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Controlling in highly competitive high-tech industriesDominik Asam, CFO16 May 2017
Agenda
Characteristics of semiconductor industry
Introduction to Infineon
Controlling at Infineon
Lessons learned from implementation of R&D controlling
Forecasting in a capital-intensive and volatile business
1
2
3
4
5
22017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
More with less: semiconductors are vital building blocks in various crucial areas of life
More energy with less resources
More performance with less energy
More mobility ‒ safe and with less CO2
More security at lower cost
32017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
› About 45% of the OECD Economic growth since 1985 comes from increased productivity; electronics is a key driver for this growth
› Up to 80% of innovation in automotive is enabled by semiconductors, even more when it comes to Hybrid and EV
The semiconductor industry has significant leverage on downstream innovation
Source: DECISION, ESIA, Future Horizons, IMF, WSTS 2010, AUDI, OECD Factbook 2013, Infineon
In
no
vatio
n
Pro
du
ctiv
ity
Automotive / Industrial /Medical / ...
WW: ~USD 30,000 bn
SemiconductorsWW: $298
bn
×5
x 20 -100
ElectronicsWW: $1,600 bn
42017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Capital intensity is slightly declining but very high compared to other industries
33
61
39
2831
48 48
5761
43
26
54
67
59 58
66 6568
73
8083
7881
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
10
20
30
40
50
60
70
80
90
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017e
2018e
2019e
2020e
2021e
Capex to
sale
s ra
tioCapital spendin
g in b
illion U
SD
Capex Capex to Sales Ratio
Worldwide Semiconductor Capital Spending
Calendar years.Source: IC Insights, The McClean Report 2016, March 2016.
52017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Wafer diameter is a key lever for costreduction but also drives scale of factories
Larger wafer diameters
Source: Intel, SEMI ISS 2013
450mm Transition
Wafer Transition
AreaIncrease
100mm 125mm
100mm 150mm
125mm 150mm
150mm 200mm
200mm 300mm
300mm 450mm
56%
125%
44%
78%
125%
125%
SEMI Industry Strategy Symposium (ISS) – January 15, 2013: Intel Corporation executives make first public presentation of 450mm silicon wafer patterned with 26nm features using nanoimprint lithography.
62017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Shrink of feature size as another key lever for cost reduction hits economical limits
No cost/transistor crossover for first time at 28 20nm transition expected.
But system integration is still a driver.
Source: Lisa Su, AMD, ISSCC '13 Keynote
Moore’s Law - scaling for more than 20 generations: often assumed to be at the end but survived - now stalling!?
Scaling of Gate Length Cost per Transistor Scaling
Norm
alized C
ost/
Tra
nsis
tor
0.0
0.2
0.4
0.6
0.8
1.0
45nm
40nm
32nm
28nm
20nm
20FinFET
The end or next brakethrough
to come?
72017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Agenda
Characteristics of semiconductor industry
Introduction to Infineon
Controlling at Infineon
Lessons learned from implementation of R&D controlling
Forecasting in a capital-intensive and volatile business
1
2
3
4
5
82017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Leadership in system understanding will fosterfuture growth
› Advanced Driver Assistance System (ADAS) - Infineon AURIX™ mC, the central processing unit responsible for all safety relevant decisions
› Sensors – pressure, magnetic andradar sensors for safety and comfortfeatures
› CO2 reduction – Infineon enablesenergy efficient and compact designsin all areas requiring electronics
#1 and technologyleader in Power
System leader in Automotive
Leader in Security Solutions
Competitive advantages Leading in system-crucial categories
Courtesy: BMW Group
92017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Leadership in system understanding will fosterfuture growth
› System leader with digitalization of
the control loop and functional
integration
› 300mm thin-wafer manufacturing for
power semiconductors
› Leader in next-generation power
semiconductor materials
GaN and SiC
#1 and technologyleader in Power
System leader in Automotive
Leader in Security Solutions
Competitive advantages Broad product & technology portfolio
102017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Leadership in system understanding will fosterfuture growth
› Hardware based security for
– Compliance with security mechanismsdetermined on application level
– Secure & trusted environment for data storage and code execution
– Protection against manipulation, access and theft of secrets
› Machine-to-Machine communication asbackbone for reliable operation
#1 and technologyleader in Power
System leader in Automotive
Leader in Security Solutions
Competitive advantages Mobile Communication & IoT Security
112017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Infineon‘s revenue development (excl. IRF) outperformed total semi market
* Based on Infineon’s portfolio (excl. Other Operating Segments and Corporate & Eliminations) per end of FY16.
