap to the number one by the strongest market share gains among all vendors. The book-to-bill ratio declined 0.7, reflecting the situation in the payment market. Segment result decreased moderately to €32 million on the back of lower revenue. This equals segment result margin of 18.6%. Ladies and gentlemen, this concludes the business review. Let me now hand over to Dominik who will comment in more details on third quarter financials.

Thank you, Reinhard, and good morning, everyone. Third quarter revenues were €1.632 million, a sequential increase of €21 million or 1%. Year-on-year, the increase in quarterly revenues stood at 3%. The average U.S. dollar-euro exchange rate for the quarter was about €1.13 compared to €1.10 in the March quarter. The resulting headwind in sequential revenue growth was more than 1 percentage point. This is another reason why the June quarter revenue growth was slightly lower than normal seasonality in euro terms. However, in U.S. dollar terms, the quarter-on-quarter increase was around 4%. Gross profit, research and development, and selling, general and administrative expenses continued to be influenced by the effects of the consolidation of International Rectifier. Gross profit climbed to €598 million, up from €566 million in the March quarter. This represents a sequential increase by 6% or €32 million resulting in a gross margin of 36.6%. Excluding acquisition-related and other non-segment result effects mainly related to International Rectifier, the underlying adjusted gross margin stood at 38.1%. R&D expenses increased slightly by €2 million and stood at €197 million. SG&A expenses increased by €5 million to €200 million. The net other operating expenses amounted to €8 million. Included in these numbers are €61 million of non-segment result charges. Of that amount, €48 million are International Rectifier acquisition-related amortization and other charges. €24 million of the International Rectifier acquisition-related cost hit our cost of goods sold. In R&D and SG&A, we booked International Rectifier acquisition-related charges of €2 million and €21 million respectively. €1 million were other charges included in other operating expenses. Within these acquisition-related costs, amortization and depreciation of fair value step-ups from the purchase price allocation represent by far the largest item. It will take several years for these items to disappear from our P&L, and after closing of the Wolfspeed acquisition, we'll obviously see this item increase further. We recorded a segment result of €254 million for the June quarter, compared to €228 million in the March quarter, a strong sequential increase of 11%. The segment result margin came in at 15.6%, in line with the fall- through from the slightly lower revenues compared to the midpoint of the guided revenue range. The operating income improved €293 million from €174 million in the March quarter. The non-segment result decreased to a negative €61 million. Included in the decrease of €7 million quarter-on-quarter are expenses in conjunction with the intended acquisition of Wolfspeed. Overall, the still meaningful negative non-segment result continues to be predominantly a result of the already mentioned expenses related to the International Rectifier acquisition. Now let me comment on depreciation and amortization. D&A decreased by €7 million to €206 million after €213 million in the previous quarter. Included in this figure are €33 million related to the aforementioned amortization and depreciation of fair value step-ups from the purchase price allocation. The financial result continue to be driven by financing expenses for the acquisition of International Rectifier and showed a negative figure of €12 million. Let me comment on the financing of our intended acquisition of Wolfspeed. If you recall, the all cash purchase price is $850 million. We'll finance the deal by $720 million of new debts and about $130 million of cash on hand. We are currently in a net cash position. Based on this, we will be in a net debt position after closing of the transaction. The intended bank financing will be split in three tranches with three-year, four-year, and five-year maturities. We expect interest rates for the U.S. dollar denominated tranches of well below 2% and for the euro denominated tranches of below 1%. Standard & Poor's confirmed in a note that our solid BBB investment grade rating with stable outlook remains unchanged. It continues to be the highest rating of any semiconductor manufacturer headquartered in Europe by S&P. Net, we stay well within our previously communicated capital structure targets. Recall that we want to carry no more than two EBITDA turns of gross debt and to maintain a gross cash balance of €1 billion plus 10% to 20% of revenues. Continuing with tax, we recorded an income tax benefit of €3 million in the June quarter after an income tax benefit of €21 million in the March quarter. Consequently, this represents an effective tax rate of minus 2%. We continue to benefit from deferred tax assets. Nevertheless, for our modeling purposes - for your modeling purposes, a cash tax rate of about 15% continues to be a reasonable assumption. Net income from continuing operations increased €184 million, up by €7 million or 4% from €177 million in the March quarter. The net income from discontinued operations came in with €2 million. Basic and diluted EPS stay flat with €0.16 for the fiscal third quarter. However, the adjusted earnings per share improved again by 6% to €0.19 from the fiscal third quarter - for the fiscal third quarter compared to €0.18 in the previous quarter. Free cash flow from continuing operations came in at €277 million, significantly up from €45 million in the March quarter. This does not indicate that we will generate a much higher cash flow on a yearly basis than previously indicated. It is merely a timing effect in terms of certain trade payables. The net cash provided by operating activities came in at €496 million compared to €195 million in the March quarter. The strong cash generation during the third quarter led to a gross cash position of €2,083 million at the end of the June quarter, up by €280 million. Consequently, our net cash position increased to €299 million after net cash position of €27 million at the end of the March quarter. Let me also comment on our after-tax return on capital employed or RoCE. It slightly improved to 14.8% in the fiscal third quarter from 14.5% in the fiscal second quarter. RoCE continues to be strongly affected by bookings related to the acquisition of International Rectifier, in particular goodwill, fair value step-ups in the context of the purchase price allocation, and the related amortization. Excluding acquisition-related bookings and effects, the underlying RoCE stood again above 20%. Let me now hand back to Reinhard, who will comment on our outlook.

