According to the supply chain, Infineon recently sent a letter to its distribution partners mentioning the cost increase and the increase in investment in 2022.
Infineon's letter mentioned that the company sees an ongoing acceleration in electrification and digitalization for which semiconductor solutions are the key components. Therefore, demand remains at peak levels and most semiconductors, especially products manufactured at foundries, continue to be in tight supply. Although at least some of the capacity tension is slowly beginning to ease, the imbalance between supply and demand in the industry will continue throughout 2022. Depending on how quickly new capacities can be added and on the development of end markets.
The letter noted that while the supply chain remains vulnerable to potential disruptions, the pressure on cost structures in the industry continues to intensify. Infineon's global manufacturing partners increase investment to address high utilization, resulting in higher costs. As a result, suppliers passed on higher price levels to Infineon. In addition, Infineon and its manufacturing partners are also affected by soaring costs of key raw materials, energy commodities and logistics, reflected in rising global inflation. Infineon absorbs these cost increases through its in-house manufacturing as well as front-end and back-end manufacturing partners.
These cost increases have now reached a point where Infineon can no longer absorb them with additional internal efficiencies. As such, Infineon says it must distribute the burden on the broadest possible basis and will balance these peaks in the best possible way, while continuing to grow with its distribution partners.
At the end of the letter, Infineon said it would increase its investment significantly again, reaching 2.4 billion euros by 2022. This represents an annual increase of around 50% over the past two years, following the 1.6 billion euros in fiscal 2021 and the 1.1 billion euros in the previous year. Infineon is taking all necessary measures to keep abreast of the current situation by expanding front-end and back-end production capabilities.