Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- STMicroelectronics NV (STM, Financial) reported Q3 net revenues of $3.25 billion, aligning with the midpoint of their business outlook range.
- The company announced a new company-wide program to reshape its manufacturing footprint, focusing on transitioning to 300mm silicon and 200mm silicon carbide, which is expected to improve operating efficiencies.
- STMicroelectronics NV (STM) introduced its fourth generation of silicon carbide MOSFET technology, achieving new benchmarks in power efficiency and density, particularly for electric vehicles.
- The company reported multiple design wins in automotive, including traction inverter and onboard charger designs, and continued traction with automotive microcontrollers.
- STMicroelectronics NV (STM) announced a strategic collaboration with Qualcomm Technologies to integrate wireless connectivity technologies with their STM32 microcontroller ecosystem, enhancing IoT solutions.
Negative Points
- Q3 net revenues decreased 26.6% year over year, primarily due to declines in industrial and automotive segments.
- Gross margin decreased significantly to 37.8% from 47.6% year over year, impacted by product mix and higher unused capacity charges.
- The company anticipates Q4 2024 revenues at the low end of the previously indicated range, with a year-over-year decline of 22.4%.
- STMicroelectronics NV (STM) experienced a significant decline in microcontroller revenues, down 43.4% year over year, largely driven by industrial market weakness.
- The automotive market saw further deterioration in customer backlog and order entry, with a shift from full battery electric to hybrid vehicles, impacting silicon carbide demand.
Q & A Highlights
Q: Can you elaborate on the expected sharp decline in Q1 2025 and its drivers, particularly regarding pricing and demand?
A: Jean-Marc Chery, CEO, explained that the decline is not primarily due to pricing but rather customer backlog and order dynamics, especially in personal electronics. The quarter will be shorter, impacting revenue run rates. Lorenzo Grandi, CFO, added that while there is some pricing pressure, it is expected to be a mid-single-digit decline, slightly higher than this year but not dramatic.
Q: What is the current status of inventory correction in microcontrollers, and when do you expect normalization?
A: Jean-Marc Chery, CEO, noted that the inventory correction is lasting longer than expected due to weakening end demand. The correction is expected to continue into Q1 2025, especially in Asia, with normalization anticipated in the second half of 2025.
Q: Can you provide insights into the slowdown in the automotive market and its impact on silicon carbide?
A: Marco Cassis, President of Analog, MEMS, and Sensors Group, explained that the slowdown is due to a reduction in battery-operated cars, impacting silicon carbide. The slowdown is more pronounced in Europe and the US than in China. Despite this, the long-term trend towards electrification remains, with expectations for recovery beyond the first half of 2025.
Q: How is the pricing environment in the automotive sector, and what are the expectations for next year?
A: Lorenzo Grandi, CFO, stated that while there is increased price pressure in automotive, it is expected to be in the mid-single-digit range. Jean-Marc Chery, CEO, added that the pressure is particularly high in China due to excess capacity among Chinese carmakers.
Q: What are the implications of the accelerated move to 300-millimeter wafers on CapEx and manufacturing strategy?
A: Jean-Marc Chery, CEO, indicated that CapEx will be reduced over the next three years, with existing infrastructure already in place for 300-millimeter wafers. The strategy involves modular expansion to adapt to market conditions without excess investment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