Thank you, Dominik. Let me now come to the outlook for the fiscal fourth quarter. We expect the seasonal upswing to continue, leading to revenues improving 3% sequentially plus or minus two percentage points. This is based on a rate of $1.1 for the U.S. dollar against the euro, reflecting a stronger U.S. dollar we have seen so far in the running quarter. We expect revenues in ATV and PMM to increase. Revenues in IPC should be flat or slightly up. CCS should come in flat or slightly down, compared to the June quarter. The midpoint of the revenue guidance, the segment result margin should come in with 17%. If this materializes, we will end up again well within the revenue guidance corridor for the full year that we have given before. This applies both for our initial guidance from the beginning of the fiscal year at a rate of $1.1 for the U.S. dollar against euro; and to the full-year guidance given last quarter at a rate of $1.15 against the euro. Adjusted for the full-year effect of International Rectifier consolidation, this implies an organic growth rate close to a trend light growth rate in this fiscal year. In terms of segment result, our discipline on the cost side and relentless push on productivity improvements has helped us offset the adverse product mix effects resulting from lower revenue contribution in high-margin cellular applications. Our previously indicated expectations with regards to investments and depreciation and amortization for the fiscal year 2016 remain unchanged. Ladies and gentlemen, the third quarter of the 2016 fiscal year continued to present a challenging environment. Nevertheless, we were able to grow in revenues quarter-on-quarter, increasing the segment result significantly and delivered a strong cash flow. Our structural strength in the power discretes and module market was once more confirmed in the latest market share data from the 2015 published by IHS. We could further strengthen our leading position in the market and are now three times bigger than the number two in the market. In 2014, our relative market share stood at 2.7%. On a five-years horizon, we are convinced to deliver our 8% trend line growth. We will benefit from strong structural demand drivers, be it electromobility, ADAS, renewable, power conversion, sensor and cellular handsets, or IoT security, to name a few examples. This quarter, we took another stride to strengthen our structural growth with the intended acquisition of Wolfspeed. We fundamentally strengthened our key verticals, automotive and industrial, and lift our radiofrequency power business and cellular base station stations to a new level. We want to become the number one in the RF power amplifier market around 2020. In this market, we are already today at the brink of a rapid transition from silicon-based to compound semiconductors. We believe that the rollover will fully unfold by the turn of the decade. This offers a unique opportunity to grasp the top spot as we'll have the most complete technology portfolio and will be leading in terms of cost performance. This makes us the preferred partner for cellular infrastructure customers. We also want to create the clear number one in silicon carbide for power application. We will accelerate the adoption of silicon carbide by cutting edge products as the clear cost performance leader. Capitalizing on the incremental growth potential and novel technologies and architectures using compound semiconductors, we are convinced that we can solidify our 8% growth target. In essence, this creates a higher addressable market beyond silicon. The business which we acquire is highly profitable with an average gross margin of about 55% and is strongly growing with 20% average growth rate. Net, it is accretive to our gross margin profile and adjusted earnings per share. This means we are creating additional market opportunities that have at the same time a higher gross margin profile as our traditional business. Hence, our priorities for fiscal year 2017 are clear: Integrating Wolfspeed and realizing the tremendous potentials; continuing to outgrow the market organically; continuing our path to gradually increase our underlying margin profile. Ladies and gentlemen, this concludes our introductory remarks, and we want to open the call for your questions.