** If International Rectifier had been consolidated since 1 Oct 2014, Infineon would have recorded revenues of €6,059m in FY15.
Source: Infineon; WSTS (World Semiconductor Trade Statistics), November 2016
organic CAGR(99-16): ~+9%
CAGR(99-16): +5.1%
[EUR m]
1,2
00
1,6
81
2,0
45
1,8
21
1,9
95
2,2
89
2,3
66
2,7
01
2,9
06
2,9
16
2,1
28
3,1
03
3,7
80
3,7
74
3,8
15
4,3
03
5,1
00 (
excl. I
RF)
6,0
59 (
incl. I
RF**)
6,4
72
0
1500
3000
4500
6000
7500
1999 2001 2003 2005 2007 2009 2011 2013 2015 2016
Revenue Infineon* [lhs]
Semiconductor World Market (adjusted for the Infineon fiscal year ending Sep 30) [rhs]
126,8
95
296,3
83
300,000
200,000
100,000
295,9
96
122017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Infineon increased relative market share in power and outperformed chip card market
Source: IHS Markit, October 2016 Source: IHS Markit, July 2016
* including SHHIC (in 2015, SHHIC was acquired by CEC Huada.)
Source: Strategy Analytics, April 2017
Automotive semiconductors
total market in 2016: $30.2bn
7.4%
7.8%
9.8%
10.7%
14.0%
STMicro
Texas
Instr.
Renesas
Infineon
NXP
Power discretes and modules
total market in 2015: $14.8bn
Smart Card ICs
total market in 2015: $2.72bn
10.4%
15.1%
16.2%
24.8%
30.5%
CEC
Huada*
STMicro
Samsung
Infineon
NXP
5.0%
5.7%
6.1%
6.3%
18.7%
Vishay
STMicro
Fairchild
Mitsubishi
Infineon
132017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Agenda
Characteristics of semiconductor industry
Introduction to Infineon
Controlling at Infineon
Lessons learned from implementation of R&D controlling
Forecasting in a capital-intensive and volatile business
1
2
3
4
5
142017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Main controlling KPIs at Infineon
Segment Result Margin
FCF from continuing operations
Return on capital employed
Revenue growth
Segment ResultMargin
Revenue growth Gross Margin R&D-to-Sales
CapEx-to-Sales Gross Margin G&A-to-Sales S&M-to-Sales
Segment ResultMargin*
FCF from continuing operations
Return on capital employed
Management Board
Divisions
Operations Central Functions
Employees
*Segment result margin of respective Division or revenue-weighted average of all Divisions if employee works in Operations or Central Functions
152017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Semiconductor industry characteristics
› Asset Intense Industry
› Long Production Lead Time
› Significant Demand Fluctuation
› Early in the Value Chain
162017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Three major stakeholders in Infineon’s planning process
Four DivisionsRegions Operations
Global Production and Distribution Network
Capacity & Supply
Regional Account Teams
Uncapped Demand
P&L Responsibility
Consolidated Demand and Release
172017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Stakeholders are aligned within one planning cycle
Planning Cycle
Demand Load Adjust & Release
Capacity
› Uncapped Demand Signal
› Price Planning
› Consolidated but still Uncapped Demand
› Flexibility Planning
› Stock and Contingency Planning
› Review of Resulting Load to Resources
› Invest Proposals
› Capacity Feedback
› Invest Decisions/Reservations
› Adjusted Plan for Demand, Load and Capacity
182017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Demand Load Adjust & Release
Capacity
Multidimensional big picture within online planning cube for integrated decision making
Demand/Product View
› Volume, Price, Revenue
› Region, Currency
All Planning dimensions are available and aligned at all planning steps
Resource View
› (Allocated) Capacity
› Reserved Capacity
› Idle Capacity
Load View
› Load for Revenue
› Load for Stock
› Inventory
