Reinhard Ploss - CEO Dominik Asam - CFO Helmut Gassel - CMO Jochen Hanebeck - Management Board Operations

Sandeep Deshpande - JP Morgan Gareth Jenkins - UBS Kai Korschelt - BOA Andrew Gardiner - Barclays Jerome Ramel - Exane BNP Achal Sultania - Credit Suisse Janardan Menon - Liberum Francois Meunier - Morgan Stanley Johannes Schaller - Deutsche Bank Guenther Hollfelder - Baader Lee Simpson - Stifel Nicolaus

Good morning ladies and gentlemen. Welcome to the conference call for the analysts and investors for Infineon Technologies 2016 Fiscal Fourth Quarter and 2016 Fiscal Year Results. With us today, we have Reinhard Ploss, CEO; Dominik Asam, CFO; Helmut Gassel, CMO; and Jochen Hanebeck, Member of the Management Board responsible for operations. We will start with an introduction by Reinhard and 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 fourth quarter results and fiscal year results, earnings press release will also be available on our website at infineon.com. Reinhard please go ahead.

Good morning everyone and welcome to the telephone conference for our fourth quarter fiscal year 2016 results. I will begin today’s call with some remarks on Group and division results, on market developments and on our achievements during the quarter as well as the outlook and our medium-term aspirations. Dominik will then go into the financial details, we will then open the call to your questions. In the September quarter, some end markets remained challenging, nevertheless revenues came in 3% better compared to the June quarter, with €1,675 million. They were driven by continued structural strength in automotive as well as seasonally strong demand from power supplier and for components for smartphones. Also Chip Card & Securities still faced some inventory overhangs in the payment card markets, CCS revenues came in slightly better than expected with a small quarter-on-quarter increase. Demand from industrial applications was mixed resulting in a flat revenues quarter-on-quarter. Segment result came in with €280 million, increasing by 10% compared to the June quarter. The segment result margin stood at 16.7%. The average euro to dollar exchange rate stood at 1.12 compared to 1.1 assumed in our guidance. Hence both revenue and segment results felt some headwind from a stronger euro. The book-to-bill ratio for the fourth quarter came in at 1. Let us now take a look at litigation. Automotive revenues climbed by another 2% percent to €690 million for the quarter, up by €14 million. Again, electric drivetrain and the radar solutions were in very high demand. The car markets in North America, Western Europe and China continued to show strength. The premium segment continued to do well, we recorded a Book-to-Bill of 1. The segment result increased by 13% quarter-on-quarter coming in with €118 million. This compares to €104 million in the June quarter. The segment results margins stood at 17.1% on the back of higher sales and better productivity. The demand we see for our 77 gigahertz silicon germanium products is accelerating as indicated earlier this year. We expect unit shipments to roughly double on the year in the range of 25 to 30 million chipsets in the 2017 fiscal year. Besides, we are also growing tremendously with our 24 gigahertz solutions for blind spot detection which we actually show in PMM's P&L. Shipments for 24 gigahertz solutions were more than double year-over-year. This momentum both in 77 and 24 gigahertz will certainly solidify our leading position in the radar sensor market. We have further strengthened our leading position automated driving by entering the lidar market through the acquisition of Innoluce, a fables semiconductor company headquartered in the Netherlands. Innoluce specializes in MEMS-based scanning mirrors for laser beams. Current lidar systems that will be introduced in premium cars within the next couple of years are based on mechanical scanning mirrors which make them bulky and rather expensive to become a standard feature in all car classes lidar systems need to semiconductor based. Innoluce’s technology combined with our expertise allows the development of compact, cost effective and robust semiconductor based lidar systems for mass deployment. This acquisition perfectly complements our radar offering. Now switching to the mega trend electrification of the drivetrain. Demand remained strong during the quarter. More importantly, we were extremely successful in acquiring new business for electric drivetrain solutions, not only during the last quarter, but also for the entire fiscal year. We secured new design wins in excess of €750 million in the fiscal year 2016. This includes a major three-digit million business in electric drivetrain based in IGBT transistors for mass deployment of hybrid and electric vehicles at a leading Tier 1. In addition, we want business that more €500 million for low voltage automotive MOSFETs during the fiscal year 2016. Thus, we were successful in solidifying our number one position in the automotive power market in general. We also achieved a major breakthrough in the Japanese market. Our next generation RX microcontrollers were chosen by a leading Japanese Tier 1 for engine management systems. This design win further strengthens our leading position in microcontrollers for classic powertrain applications. Let us now turn to Industrial Power. Revenues were essentially flat coming in with €279 million, in-spite of the reduced feed-in tariffs, the demand IGBT modules for solar inverters continued to be very high during the quarter. Major home appliance returned to growth after the inventory overhang in Chinese supply chain was digested. The demand for inverter solution for electric buses in China gathered momentum in the September quarter. However, demand from industrial automation and traction decline quarter-on-quarter. The book-to-bill ratio stood at 0.9 in the September quarter indicating a normal seasonal decline in the December quarter. This segment result declined to €36 million, compared to €42 million in the June quarter, representing a segment result margin of 12.9%. Let us now take a look at Power Management & Multimarket. Revenues of PMM increased by 5% to €535 million, €26 million up from €509 million in the June quarter. On average the Power business showed softer seasonality than normal. While demand from AC-DC application showed good seasonality, DC-DC application showed soft seasonality, remaining is essentially flat. In