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

Thank you for letting me on. My question is regarding midterm growth. I mean, [indiscernible] you've talked about long-term growth being 8%. The last two quarters, you've grown 2.9%, and now the guidance about - somewhere above 5%. Do you think that in the midterm, that is, into 2016, 2017, you can grow at your long-term growth forecast? And my second question is on a narrow market for you which is, in the auto market, you've talked about growth in radar. Your competition also talks about growth in the radar market. Are you comfortable with your radar growth position given the design wins they are reporting in the radar market? Thank you.

Thank you, Sandeep. The growth for the upcoming time, I think here we have seen some specific structural elements in chip card and mobile. We are sure that we will overcome and continue through the growth path so that we assume that even in the mid-term our basis for growing is intact and even not considering the Wolfspeed acquisition, we should be also upcoming, I would say in the next quarters, which is not restricted to just the next four quarters, pretty close to our growth target assuming that the macroeconomics hold up. Regarding the automotive market, here definitely we have a very good position and good feeling that our radar solution is designed in so many application that we will hold up and continue our growth. Here we see an overlay of two effects: First of all, our superior solutions; on the other side, the take rate in the car industry increases a lot. So if I'm not wrong, we are currently in every 15th car on that planet, and we are pretty sure that we will continue to grow, especially as some of the worldwide customers have committed themselves to install emergency braking and others. So here we are pretty confident. So just to give you one number, we are shipping 15 million annually this year and we are pretty sure, next year, more. So this, I would say, trend is unbroken, Sandeep.

Have you - plus one follow-up. I mean, have you seen any new competition develop in the EV market for your IGBTs, because various companies are now talking about coming into that market?

We see the overall markets to be dominated on one side by the Japanese, but this is a, I would say, their own market and for the rest, we have not recognized - actually many competitors, many people talk about, but we still believe we have an excellent position on the technology. So currently no big change there. And as we said already, we are seeing that more markets are coming online like buses, where we have a very unique position in the high-performance modules. And to be honest, we are developing the next generation of modules which should give a much better cost-performance point. So we believe that we will stay ahead, and together with Wolfspeed, we expect the silicon carbide to kick in, well, maybe around if 2020, great timeframe for the inverter, and the charger may come earlier. So we believe our extreme strong position we can maintain.

Thank you very much.

Thank you. We can now take our next question from Kai Korschelt from Merrill Lynch. Please go ahead.

