UPDATE 2-Infineon expects auto, security chips to boost sales

Thu Jan 30, 2014 8:00am EST

* Operating profit, ex one-offs beats forecasts

* Sees fiscal Q2 revenue rising by about 5 pct

* Automotive and security chips to drive Q2 sales

* Shares hover around 2-year high (Rewrites, adds shares, CEO, analyst comment)

By Harro Ten Wolde

FRANKFURT, Jan 30 (Reuters) - Infineon expects demand for microchips used in cars and smartcards to boost quarterly revenue, giving the German chipmaker an edge over rivals more heavily exposed to tough smartphone and tablet markets.

Infineon, whose chips activate airbags, enable cruise control and cut vehicle emissions, said on Thursday revenue should rise by about 5 percent in the three months to March from the previous quarter.

The Neubiberg, southern Germany-based company is benefiting from a recovery in the chip market as the outlook for the global economy improves.

The global chip market is expected to expand by almost 3 percent this year to $329 billion and to $366 billion in 2017, research firm IDC estimates.

"Positive forecasts for the global economy underpin our positive outlook," Chief Executive Reinhard Ploss said.

Infineon shares were up 3.8 percent, hovering around two-year highs, by 1210 GMT. They were the second-biggest gainer in the FTSEurofirst 300 index of Europe's leading shares .

Ploss said Infineon received more orders than it filled in the first quarter, with strongest demand for its automotive chips.

Rivals that are more dependent on chips for smartphones and tablets have posted disappointing results.

Leading mobile chipmaker Qualcomm on Wednesday posted first-quarter revenue that missed expectations, days after Apple posted a weak revenue forecast, renewing fears about Chinese demand.

Although Infineon still makes chips for mobile devices it does not depend heavily on that market because it sold its wireless business to Intel in 2011.

It now gets almost half of its sales from the automotive sector, tapping into a $24 billion market and counting Continental, Robert Bosch, Mitsubishi Motors and South Korean carmaker Hyundai Motor Co among its customers.

Europe is set to end six years of falling auto sales in 2014 with a 2 percent increase in passenger car registrations, the Association of European Carmakers (ACEA) said earlier this week.

Infineon is also pinning its hopes on its security chips business, which targets a $2.2 billion market for smart cards used for electronic payments. The division accounts for 10 percent of sales and has Hewlett-Packard among its customers.

The former Siemens unit also affirmed its outlook for revenue to rise by 7-11 percent to 4.11-4.27 billion euros ($561-$583 billion) in its current year ending Sept. 30, with a core operating profit margin of 11-14 percent, up from 9.8 percent the previous year.

"Infineon's earnings guidance seems to be conservative," said DZ Bank analyst Harald Schnitzer in a note to clients, confirming his "buy" rating for the stock.

Operating profit for the financial first quarter through December, excluding special items, more than doubled from the previous year to 116 million euros, beating even the most optimistic estimate in a Reuters poll. ($1 = 0.7329 euros) (Reporting by Harro ten Wolde; Editing by Erica Billingham)