AC-DC, demand from China for our 650-volt CoolMOS power MOSFETs for xEV charging stations remained high. In DC-DC, shipments into server platforms remain flat quarter-on-quarter due to the gradual concession from server platforms VR12.5 to VR13. However demand for low and medium voltage MOSFETs for DC-DC power management applications, such as brushless DC motors was good. The business with components for Smartphone’s showed a reasonable seasonal increase quarter on quarter, both the RF component business and the sensor business were driven by the ramp of new Smartphone models. Besides we’re pleased that our barometric pressure sensor of high accuracy, vertical height measurements starts contributing to the top line. On top our efforts to diversify our customer base are bearing fruit, a significant portion of our component business was cellular handsets is now coming from greater China. The RF power amplifier business for cellular power base stations stabilized but visibility remains low. The book-to-bill ratio for PMM came in at 0.9 in the fiscal fourth quarter. The PMM segment result improved broadly in line with higher sales by €16 million to €95 million. This translates into a segment result margin of 17.8%. Now, let me make comment on Chip Card & Security. Revenues increased by €1 million quarter-on-quarter to €173 million. The slight increase is primarily a result of a stabilizing payment card market. Our traction in the embedded security controller market for IoT applications continued. We secured a strategic project win at a leading device manufacture for Smartphone applications. Furthermore we secured some important project wins for embedded sim targeting computer, consumer applications. This quarter also marks important designs wins for secure elements for smart wearables like rings, wrist bands and fitness trackers. The book-to-bill ratio improved to 1, reflecting the stabilization of the payment market. Segment result increased slightly to €33 million in-line with slightly higher revenues. This equals a segment result margin of 19.1%. Ladies and gentlemen, as we progress through this 2016 fiscal year, we were facing an increasingly challenging environment according to WSTS the overall semiconductor industry was flat in Euro terms now at 2016 fiscal year, while we delivered 12% growth in-line with our guidance from the beginning of the 2016 fiscal year. Even we adjusted for the full year effect of the International Rectifier integration, we would deliver 7% organic revenue growth. This is not only very close to our long-term growth target, but more importantly the significantly large outperformance against the overall semiconductor industry than what we’ve historically achieved. Let me now come to the outlook for the first quarter of the 2017 fiscal year. We expect a typical seasonal downswing as revenues declining 4% sequentially plus or minus 2 percentage points. This is based on a rate of 1.1 for the U.S. dollar against the euro. We expect decline in revenues for all divisions except for automotive, which should be flat or even slightly up. The midpoint of the revenue guidance, the segment result margin should come in with 14%. For the full 2017 fiscal year we expect a growth rate of about 6% plus or minus two percentage points year-on-year. This implies a return to an 8% trend line growth and normal seasonality from the revenue run rate in the September quarter. Dominik will explain in more details why this resulted in a slightly lower full year growth rate. At a mid-point of the guidance range, we expect a segment result margin of 16% of sales. We are convinced that we will continue to benefit from strong structure demand drivers, be it electro-mobility aiders, renewables, power conversions, sensor in smartphones or IoT security to name a few examples. We are confident that by capitalizing on these levers, we will be able to continue to deliver the 8% organic revenue growth set forth in our target financial model in the years to come. Coming now to invests and D&A. We defined invests as a sum of outlays for the property plant and equipment as well as intangibles and capitalization of certain R&D expenses. For the 2017 fiscal year, our budget will be around €950 million or 13.8% of sales. This budget includes about €35 million for a new office building here at our headquarters. Adjusting for this extraordinary item, we are basically in-line with our 13% invest to sales ratio. Depreciation and amortization charges will remain more or less flat year-on-year and come in around €830 million. This represents a ratio of about 12% of sales. This figure also comprises about €130 million in the conjunction with the acquisition of International Rectifier, mainly D&A or the purchase price allocation. We also want to give you a brief update on the closing of our intended acquisition of Wolfspeed. We now expect the closing to take place early in 2017. Based on our solid performance in the week market environment in 2016 fiscal year, our confidence about our future growth opportunities as well as the fact that the U.S. dollar seems to stabilize on a stronger level against the euro, we have taken two decisions which might be of interest to you. Firstly, we increase our through cycle segment result target to 17%. Recall that we said the segment result target of 15% back in 2010. At that time, the Euro was roughly at 1.3 to the dollar, but the currently prevalent exchange rate, we wanted to gradually increase our segment result margin to 17%. In the current fiscal year, we planned to cover about half of the gap to reach this target. Given the momentum we see in ramping our unique 300 millimeter thin-wafer power fab, we plan to reach the cost cross over by the end of calendar year 2017 and further benefits from the integration of international rectifiers and the acquisition of Wolfspeed, we aim to achieve this level shortly thereafter. Secondly, we in-line with the supervisory board of Infineon want our shareholders to participate in the profit and cash flow enhancement resulting from our strong gross momentum. Therefore, we plan to recommend an increase of the dividend per share from $0.20 to $0.22 at the next Annual General Shareholder meeting in February 2017. Ladies and gentlemen, this concludes my introductory remarks and outlook. Let me now hand over to Dominik, who will comment in more details on the financials. Thereafter my colleagues and I are happy to answer any questions you might have.