Yeah. Good morning, Herr gentlemen. Thanks for taking the question. I had a couple on the Automotive business and then one on Chip Card. So firstly on Automotive, so it looks on the EV side China's been very strong and I think Tesla wants to ramp up production 10 times. I think GM is launching the Chevy Bolt. So my question really is, do you actually have enough IGBT and MOSFET capacity needed to support the multiplier and volumes here over the next couple of years? That's the first one. The second one is on the global auto market. If we were to see global sort of [indiscernible] run rates not increasing or growing anymore, but obviously ATV's penetration and ADAS going up, what sort of revenue growth in Automotive do you think you can achieve in a flat global auto market? And the third question was on the Chip Card business. I think NXP suggested a couple days ago that you've been fairly aggressive on price, and I - it looks also like the EMV cycle is slowing a bit. So my question is, how do you think about the sort of margin versus growth or market share tradeoff in that segment over the next few quarters? Thank you.

Yeah, Kai. Thank you for your question. The first one, Jochen Hanebeck will take, talking about the capacity potential constraints or not.

Yeah. Thanks, Reinhard. So actually this is just meeting our bet on 300 millimeters very well. We are in the process of qualifying automotive IGBTs also on 300 millimeters also for IGBT modules. So we will have a lot of capacity available for this market to participate, and more, to lead this market.

Growth in a flat auto market or in turnover growth, Helmut will take.

Yes. Thank you very much, Reinhard. Two comments on this. Number one, the auto market is still slightly growing. Total vehicle manufacturing is slightly up, but anyway the growth of our business is much more related to the share of bill of material and the bill of material itself. And there, with two major trends, assisted driver - assistance systems as well as electric vehicles, we feel very comfortable to take a larger share of that market going forward.

Kai, the third question about Chip Card, can you repeat it?

Yeah. So I think NXP suggested on their call that you have been fairly aggressive on price recently. And then in that context, the EMV card cycle is slowing. So my question is, Chip Card business has pretty good operating margins; how do you think about the trade-off about winning new business and sort of still growing that segment versus pricing and margins? Thank you.

Well, our position on Chip Card, definitely, we do not need to buy market. We have superior technical solutions and have one. Maybe you remember last year, a significant part of the payment business by our advanced way how we deliver to the market. And of course, this market now takes a certain deep breath in order to, I would say, because there is such an overhang in the total value chain, the further growth we believe that we can manage across the board and we will be also able to maintain the margin. We have talked about that. We outsourced this to the foundry, so we can even manage the volatility of that market quite nicely without harming the margins.

Okay. Thank you.

Thank you. We can now take our next question from Janardan Menon from Liberum. Please go ahead.

Hi. Thanks for taking the question. I have a few which mainly focus on the margin side, probably more for Dominik. I was just wondering, you came in below guidance. You had guided for 16% margin in the quarter and you were below that. And you also had a tailwind from currency because you dropped your margin guidance because the currency had gone up the previous quarter. So I was just wondering, could you just tell us what was the headwind for margins in the quarter given the tailwind from currency? Was it entirely coming from the lower-than-expected growth in the smartphone side which you alluded to that you didn't get the normal seasonal uptrend there? And that also in the context that Samsung's shipments are probably better than expected in the quarter, you are saying that you saw good momentum on the Chinese front. So I'm just trying to put that into perspective and figuring out what went - what was the issue with margin. And then I have a couple of small follow-ups.

Okay. So let me just try to walk you through this. First of all, yes, in theory, the U.S. dollar should help, but this is only at ceteris paribus consideration if you keep all the other things in - especially volumes left. The fact that we are slightly lower than the midpoint of the revenue guidance despite a $0.02 stronger U.S. dollar, namely $1.13 against $1.15 means that volumes have been somewhat lower. And the fall-through on margin on lower volume is actually significantly higher than the dollar fall-through. You remember that we say for every dollar of revenues lost to volumes, we lose about three-quarters, so $0.75 basically. That fall-through is about a third, so a $1 reduction due to currency is about one-third on the margin, so $0.30, $0.33. Secondly, you are absolutely right. We had lower than anticipated revenues on the smartphone side and these are extremely high-margin products. So we were actually quite pleased that we were able to compensate both these effects to come up with a margin which was very close to the midpoint of our guide. So from that perspective, I don't think there's any miracle. If anything - if we do a bridge, you would actually be surprised how high the margin was.

