Boom in heat pumps pushes chip manufacturers to their limits
Munich The run on heat pumps ensures full order books for the chip manufacturer Infineon. “With the war in Ukraine, the business took on a whole new dimension. That will be extremely relevant for us,” said Peter Wawer, head of the industry division, the Handelsblatt.
The semiconductors for heat pumps are so popular that customers have to be patient. “We are building up enormous capacities, but we can’t keep up with the deliveries,” warned the manager. Because not only in Germany According to Wawer, demand has skyrocketed since the Russian invasion of Ukraine: “Heat pumps have become a global issue.”
Germany’s largest semiconductor producer assumes that sales with the manufacturers of heat pumps will increase massively in the next few years. The Munich company does not publish figures for the business. But one thing is clear: a billion-dollar market is developing.
As can be seen from an investor presentation, Infineon calculates 40 to 60 euros for so-called power semiconductors per heat pump. The company is the world market leader for these chips, which are necessary for the power supply of the devices. The group estimates the annual increase in this area to be 16 percent by 2030.
This corresponds exactly to the forecast of the International Energy Agency (IEA). She estimates that 1.5 million heat pumps are currently being installed each month, ie 18 million a year. For 2030, the researchers predict five million a month, that would be 60 million a year. For chip manufacturers, this means sales of between 2.4 and 3.6 billion euros with power semiconductors.
But that’s not all: a large number of other types of chips are installed in the systems, for example sensors to measure the temperature, or semiconductors for remote control and the connection to the Internet. Infineon also offers these.
Sales of heat pumps are currently increasing extremely quickly. According to the Federal Association of the German Heating Industry, 236,000 heat pumps were sold in Germany last year, 53 percent more than in the previous year. Sales of classic gas heaters, on the other hand, have shrunk by eight percent. The Bosch subsidiary Thermotechnik recently announced that its heat pump business in Germany increased by 75 percent last year, and worldwide the increase was 54 percent.
The suppliers are therefore opening production facilities on a large scale: The German heating engineer Vaillant is starting up a new mega-factory for heat pumps in Slovakia. Production is scheduled to start in May. The new plant is designed for an annual production capacity of 300,000 heat pumps. Thus doubled Vaillant its capacities to more than half a million heat pumps per year. competitor Viessman meanwhile builds a production site in Poland for 200 million euros.
And that’s probably just the beginning: because the federal government wants to enact a law that from 2024 will stipulate that every newly installed heating system must be operated with 65 percent renewable energy. As a result, new gas or oil heating systems would have to be supported with heat pumps, which should boost sales again. However, this law is highly controversial because it is expensive for property owners. The federal government is therefore discussing a possible scrapping premium for old heating systems. The federal government currently subsidizes heat pumps with up to 40 percent of the investment sum.
Germany is rather late in doing this. Figures from the European Heat Pump Association show that many more new heat pumps have recently been installed in France and Italy than in Germany. In France there were around 462,000 last year and in Italy 502,000. That is already as much as Germany intends to achieve next year.
Infineon also earns money from solar, wind and storage systems
However, it is not only the heat pumps that are causing an order boom at Infineon. The energy transition is also having an impact elsewhere: “The business with renewable energies is growing rapidly overall,” explained division head Wawer. “We are seeing a huge demand here for chips for solar and wind systems, for charging stations and energy distribution, and also for storage systems.”
Infineon is building like never before in order to be able to cope better with the flood of orders in the future. A new factory is currently being built in Malaysia and is scheduled to go into operation next year. In the course of this year, construction work on another factory in Dresden is to begin. CEO Jochen Hanebeck takes on five billion euros for the expansion in Saxony. It is the former’s largest investment of all time Siemens-Branch.
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In Malaysia, Infineon will manufacture, among other things, power-saving chips made of silicon carbide (SiC). The innovative material is increasingly being used by car manufacturers in particular because it can be used to increase the range of electric vehicles. But SiC also has its justification in heat pumps, Wawer asserted. “Silicon carbide is at least twice as expensive as silicon. Nevertheless, it can be worth using the material in heat pumps.” That depends on customer requirements and application.
In the meantime, huge heat pumps are also on the rise, which no longer just supply a single family house, but entire blocks of flats or districts. Even small gains in efficiency would have a big effect here. But that’s not all: “With silicon carbide, the drive is practically inaudible. The otherwise annoying hum is gone.”
Silicon carbide for huge heat pumps
In addition, SiC should also become significantly cheaper in the future, says Peter Fintl, chip expert at Capgemini. The producers are currently converting production from discs with a diameter of 150 millimeters to 200 millimeters. As a result, “the unit costs will drop significantly,” says the consultant. “This makes SiC technology affordable for more applications.”
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Growth areas such as heat pumps are important for Infineon because CEO Hanebeck promised investors more growth and higher returns in the fall. The manager now promises annual sales growth of 10 percent over an industry cycle – that’s one percentage point more than before -, free cash flow adjusted for large investments of 10 to 15 percent of sales and 25 percent operating margin; previously it was 19 percent.
In the current financial year, which ends on September 30, sales are expected to increase by around nine percent to EUR 15.5 billion, with an operating margin of 25 percent.
The good prospects have recently convinced investors. Since the beginning of the year, the share price has risen by a good fifth to currently around 35 euros. Meanwhile, analysts see further upside potential: The Bank of America expects an increase to 50 euros within a year, i.e. almost 50 percent growth.
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