Thank you Reinhard and good morning everyone. Fourth quarter revenues were €1.670 million, a sequential increase of €43 million or 3%. Year-on-year, the increase in quarterly revenues stood at 5%. The average euro to U.S. dollar exchange rate for the quarter was about 1.12 compared to our guidance 1.10. The resulting headwind in sequential revenue growth was around 1 percentage point. Comparing apples-to-apples our quarter-on-quarter growth was thus 1 percentage point better than the midpoint of our guidance showing the underlying strength of our diversified business despite some difficult end markets. In the 2016 fiscal year, we demonstrated the revenue growth of 12%. This included the International Rectifier full year consolidation effect and 7% organic growth on a comparable basis. However, please keep in mind that the 2016 fiscal year was typically front-end loaded with a stronger than usual revenue contribution in the first half. In the second half, we also got caught by the sluggishness in our industry. Recall the flat overall semiconductor market in the 2016 fiscal year that Reinhard has already highlighted. However, starting from the revenue run rate in the September quarter, we clearly see a normalization and anticipate a return to normal sequential trend line growth of 8%, obviously overlaid by the usual seasonality. Mathematically, this translates into only 6% growth year-on-year for the full 2017 fiscal year, because of the aforementioned adverse base effect in the 2016 fiscal year. Based on return to normal seasonality and the current order intake, as well as our backlog. We expect this negative base effect to be gradually absorbed, resulting in an increasing year-on-year growth rate as we move through the quarter of the 2017 fiscal year. Based on A, this near-term outlook, B, the 7 percentage points revenue growth outperformance relative to the overall semiconductor market in the 2016 fiscal year, as well as C, the expectation that the overall semiconductor industry will return to some albeit very moderate growth, we are confident that we are well on track to continue to achieve our 8% average growth target in the years to come. Back to the September quarter’s P&L. Gross profit climbed to €608 million, up from €598 million in the June quarter. This represents a sequential increase by 2% or €10 million resulting in a gross margin of 36.3%. However, excluding acquisition-related and other non-segment result effects mainly related to the acquisition of International Rectifier, the underlying or adjusted gross margin stood at 37.7%. Research and development expenses declined by €17 million coming in with €180 million. Going forward, you should continue to expect R&D expenses in the order of 12% of sales excluding any acquisition-related effects. Selling, general and administrative expense decreased slightly by €4 million to €196 million. The net other operating expenses amounted to €3 million. Included in the numbers are €51 million of non-segment result charges. Of that amount, around €40 million are International Rectifier acquisition-related amortization and other charges. Thereof €23 million hit our cost of goods sold. In R&D and SG&A, we booked International Rectifier acquisition-related charges of €2 million and €60 million respectively. Within these acquisition-related costs, amortization and depreciation of fair value step-ups from the purchase price allocation represent by far the largest item. We recorded a segment result of €280 million for the September quarter, compared to €251 million in the June quarter, a strong sequential increase of 10%. The segment result margin came in at 16.7%. The operating income improved €229 million from €193 million in the June quarter. The non-segment result improved to a negative €51 million from a negative €61 million in the previous quarter. Overall, the still meaningful negative non-segment result continues to be predominantly a result of the already mentioned acquisition related expenses. Now let me comment on depreciation and amortization. It decreased slightly by €3 million to €203 million after €206 million in the previous quarter. Included in this figure are €32 million related to the aforementioned amortization and depreciation of fair value step-ups from the purchase price allocation in conjunction with the acquisition of International Rectifier. The financial result continue to be driven by finances expanses for the acquisition of the international rectifier and showed a negative figure of €16 million. Continuing with tax, we recorded an income tax benefit of €50 million in the September quarter after an income tax benefit of €3 million in the June quarter. Consequently, this represents an effective tax rate of minus 7%. We again benefited from increased deferred tax assets mainly as a consequences of reorganization measures related to International Rectifier. However for your modeling purposes, a cash tax rate of about 15% should do well our cash tax rate for the last fiscal year was actually in that order of magnitude when dividing cash out for income tax by the pre-tax profit adjusted for non-tax deductible amortization and depreciation of fair value step ups. Net income from continuing operations increased significantly to €228 million, up by €44 million of 24% from €184 million in the June quarter. The net income from discontinued operations came in with a negative €3 million. Basic and diluted EPS increased significantly to €0.20 for the September quarter. The adjusted earnings per share improved by 11% to €0.21 from the fiscal fourth quarter compared to €0.19 in the previous quarter. Free cash flow from continuing operations came in at €169 million, down from €277 million in the June quarter. As significant portion of the decline is related to our typically higher investments in property plant and equipment in the September quarter. The net cash provided by operating activities came in at €447 million compared to €496 million in the June quarter. Last week we signed a purchase agreement with the lessor of our Companion headquarters, acquiring a 93% equity stake in the investment vehicle that owns Companion and lease it to Infineon. The price is €130 million, we also entered into a call option for their remaining shares. As we acquire control of the lessor we’re going to fully consolidate the net debts of the investment vehicles, which amounts to around €220 million. The transaction is expected to close by the end of this calendar year. On the other hand by virtual of consolidation we will enjoy a low double-digit million per annum expense reduction since the lease rate used was significantly higher than the depreciation going forward. For the years beyond 2018, the transaction also increases the annual free cash flow by €20 million to €30 million. At end of the September quarter, the gross cash position stood at €2.240 million up by €157 million. Consequently our net cash position increased significantly to €471 million after a net cash position of €299 million at the end of the June quarter. Let me also comment on our after tax return on capital employed, or ROCE. It improved significantly to 18.2% in the fiscal fourth quarter after 14.8% in the fiscal third quarter. ROCE continues to be strongly effected by bookings related to the acquisition of International Rectifier, in particular goodwill, revenue step ups in the context of the purchase price allocation and the related latest amortization. Excluding acquisition related bookings and effects the underlying ROCE stood again above 20%. Ladies and gentlemen this concludes our introductory remarks and we are happy to answer your question. Dear operator, please start the Q&A session.