Okay. And so, if there's a lackluster smartphone market going forward, what effect does that have on your margins? Would that have a negative effect going forward?

I mean, we are already in what we consider a relatively sluggish environment now. We're not anticipating a kind of weakening beyond that. As Reinhard mentioned, there are a lot of initiatives on the way, especially with Chinese handset manufacturers to really diversify demand in that area to make sure that we have a resilient growth there. So from that perspective, we don't see that risk. Now, if that happens, if the RFS business which is about one-third as we say, of the overall PMM business is kind of taking a smaller share in the mix within PMM. that would slightly adversely affect the margin because indeed still their gross margin is higher than the overall PMM margin. But again, we don't see that negative mix trend. We believe that both the power and the non-power are either radio frequency and sensor business in PMM have similar growth prospects.

Thanks. And just a small last one. On depreciation, you saw a fall in depreciation. Can you just give us a medium-term guidance for that, both including and excluding the International Rectifier component? Would depreciation be flat to down over the next few quarters or would you expect a pickup there?

No, depreciation should actually, on a yearly run rate basis, if you look into next fiscal year, be flat to down indeed. The International Rectifier items will roll off later, so that will not have a significant positive impact. Most of these items are longer term acquisition-related step-ups. So the bulk is really more the towers, the investment towers we had in 2011, and they are rolling off as we speak because if you add five-year depreciation period to that time you come into the current period. So if you compare it on a year-on-year basis for fiscal year 2017 versus 2016, you will see no headwind from depreciation. To the contrary, there will be some tailwind.

So that should help your margin outlook into 2017, yeah?

Yes.

All right. Thank you.

Thank you. We can now take our next question from Achal Sultania from Credit Suisse. Please go ahead. Please ensure that your mute function is switched off, please. Hello, caller, please ensure that your mute function is switched off. Achal? Okay. We'll now take our next question from Pierre Ferragu from Bernstein. Please go ahead.

Thank you for taking my question. I was wondering if you could give us a bit more of a quantified view on your most important growth driver. So, if we look at ADAS and electric vehicle, maybe if you could get us a sense of how much - what percentage of your ATV division it was this quarter and how much it grew sequentially year-on-year? And then I was wondering the same for solar and wind. What percentage of your IPC business it stand up today and what sort of growth rates are we seeing there? And then I have another rather unrelated question, which is like, the way you look at the strategic value of your security business, so it doesn't feel that much the - generating synergies with the rest of your business. And I was wondering if you have, like, any specific views on how important it is to Infineon to keep that business and whether divesting the business could be an option? Thank you.

So I will start with the Chip Card business and later on Helmut will comment on the growth drivers, Pierre. Regarding Chip Card, definitely, the Security business is developing more and more as a cross-application competence. It reaches from automotive, and many people are seeking for our advice in how to set-up secure products. It is also in the IoT range, coming where you have, I would say, either low, medium, or high security certain demands in order to secure devices. So we believe, Chip Card being a strategic element in overall from Product-to-System approach and complementing the various markets and here definitely number one is that it's Chip Card's core markets is automotive very nicely. With this, to Helmut.

Yes, Reinhard. Thank you. Adding to the Chip Card story, I would say, the secure element is an important part of our P-to-S story. So I think very clear that it's part of Infineon for good reasons. Now, going back to your automotive question, roughly half of our growth that we target for the next half years is coming from advanced driver assisted systems as well as from electric drivetrains, which is roughly 4% growth over the - annually over the next five years is what we are target there. With respect to your IPC question, about 20% of the IPC revenue are based on renewables, and we had very, very good double-digit growth quarter-on-quarter in this business and we do see a strong continued trend supporting our overall trend line for IPC business going forward.

Thank you very much. Very clear.

Thank you. We can now take our next question from Francois Meunier from Morgan Stanley. Please go ahead.