192017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Adding Financial Key Parameters to Planning Cube translates it into a Financial Statement
Volume related inputs to Financial Forecast Statement
Financial Parameters
Sourced from Finance Systems
› Price per Piece
› Cost per Piece
› Cost per Idle Capacity Unit
› …
› Revenue
› Cost
› Margin
› Idle Cost
› Inventory Value
› …
202017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Multidimensional picture for controlling landscape
SORT
WafertestSawing
DIE BANK ASSEMBLY
Sawing
Die BondingWire Bonding
MoldingTrim & Form
FAB
FurnaceImplantingDeposition
StepperEtching Wetting
Chiptest(Burn In)
TESTWafer stock DC
Up to 500 process
steps
Buffer /
StockBuffer /
Stock
Buffer /
Stock
Buffer /
Stock
Consi
Around 4 months cycle time
Production Site› Capacity› Utilization› Idle Cost› Necessary Invests
Production Network› Flexibility › Stock development
Customer Demand› Volume› New Products
Product › Currency› Regional Split› Price› Cost of Sales
212017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Agenda
Characteristics of semiconductor industry
Introduction to Infineon
Controlling at Infineon
Lessons learned from implementation of R&D controlling
Forecasting in a capital-intensive and volatile business
1
2
3
4
5
222017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
What projects do we invest our R&D money in and how
profitable are they?
The PPL lies at the core of our financial R&D project controlling
232017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Purpose of a Product Plan - PPL
PPL predicts the contribution to financial targets with respect to profitability and growth potential
PPL is a financial tool to support systematic reviews during the lifecycle of a product
PPL serves visibility for assigned entrepreneurs to react fast on increasing market dynamics
A PPL is a joint commitment of…
–Sales & Marketing on future customer projects in terms of price, volume and product specifications
–Operations regarding future manufacturing cost
–R&D regarding project timeline, resource commitment and project cost development
–Finance
242017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Replace excel by a system –the three key elements of ePPL 2.0
Data sources Calculation Tool Reporting
OCC BI Portal
ePPL 2.0 DB
252017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
KPI: PPL Execution
Measure for project planning accuracy
Measure for actual time-to-market
Product Segment A Product Segment B Product Segment C
262017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
FY17 FY18 FY19 FY20 FY21
Pre X3 / new products
X3-X9 Expedition
X3-X9 Mission
X3-X9 Autobahn
Legacy
Bluebook
MI: Strategic 5-year plan vs. R&D pipelinecoverage
How much revenue is planned with products which are currently under development(Milestone 3- Milestone 9) during 5-year planning timeframe, what is the risk profile(execution, time to market) of the plan
Measurement: Coverage of revenue with products currently under development
Plan
Project categories: 1) Expedition: Dynamic boundary conditions, high level of uncertainties. 2) Mission: Possible changes to boundary conditions, significant but manageable uncertainties. 3) Autobahn: Stable boundary conditions, low level of uncertainties.
*
*
*
272017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
KPI: Conversion rate of R&D into revenue
How does a project/product contribute to growth and profitability of a Division/Business Line/Product Line?
What is the conversion rate of an R&D investment into revenue, what is the profitabilitycompared to the segment targets / expectation?