Thank you. [Operator Instructions]. We will take our first question from Sandeep Deshpande from JP Morgan. Please go ahead.

I have a question regarding the automotive market. There is a new technology in the electrification of the car, which is silicon carbide. Can you comment on your presence in that technology and how you see the growth of that technology in the market? And another follow-up question I have regarding your overall margin guidance of 17%. By which timeframe do you expect to be hitting that on a full-year view? Thank you.

Okay. So, Dominik will start with the answer on the 17% Sandeep and then I will comment on the silicon carbide topic.

Sandeep hi. You know that we always guide only for one year ahead. So it’s not obvious when exactly, but given everything we have in the pipeline, the next fiscal year, provided and that’s a big provider, that the overall semiconductor market is in the kind of normal and not in a downturn and that is feasible perhaps. But we are not officially kind of giving you a date because you always have the caveat before we enter any fiscal year that we don’t know before the kind of November timeframe what our belief is on the overall kind of cyclical situation.

Well the silicon carbide topic Sandeep, we are active in silicon carbide for quite some time and we are very active in the electric drivetrain market. We have a very good understanding of the drivetrain and we see currently that the silicon solutions are by far dominating. Of course the new technology silicon carbide will require to be as reliable as silicon and we see here a certain still a way to go as well as silicon carbide, the devices today are pretty expensive. It has to come down in costs that means we have to further push the development. Infineon is developing here and we have shown this already last year in the PCIM, the fair for power semiconductors, a respective silicon carbide trench MOSFET. Definitely here we have been making progress, but now we make a big jump with the acquisition of Wolfspeed, because Wolfspeed is already in the market. We expect that the best way to design in silicon carbide in the car will be starting with the onboard charger, because here the advantage of more compact systems and less losses will start and then move to the drivetrain. We expect to, let’s say, silicon carbide base drivetrain, which also requires a significant redesign of the system to harvest on the benefit of the technology, to start at the end of the decade somehow, maybe chargers coming earlier. With our overall position here, I think, again very much successful in this game. And I think it is also very important to notify, that you have to have the full breadth of technology from IGBT to silicon carbide to CoolMOS in order to cover all the requirements at the very best for the customer solution.