Yes. Actually, it's Francois Meunier. So, yeah. I've got a few questions, actually. For Wolfspeed, I think you mentioned the gross margin, but you didn't mention the EBIT margin of the business, so I wanted to know what it is for - to compute the margin expansion on this one? On the Chip Cards, you had really, really good margins in the past year, and it looks like the market is normalizing a bit. What's in your view, the long-term EBIT margin for this business? And then the last question is, you mentioned augmented realities in your opening remarks. I wanted to know if you had any particular exposure to Nintendo's Pokémon Go. Thank you.

So, first question will be answered by Dominik.

Yeah. Francois, hi. First of all, Wolfspeed EBIT margin, they are still at what we think relative to the potential, relatively low revenue run rate. So we talk about €174 million in the 12 month ended March 2016. Gross margins at the kind of 55 percentage level. They are - still have an operating expense ratio to sales which is higher than Infineon's. Infineon is about 23%. I don't want to give you precise numbers, but what I can say is that their current segment result margin is above Infineon's, not dramatically because they have relatively high OpEx-to-sales. Over time, in the five-year planning horizon, we think that that OpEx ratio will be diluted down by virtue of the growth we target to a OpEx-to-sales ratio which is more or less in line with Infineon, because it's a pretty similar business, power discretes and modules and some substrate business with it where that is very profitable. So from that perspective, for modeling purposes, if you look at your kind of five-year model, I think it doesn't move the needle much next fiscal year because you have 2% of revenues being added at a slightly higher margin that's basically a rounding error. And then as you move along, you grow that revenue by about 20% per year and you assume that you dilute the OpEx down to a level in line with Infineon. And then if you have 55% gross margin and you have an OpEx ratio in line with Infineon, you can clearly see that this should then play a certain role in margin expansion because then you will see some significant upside potential or on-top-margin in that incremental business. So on the Chip Card side, margins - I mean, yes, the margin has been quite good. Historically, we see that the margins in Chip Card will continue to be strong. Maybe given that they are still investing and gaining more market share, you might see a very slight reduction in the margin, but you shouldn't see any dramatic move there. I'd say that the current level is not far off what we should see in the mid to long term.

Just to add here, Francois, we, I would say, introduced the SOLID FLASH which helps to avoid any preproduction or intermediate production. The other one is the aggressive roadmap we have driven and the FLASH technologies which gives us I think a very good position - cost performance position on the technology and product side. So here I agree what - I would say, I 100% agree with what Dominik said. Augmented reality, I would say, not yet. This does not mean that I want now to address that we will be in pretty soon, but we see big potential for these augmented reality devices. We have two major projects with Google, one called Soli, which is using the radar system in mobile devices, and the other is the Tango which is using the 3D camera. Especially for the Soli, I see a certain chance for the anti-collision behavior for these type of people running around. And the other one is, I think definitely with this hype, more applications will come up and drive these technologies which we have there.

Okay. Thank you very much.

Thank you. We can now take our next question from Johannes Schaller from Deutsche Bank. Please go ahead.

Yeah. Hi, there. Thanks for taking my question. And all the best to Arun for your future following Infineon. I had two questions, one on the smartphone side. If we could dig a little bit deeper here into what's happening with your business at the moment, I mean one of your peers is rather positively talking about market share gains in MEMS microphones. This is certainly more than a two-player market, so maybe you can give us a bit of an idea of what you are seeing here, if this is a bit of a market issue you see in mobile or if maybe we had some design wins that didn't come through for U.S. as you maybe have expected them. And then the other thing is on IPC. The margin here is clearly very encouraging, but you commented on a specific revenue mix that helped here. Maybe you can dig a bit deeper into that and also give us a feeling how sustainable that business mix is or if that's maybe just a one-quarter thing. Thank you.

Yeah. Thank you for the question. Helmut will take the smartphone, and the IPC will be commented by Dominik.

