By Harro Ten Wolde
FRANKFURT (Reuters) - Demand for chips for cars, especially in China, will lift Infineon's profit in 2017, the German chipmaker said, sticking to its forecast for revenue growth and profit margin.
Chips made by Infineon are used by carmakers including Tesla and Hyundai as well as auto parts suppliers Continental and Bosch to activate airbags, enable cruise control, manage power supplies and cut emissions.
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Infineon is the world's second largest semiconductor supplier to the car sector, with a market share of 10.4 percent according to Strategy Analytics, behind NXP with 14.2 percent.
The automotive unit accounts for more than 40 percent of revenues at Infineon, which on Thursday posted a 12 percent rise in operating profit, excluding special items, to 246 million euros ($265 million) for the quarter ended in December.
That was above the highest estimate in a Reuters poll with an average forecast of 232 million euros, while revenues of 1.65 billion euros were also better then expected.
"In the first quarter, revenue and earnings were better than expected, driven in particular by strong demand for our components for automotive electronics and MOSFET power transistors," Chief Executive Reinhard Ploss said.
First-quarter sales of the autos unit, whose chips are used in one in 15 cars worldwide, booked a 15-percent revenue rise, while its operating profit rose 58 percent.
Like its peers NXP, STMicroelectronics, Renesas and Texas Instruments, Infineon is riding the automotive wave as carmakers are rushing to develop electric and self-driving cars, pushed by tougher anti-pollution rules and the emergence of new competitors from the technology sector such Alphabet's Google.
The world's largest automotive chipmaker NXP Semiconductor, which is being bought by rival Qualcomm, reported earlier on Thursday a 17 percent rise in fourth-quarter automotive revenues.
STMicroelectronics, the world's fourth largest automotive chip maker, last week posted in-line 2016 results, while number five, Texas Instruments Inc reported higher-than-expected quarterly revenue, helped by strong demand for its analog and embedded chip products from its automotive and industrial markets.
Infineon said it still expected revenues for the fiscal year, ending Sept. 30, to rise by some 6 percent to 6.86 billion euros, with an operating margin of about 16 percent, which was in line with analysts' expectations.
"The maintained outlook looks cautious," said DZ Bank analyst Harald Schnitzer, keeping his "Buy" recommendation for the stock.
But financial chief Dominic Asam told analysts there were still too many uncertainties, such as an upcoming round of negotiations about its chip prices with customers, to be more confident about the year.
"Still, currently the order intake is good," Chief Executive Ploss added.
Shares in Infineon were 2.3 percent higher, one of the top gainers in the STOXX Europe 600 Technology index, which was up 1.3 percent.
Infineon shares have gained 6 percent so far this year and are up more than 70 percent from their year-low. The shares are at an almost 15-year high and have outperformed the STOXX Europe 600 Technology index which has gained 3 percent in 2017.
(Editing by Alexander Smith and Adrian Croft)