Thank you.

Now take our next question from Gareth Jenkins from UBS.

Two quick questions, if I could. I wondered if you could just help quantify the benefits around 300 millimeters in terms of timing. You’ve talked about the under-utilization charge moving from the end of ’17. But can you talk about the benefits beyond that in terms of your margin uplift potential? And, secondly, I just wondered if you could maybe give us some update on the litigation with MACOM and whether you see any impact to the acquired business of IRF. Thank you.

Gareth, thank you for your question. The answer for 300 millimeter will come from Dominik.

I mean, as we’ve already highlighted several times. We think that coming out, and then the confidence, of course, is increasing every quarter, that we’re coming out of the calendar year 2017 unburdened, so to speak, from the ramp up costs. We’ve also commented that in the fiscal year 2016, we had about 60 million of headwind from that. And by the way that is one of the key reasons why the semiconductor market will be okay next year, we see an opportunity to reach the 2017 -- sorry the 17% target as discussed in the prior question. Beyond that, it really depends on how quickly you ramp. As you increase the loading, you will see further progress on costs. And in the fully loaded we should be 20% to 30% better in cost position than our average 200 millimeter fleet. And that gives you certain market expansion opportunity, but we cannot quantify when exactly that will roll in because it very much depends on how quickly we ramp.

The MACOM case. Here the background is that we went to court, we terminated the contract with MACOM because we see that they violated quite some conditions which we have in the contract for, again on silicon, which is related to RF base station. Here I can make it short. The court ruled that they can operate under the used contracts and continue until the final call -- the final judgment is made, because the harm to may them would be -- for being forced to stop now would be greater then what our situation relates. Never the less there is not the -- the message MACOM gave to the press, we do not understand where they come from and we also have notified the court of about the press statement MACOM has given asked the court to force MACOM to correct this. So we feel very confident on our case that we will finally succeed in this, but obvious these court case will take some time.

We will now take our next question from Kai Korschelt from BOA.

I had a couple on Wolfspeed and, so I just wanted to clarify the guidance doesn't include any accretion. And also wanted to confirm whether 100 basis points to 150 basis points on top line and maybe a little bit on the margin is the right ball park for us to think about it. I also wanted to ask whether the nature of the delay, is that just purely technical or is there any further or more detailed investigation maybe on market share or anything else going on? And then my third question was on the chip card business. So clearly this year will be a lot tougher, particularly on the banking side. So I'm just wondering is this year really just a pause? Or is the segment now structurally [indiscernible]? Thank you.

Yes okay, thank you for your Wolfspeed will be answered by Dominik, the other two will be given by Helmut.

So on the guidance, it’s absolutely right we’ve not yet baked into the numbers we’ve guided for fiscal year 2017, the Wolfspeed numbers. Revenues wise that’s on a full year basis it’s a kind of couple of 100 million of revenues and you can by the way, read in the Cree filings what's the revenue run rate per quarter there. And on the margin point of view, if you then blend that kind of couple of 100 million against the kind of almost 7 billion current fiscal year. You will see that if there is a significantly higher margins at Wolfspeed, it has not a material impact, but is very kind of incremental. So I will pass for the closing question to Helmut.

On the Wolfspeed closing date, we’re going to the regulatory approvals and we’ve already with International Rectifier experienced that in particular around year end, certainly delays can occur but these are purely technical so no further risks to the deal. So that was to, this question and the other one was on chip card.

The chip card question, while we do not see any structural weakening of this market, definitely there was a -- I think, over significant hang through or overstocking in the supply chain, which were affecting the revenue growth rate, when you compare it to the 2014 fiscal year revenue and the growth between -- in these years, that was enormous growth that saw that, I would say the plateau of this year can be very well explained. We assumed chip card to return to gross and to continue its path of success. But nevertheless a lower growth pattern than we have seen in the very year of the rollover of the banking card in U.S.

That's great. Thank you.

We will now take the next question from Andrew Gardiner from Barclays.

Just two, if I may. First on automotive and the outlook you've given for 2017. The quote in the guidance is substantially greater than the 6% you've guided for the Group. I'm just wondering if you could walk us through some of the underlying assumptions there in terms of what you are baking in for annual unit sales for the markets, levels of content growth and, I suppose, in particular, the hybrid electric mix as we look into the next year. And also, conversely, on the PMM side you're clearly being more cautious, suggesting I think, almost economic growth-type levels of growth, low single digit. I'm just wondering what you're hearing from the different principles that is leading to that level of caution. Thank you.