Yes. Thank you. On the silicon microphones, we have been up double digit year-over-year and quarter-over-quarter. So we've been very successful as mentioned earlier with some of the Asian smartphone manufacturers. Overall, we have had a slightly lesser-than-seasonal uptick on this market overall. So I think with this, hand over to Dominik as far as IPC margin.

Sure. Thank you. On the margin of IPC, indeed, the 15% we printed basically in the June quarter was up very significantly on 10% in the prior quarter. Might not end up at that level in the Q4, but not far off either. Also, we see that of course fiscal year 2017 margin for IPC should be significantly higher than fiscal year 2016. So there is a general positive trend. And some of the cleanup work of some of the International Rectifier businesses will still last through fiscal year 2017 and then there's more improvement potential beyond that.

Yeah. So if...

Especially, maybe quick...

Yeah? Please, yes?

No. Sorry. Go ahead.

So, I was just adding a little bit more color there that the area where we have still a significant improvement potential is on the small drive area, where there's still some legacy from International Rectifier to be digested.

That's very helpful. Maybe a follow-up quickly just on the MEMS business. You mentioned the pressure sensor earlier. That's something that should already be a bit more visible from your fourth quarter onwards or is that really something where we should think about the revenue impact more in your next fiscal year?

Yeah. The pressure sensor is still to come. This is a 2017 gain.

Got it. That's helpful. Thank you.

Thank you. We can now take our next question from Tammy Qiu from Berenberg. Please go ahead.

Hi. Thank you for taking my question. Firstly regarding auto, can you help me understand regarding the auto parts you had this quarter? Is it more to do with content, and what is the percentage or rough split about the volume impact and the content growth impact? And also, I have the second question on the International Rectifier Wales factory which you were planning to sell or shut down by the end of the year. Just wondering, what is the progress there? Have you found a seller, or what is the new update? Thank you.

Thank you, Tammy, for your question. Auto will be commented by Helmut and Jochen will talk on the Newport Wales factory.

Yes. You can look at our 8% longer-term growth rate basically consisting of three factors. 2% is 2% growth of automotive increase itself. 4% is coming, already mentioned, out of our increasing share of bill of materials; and 2% is roughly market share gains. This is pretty much in line with our this quarter's growth.

Yeah. Turning to the question on Newport, we communicated the plan to phase out the factory by the end of 2017. We are on track with this plan to either sell it or close it.

Thank you very much.

Thank you. We can now take our next question from Lee Simpson from Stifel. Please go ahead.

Great. Thanks for letting me on. Maybe just three quick ones, if I could, most of my questions have been asked. So, if I circle back to the peer chip maker on 77-gigahertz, clearly gaining some share there, it looks like. And you mentioned, I think, in your early commentary that it was €15 million for this year. Can you just quantify, is that all front-end RF or is there any back-end processing in that number? Maybe secondly, a clarification on the book-to-bill for Chip Card, I missed what it was. And then thirdly, we've heard of some recalls at Autoliv around airbags. Just wondered if there was any exposure for Infineon there? Thanks.

So the answers for the radar business currently is the RF part, the combo where we have both the RF and the micro is still on the way and we expect to ramp this in 2018. The second question was...

The book-to-bill for Chip Card.

The book-to-bill Chip Card. [indiscernible] Helmut?

Yeah. I think on the book-to-bill, what you've seen there, as already mentioned earlier, some inventory corrections predominantly in the payment market and that is - say, behavior is rather short time is kicking in strongly.

The number is 0.7 times - was the number, because it was not...

The question was about the number? Oh, sorry.

Yes. And just to complete on the radar, we are very confident that we can continue our strong position because we are designed in on a global basis in all major Tier 1s.

Okay. Thanks. And maybe just on the...

And the recall, the recall is not - sorry, the recall is not affecting us.

Got it. Super. Thanks so much.

