FRANKFURT German chipmaker Infineon forecast a rise in second-quarter sales and operating profit on Thursday as its key car clients started to restock, and said broader demand would also pick up.
Although the global automotive industry is still battling a slump in sales that is particularly pronounced in Europe, Infineon said carmakers were now starting to re-order chips such as those which activate airbags and enable cruise control equipment, after a period of running inventories down.
"We have secured contracts worth more than 400 million euros in this area for the rest of the year," said Infineon's Chief Executive Reinhard Ploss, adding he expected demand for auto chips - which account for 40 percent of Infineon's operations - to continue to rise.
Chief financial officer Dominik Asam added that overall the chip market had bottomed out and was ready to grow again.
"From here we expect things to go up," Asam told reporters. "It is our impression that the sector has reached its bottom."
Infineon's report chimes with a broader trend: earlier this month TSMC, the world's No.1 contract chip maker, said it expected the semiconductor industry to grow 9 percent in 2013.
The German company said it expected revenue for the fiscal second-quarter, ending March 31, to rise about 5 percent from the first quarter to around 894 million euros ($1.2 billion). That is above an average analyst expectation of 869 million, according to Thomson Reuters StarMine.
The global chip market has suffered post-financial crisis as consumer demand collapsed across all sectors, from industry to consumer electronics like phones and tablets to cars.
Infineon has shielded itself from the worst of the volatile mobile phone market however, after selling its wireless chip unit to Intel in 2010.
The German chipmaker's outlook contrasted with that of European peer STMicroelectronics, which said late on Wednesday it expected current-quarter revenue to fall around 7 percent from the previous quarter because of trouble at its mobile chip unit.
Infineon shares were up 5 percent by 1145 GMT on Thursday, outperforming the sector index, which was up 1 percent and STM shares, which were up 0.3 percent.
BOOST FROM COST CUTTING
Infineon's operating result in the current quarter, ending March 31, will be boosted by the results of cost cutting, it said.
The German company is cutting costs through measures such as temporarily switching off underutilized equipment, cutting staff costs and making use of shorter working hours, targeting 100 million euros in annual savings.
"Cost saving measures are beginning to take effect," Ploss told reporters. "In the first quarter the company has already saved 30 million," he added.
Infineon also more than halved investments for the current fiscal year to 400 million euros.
Infineon kept its full-year outlook for 2013 revenue to drop by between 5 and 9 percent and a core operating profit margin of between 5 and 9 percent. The margin was 13.5 percent for the year through September 2012.
Fiscal first-quarter operating profit, excluding special items, fell 69 percent from last year to 44 million euros, beating the average expectation of 42 million in a Reuters poll.
(Editing by David Holmes and Sophie Walker)