Andrew, thank you. The question about automotive, that will be answered by Helmut again, so PMM.

Yes, so automotive first. We do see very strong growth in content particular in the radar space or ADAS, as well as in electric vehicles. So the despite of a let’s say slightly slowing down growth in unit vehicles, in particular in the U.S. we do see continued growth in content as well as our gain in share as we are very strong in the fastest growing applications in automotive. So that remains a continued growth driver for us, we do expect overall from the current booking and as well from our customer interaction a substantially higher than average growth for the company, growth rate for automotive in the running fiscal year.

So in PMM, the story is more mixed. I would say under power side we have a continued growth in the AC to DC space that is mainly driven by the continued growth in the server businesses. And the DC-DC side, there is a transition from the VR-12.5 to 13 platform which is slightly growing and slowing down our growth in the DC-DC space. Nevertheless we are pretty strong -- see pretty strong growth in our low voltage MOSFETs smaller, motors, brushless DC motors like being used in multi-copters or power tools. So that is pretty say good continued growth in these areas and we are having a significant gains in our latest aspect technologies there. When it comes to the mobile market overall there is two effects, number one the growth in smartphones has come down quite significantly. One thing, two things is that in some cases we’ve seen that the module manufacturers that are incorporating our products have not had all the success in the market that was anticipated as well as some of the phone markets weren’t quite as successful as you can see from their report as well in their particular market. The good thing there is that in China we’re making very good progress with our producers there and the infrastructure market remains very as low visibility.

We will now the next question from Jerome Ramel from Exane BNP.

Good morning. Just concerning the CapEx, could you give us a little bit detail where you can spend the CapEx for which particular areas? Thank you.

Jochen Hanebeck will answer this for the CapEx.

Yes. Hello, good morning. So significant part of the CapEx will go into 300 millimeter, but of course we will also continue to invest into our 200 millimeter size wherever we can differentiates. Our manufacturing strategy is if we cannot differentiate we invite outsourcing partners to participate in our volumes, but we feel that in various areas manufacturing knowhow is differentiating and therefore also this 200 millimeter sites get some investments, as well as of course also related back end, if we talk about for example everything related to IGBT modules. And I think Dominik wants to add here.

Yes. And please note that we are doing something in the current fiscal year, which we very, very rarely do, which is expanding our facilities here on Campeon, which is a mid-double-digit million CapEx item. So this is more of an unusual thing, because as you know last time we’ve done that was basically in 2005 moving into Campeon here. So that’s 11 years ago and we do not anticipate that we will build office building every year.

Thank you. Another follow up concerning silicon carbide. When do you expect your qualification for, let's say, 1200-volts? And when do you expect the first shipment of silicon carbide product? Should we think about 2018?

So, Jerome, we will qualify the 1200-volt product this fiscal year and we are starting shipments for these products now, it means this fiscal year. But here the use case is mainly for the renewables, starting automotive. As always, from the point of design it will take a little bit longer when we see revenue streams coming in thee. But it is a real technology and will hit a real market.

Thanks very much.

We now take the next question Achal Sultania from Credit Suisse.

One clarification on your EBIT margin guidance for fiscal ’17. So, I guess, I presume this already includes some of the benefits around the Campeon headquarter leasing changes that you have mentioned, which basically -- and, if that’s the case, am I right to understand that your guidance implies that margin improvement in 2017 would be lower? And then that, you basically quote that margin improvement is going to accelerate as we go from 2017 to 2018 because you are guiding for 17% EBIT margin long term. Is that the right way to think about it?

Yes. I think that is the right way to think about it. Campeon will not be there for the full year and the effect is actually smallest in the first year. It’s an effect that is not so material, I think, in the bridge to 16%. And you’re right, there are very specific improvement measures, which are actually giving the biggest part of the tailwind in 2018, i.e., next full year we mentioned already 200 millimeter ramp up cost. So the improvement to get this headwind out of the equation by end of calendar year 2017 is somewhat backend loaded and will account -- the biggest effect will happen actually next fiscal year, and when we think about Newport existing the manufacturing there it’s also the biggest benefit is when we can shed the fixed cost end of next calendar year. And last but not least some of the measures in IPC still coming out of the restructuring of international rectifier, and also really coming to full fruition next fiscal year, so in general your comment is right.

Okay. Thanks a lot, Dominik. And maybe one clarification. I think this was about the PMM business to an earlier question. So we have basically seen three quarters in a row where PMM hasn't grown in revenue terms year-on-year. We all know that unit growth for Smartphones, tablets, PCs, we are not seeing any unit growth in those segments combined. So what gives you the confidence that PMM still is a long-term growth business? Are you seeing like share gains with different OEMs? Or you're still seeing content gain? Can you just clarify that point again, sorry?