Thank you. We can now take our next question from Günther Hollfelder from Baader Helvea. Please go ahead. Günther Hollfelder: Many thanks. Two questions, I think, left on PMM. Given the lower seasonality in the smartphone business, was there any - a more pronounced impact then from the Kulim, Malaysia ramp up? Is there a significant impact currently and how do you see this going into fiscal year 2017? And also due to the slower than expected business, potentially any inventory write-downs already booked here in the quarter? And the second question would be on the LDMOS cellular base station business. You mentioned that you saw a decline here, what's the short-term outlook here? Thank you.

Okay. So, for the write-down, Dominik will answer.

Yeah. So that was a question on the inventories, and you're right. Actually, the inventory levels which have increased a little bit are very much centered around that lower than normal seasonality story in PMM, and we have taken some inventory reserves. Not so much, because we felt that we have to scrap that inventory, simply because we have very clear accounting rules, if certain inventory reaches are - exceeded that we have to mark them down. So, that's actually something that has affected our margin both in the June quarter - predominantly in June quarter, sorry.

I think the lowering for Kulim will be answered by Jochen.

So we built Kulim II mainly for Automotive technologies and here the transfers are on track. The microphone technology is just in the transfer right as we speak, so there is no impact right now on the ramp up of Kulim II with respect to this topic.

And the final comes from Helmut.

Yes. The business - the infrastructure is, I'd say, influenced by very large projects, and therefore, has a higher volatility than average for our business. And yes, there have been some delays in the infrastructure installment in China as well as in India. So, therefore, we had a higher volatility this quarter. Going forward, very difficult to predict what we think that we're probably at a lower point of that business going forward right now. Günther Hollfelder: Thank you.

Thank you. We can now take our next question from Stefan Slowinski from Haitong. Please go ahead.

Yes. Thank you very much for taking my question. I just had a question on China. You stressed that we should see some higher growth rates there or even accelerating growth going forward in renewables, electric buses, and other areas as well. Can you give us an indication as to the type of growth rates that you are currently seeing and that you expect to see going into next year and beyond? And kind of what percent of your overall revenues you see coming out of China in the sort of medium term? Thank you.

So, this is - the comment on China was mainly due to IPC's business where we see very good potential in growth for the buses and the renewables. Here, we cannot give any specific China growth rate for IPC. The overall business for China will continue to grow on the rate we have seen up to now.

Okay. Thank you. Jürgen Rebel: So maybe we have time for one very last question.

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

Hi. Thanks for taking my follow-up. Just two things. One is on Google Tango and Google Soli. It's been a few months since Google Soli was launched officially by Google. And on Google Tango, we have the Lenovo phone in the market and I think there is one more phone. Given that you're pretty much the sole supplier of these technologies, what's the kind of design activity or the interest from smartphone and other manufacturers that you've seen so far? And would you expect revenues from Google Soli in FY 2017 or is that too early for that product? And secondly, Dominik, if you can give us a brief update on the 300-millimeter utilization trend that you see, especially from end of this year to end of next year that will be great.

So, Janardan, the utilization will be commented by Jochen. Regarding Soli and Tango, here we see a lot of interest by various application, and this will still take some time until we see significant revenue coming from there. Soli is a radar-based solution where we can think of many applications like automatic door openers and room motion detector and security elements and others. So these technologies are not only related to the mobile phone. The 3D camera, we also expect that various applications will come, maybe some - but here definitely, we do not expect substantial revenues from these applications in the next year. But you never know, this may be changing when the markets develop more quickly. But here, we expect the design end to be the major activity we have in the next time. Regarding the utilization of 300-millimeter, Jochen will comment.

Yeah. We are making good progress on our transfers to 300-millimeter, and therefore, we are on track to achieve the crossover by the end of 2017.

Thank you very much. Jürgen Rebel: All right. Thanks a lot. With this, the time is over and we would like to thank for your participation. And for any follow-on questions, the Investor Relations team will be available.

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