Measurement 1: Conversion rate of 1€ project specific R&D into X€ cum. revenue
Measurement 2: Øproduct-cost-margin of product/project compared to targets in 5y-plan
Measurement 3: Planning stability between Milestone 3 and Milestone 9
M6
M3
M9
current
0
5
10
15
20
25
30
35
40
0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0
Growth
Profitability
Div / BL / PL specific
aggregation
282017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Lessons learned during PPL roll out
› Ease of use and value add required to provide incentive for adoption “bottom up”
– Certain simplifications to be jointly agreed in the finance community to reduce the degree of complexity
– Data available in other systems needs to be automatically fed into the system to reduce workload
– User interface needs to be convenient and fast
› Tone from the top both by the technical and finance side required to support roll out “top down”
– Improved transparency in an area which is at the core of the decision power of the divisions not always welcome (potential fear of increased top down interference)
– It takes a considerable time before contents provide full benefit in terms of controlling
292017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Agenda
Characteristics of semiconductor industry
Introduction to Infineon
Controlling at Infineon
Lessons learned from implementation of R&D controlling
Forecasting in a capital-intensive and volatile business
1
2
3
4
5
302017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
VOLUME
VELO
CIT
Y
VARIETY
COMPLEXITYVARIABILITY
& INCONSISTENCY
The quantity of data that is generated today and has become available
The speed at which data is generated has increased vastly
The sheer variety/types of data that is available today has increased
&
? !
The inconsistency which can be shown by the data at times
The data is often unstructured and not linked, connected or correlated
Proliferation of data has the potential to change how we think of business strategy
312017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Exploratory Data AnalysisA few of the key data points considered
New Orders Trend Analysis (Quarterly)
New Orders Trend Analysis (Weekly)
Order cancellations Trend
Analysis (Q & Wly)
HFM Adjustments Analysis S&D Notes Trend Analysis (Q’ly & Weekly)
Number of Days (Sales) Impact on Revenue
Revenue Composition Analysis
Revenue Trend Analysis (Yearly)
Revenue Trend Analysis (Quarterly & Weekly)
Quarter on quarter Trend Analysis
Credit Notes Trend Analysis (Q’ly & Weekly)
OBL & CU_FC Trend Analysis (Q’ly & W’ly)
322017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Infineon Group revenue prediction model construct
Revenue (Order
Development)
Revenue (Order
Development)
Customer ForecastCustomer Forecast
Order BacklogOrder
Backlog
Revenue
Quantity
RevenueQuantity
Revenue Estimate
RevenuePredictionRevenue
Prediction
New Orders Received
Order Cancellations
HFM AdjustmentsOther Adjustments
Data Source: CEBIS
(Granularity: Weekly)
Variables for Adjustments
Revenue Run rate
Derived Variable
FRFC Forecast
Variable for Reference
IConsistent Data Integrity &
Quality checks and Profiling
IFX Group Prediction Model: Major FeaturesModel Construct
II
III
IVEmphasis on ’Complexity reduction’,
‘Mathematical validation’ &
‘Avoidance of over-fitting`
V
VICurrency Exchange
Month End RateRFC Rate
Variable / Feature selection and
extensive Exploratory data
Analysis
Quarterly & Mid-Quarter Iterations
with close feedback loops and
Regular model evolution
High levels of Prediction Accuracy
with Actionable Insights
Embedding the Outcome of the
Analytical Model in IT Solutions for
Business consumption
332017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
IFX Group Revenue Prediction ModelMulti-iterations with High Prediction Accuracy
Base Model Advance Model
Operatio-
nalization
(Advance
Model)
Next Level
Model with core variables:
Cash Flow, Order Backlog,
New Orders, Credit Notes &
Order Cancellation etc.
Iteration – I & II
Oct’15-Jan’16
Two distinct prediction models for
euro and non-euro ‘Revenue’
components; using Month-end
Exchange Rate & RFC Exchange Rate
End to End automation
and result integration
with CEBIS
In – Progress
Advance Algorithm and
Model Refresh
Iteration– III, IV, IVA, V
Apr’16-Jul’16-Oct’16
Iteration – VI, VIA
Jan’17Future Iterations..
Prediction Accuracy
Oct’15: 0.7%
Jan’16: 1.5%
to be updated after FY1617 Q2
Closure
Apr’16: 1.8 -2.6 %
Jul’16: 0.7 - 1%
Oct’16: 1.3 – 2.4%
Next Level
342017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.
Thank you for your attention
352017-05-16 Copyright © Infineon Technologies AG 2017. All rights reserved.