What's going on?

Infineon�makes computer chips � like the ones embedded in your phone�s SIM card. On Thursday, it reported profits that were almost double (!) what investors were expecting � and its stock rose more than 12%. It�s emerging as a winner in the highly competitive �semiconductor" industry. �  

What does this mean?

Virtually every type of electronic device is built on semiconductors, from computers to smartphones to airbags in your car (the main component in semiconductors is silicon, which is why it�s called �Silicon Valley��). Infineon is the largest semiconductor company in Germany but mid-sized from a global perspective; it�s basically a smaller version of Intel or Qualcomm. It is trying to punch above its weight though and the most recent evidence is that it�s succeeding. It made a smart acquisition last year when it bought a smaller US-based rival � a move that contributed significantly to its big profit beat.

Why should I care?

1. The bigger picture: "Consolidation" in the industry has boomed. Almost $100 billion worth of semiconductor deals have been completed this year. That�s because it has gotten harder to make profits and, by combining with each other, companies can cut overlapping costs.
2. For the stock: Infineon is doing well � but that�s not a secret anymore. Investors have already pushed the stock up more than 45% this year and the semiconductor industry is notoriously risky. Supporters of the stock, however, note that with its automotive business, it is well placed to take advantage of the trend towards computer-assisted cars. And, in a prolific time for acquisitions, Infineon itself could be a target.