Very briefly, you have to separate PMM in two buckets, which one is addressing the mobile phone and one is the power. We defiantly see in the current year, revenue increases due the completion of our portfolio and expansion of it in CoolMOS and the driver IC for it so we -- the markets shows a slight growth there and we expect to capture further market share. The weakness in the mobile phone and the move or the growth in the mid and lower segments is putting pleasure on the overall growth rate of PMM. So we do not have a structural issue over the power business.

We will now take the next question from Janardan Menon from Liberum.

I just want to go back to PMM and especially on your mobile phone business. Your comment that some of your module manufacturers did win the sockets, is that essentially to say that you've lost some market share potentially at some of the larger smartphone vendors? And so, from a long-term strategy point of view, how do you go about compensating for that, if that is true at all? And is a similar thing happening on the MEMS microphone side as well? Are you being able to maintain that market share or are there any movements there as well? The second question is on your 300 millimeter fab. The increase in utilization from a linearity point of view, is that going to start moving up from the beginning of the year, as you had said long ago from the end of this year to the end of next year you shall move up? Or is it going to be more lumpy and second-half loaded? And how much of that is coming from the Newport shutdown and transfer versus organic growth of new qualifications of Infineon products moving into 300 millimeter? Thank you very much.

Jochen will answer the manufacturing part. Helmut will comment on the mobile phone side.

Thanks for the question on 300 millimeter, actually we’re well on track in a liner curve to reach these cross over that means we’re half way already today towards the cross over and towards the Newport question, this is only 5% to 10% of the loading at the end of 17, related to new parts. So it’s lot about organically growth in CoolMOS and in IGBT, out of various applications.

With respect to our mobile phone business, two things. Number as you see there is some shift in market share between some of the established players and some new players, we are making very good progress in getting into the new players, in the midst though we do see some changes in market share there and we are exposed to that, fact number one. Fact number two, yes I have mentioned we have some module manufacturers in between us and the phone makers and yes some of those have not been as successful as they happen in the past. Nevertheless, I think going forward that would have been compensated with the new players in smartphones. And also adding to this we expect to grow and the base stations moving forward based on the acquisitions. So I think here for us is very important to growing the customer base in order to be less dependent on the success of large mobile phone players.

But are you saying that your low noise amplifiers, antenna switches, et cetera, are being designed in with additional module makers right now so that you can be successful in the future?

Here we have two ways, one is of course that the discreet components find its way. On the other side, we will continue in the environment we have and expect that the current module manufacturer will be able to recover the technical capabilities with our supplier.

Understood. Thank you.

We will now take the next question from Francois Meunier from Morgan Stanley.

A more general question. I think, if I look at the statement from one year ago when you were guiding for fiscal year ’16, you were guiding for 16% segment profit margin and actually you've done 15%. So what was the headwind this year? And why do you have confidence that this headwind will not reoccur this year and why you're going to achieve 16% this year? I know it's only 100 bps difference, but I think it's very important. Thank you.

Yeah, Francois the answer is quite simple. We basically guided a slightly higher revenue in the midpoint of the range. I mean the 12% we reached, we actually were below the midpoint of the range and if you look at our so called follow-through formulas about revenue attrition effecting our segment results, you will find the delta can be entirely explained by the lower revenues. And that was actually from our perspective quite a good outcome given that we had indeed some -- surprised us a little bit on the RF side which have been very much commented which were very high margin businesses, so we were able to mitigate the structural effect from losing some of these very high margin businesses. Now, why are we confident on the outlook for the currency it’s clear, first-of-all the bookings situation in the now December quarter is excellent, very strong and we do not anticipate that we will have a second year, fiscal year where the overall semiconductor market is flat, but we do anticipate a return to moderate growth and that’s very different from the last fiscal year where basically the semiconductor market overall was very sluggish and as you’ve seen all the growth rates of the competitors has adversely effected them and us.

Okay. Thank you very much.

And I’ll take the next question from Johannes Schaller from Deutsche Bank.

Two, if I could. Just clarifying on the 17% through-the-cycle margin and the last one was based on 1.30. I'm not sure if you fully quantified the FX assumption you have in the 17% now. Is that 1.10 or is it a bit more of a conservative exchange rate assumption maybe in there? And then the second question, just in terms of capacity utilization, can you give us a bit of an idea where you stand at the moment? And also specifically on the automotive business if there are still any potential issues around capacity or if you are doing fairly well here that would be helpful. Thanks.

This is Reinhard. Thank you for your question. Dominik will explain the exchange rate. Jochen will take the capacity topic.

So on a mid-term guidance, we cannot be as precise with the exchange rate assumptions and the impact on our result as we can be on the short-term. So for the short-term clearly it’s the 1.10, very mathematically precisely can do the bridges. Any deviation in the exchange rate would give a deviation of revenues and segment results. In the mid-term as also a competitive effect, which is some competitors in different currency areas will be better off or worse off and then that’s why we’ve been normally not so precise on this. But what we can say is that you should take the current, the present, exchange rate level as the benchmark. But I would caveat that five years later when you do the bridges, it’s not a mathematical hard one-to-one translation because of the competitive shifts resulting from the exchange rate moves.

Yes, on the capacity question, so typically we managed to run our frontend subs above 95% utilization. Backend, due to a structural topics a little bit lower, we achieved this by internal flexibility and flexibility with our sub partners. If there are areas where we trying to still catch-up with capacity to demand than it’s in the area of a mobility China, that’s why we are so positive about it and also in 300 millimeter, we see very strong demand which supports and our optimism in related to the 300 millimeter ramp up.

You’re not seeing any supply constraints or possible supply constraints in automotive, given the strong growth there at the moment?

Not in general. There are always little things here and there but manageable.

That’s helpful. Thank you.

And we especially are increasing Regensburg fab to continue our extremely successfully rally in the radar. So it should also be manageable.

That’s clear. Thanks.

And I’ll take the next question from Guenther Hollfelder from Baader.

A first one on electric cars. You showed in your presentations recently your strong position you’re having today in the electric drivetrain with your IGBT technology. So I was wondering we’re still talking about relatively low volumes in terms of electric cars. On the other hand, several OEMs, including Volkswagen, Mercedes Benz, they announced first platform-based electric car designs being introduced in the 2019 timeframe. So I was just wondering are you, is full year ’17 the year, so the next 12 months, where you will pitch for these platforms and will achieve the socket wins here? And how comfortable are you to protect your strong market share regarding these platforms?

Helmut will give the answer, but I will make one addition to it. But Helmut will tell on the market situation. We believe that based on our manufacturing strategy we’ll be one of the few, and maybe even the only one who can manage to provide such a high or support such a high growth rate, because there we will see significant demand coming for the near term in IGBT’s.

Yes we’ve registered over €750 million worth of design wins based on IGBT technology in fiscal year 2016. So, as Reinhard mentioned earlier, this clearly shows how dominant IGBT’s will be in the upcoming business in the electric vehicles. This is one thing. Number two, China has been or is currently the strongest market in rollout of electric vehicles. That will be complemented with some similar or comparable volumes in Europe and the U.S. on the much later. And yes the design time frame for the ramp ups of ’19 and ’20 are beginning next year. And yes given our very strong position in power semiconductors overall combined with a very strong position in automotive, we feel very confident that we can keep our very strong position in the electric vehicles space.

Yes. And, as a second and last question, again on Wolfspeed, do you already have insight regarding the qualification of Wolfspeed silicon carbide MOSFETs for automotive applications?

Here due to the competitive nature of this, we cannot talk here to Wolfspeed, we have some signals from the market and I think it seems to make progress, but we cannot give you more details on that.

We will now take our next question from Lee Simpson from Stifel Nicolaus. Please go ahead.

Just three quick one, if I could. First off, could you give me just the relative size of the RF Power business for cellular infrastructure as it is inside PMM? Secondly, there was a lot of wins over fiscal year ‘16 for e-buses in China for air-quality modules. I just wondered how much of that is a sales driver? What is the momentum like as it continues into 2017? And, maybe lastly, this time last year we saw some inventory channel issues for the home appliances business in Q1. Are you seeing any of that surface again this year? Thank you.

So, Dominik, please, RF Power.

So RF Power is in mid single digit percentage of revenues down to that number right now, because it’s relatively weakly and it should actually we cover it’s snapping back. And then when you add Wolfspeed we should be in double-digit percent of revenues of PMM. It used to be a third of a thirds, but currently it’s lower than that and with the addition of Wolfspeed, we anticipate, and the fact that we start from an extremely sluggish base, as we speak that should be a nice growth potential going forward.

The e-buses is still a reasonably small overall business. But we see in total for the buses and the CAV, a gross potential, moving forward to may be Helmut can add to this.

Overall we’ve been very successful in this space again it’s predominantly driven out of China and we do see continued growth in this area going forward. And as far as the inventory issues are concerned, major home appliances, the third question, I think that is over. We do see a beginning of growth in the major home appliance business in China also.

So, thank you everyone. Basically our time is up, so operator please conclude to call.

Thank you. That concludes this conference call, thank you for participation and for joining. You may now disconnect.