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Crolles outage, Shenzhen shutdown fail to hold back ST on path to $15bn

Business news |
By Nick Flaherty


A power outage at its fab in Crolles and the shutdown in Shanghai, China, have failed to slow growth at STMicroelectronics as it predicts revenue of $15bn this year.

The two events have cost “a few tens of millions of dollars,” says the company, with a production backlog of at least 18 months.

“Shenzhen was basically an equivalent of two weeks of production losses,” said Jean-Marc Chery, CEO of STMicroelectronics. “We are facing the impact of lockdown from Shanghai already in Q1 on logistics mainly. It is clear that in Q2, we have also some implications related to the assembly and test subcontractor or some assembly material provider, but it is included in our guidance,” he said.

At the same time all the company’s fab capacity is sold out for 2022. It has a backlog of at least 18 months, but it still predicts up to 20% growth in revenue in 2022 to hit $15bn earlier than expected.

“Q1 net revenues of $3.55 billion and gross margin of 46.7% came in above the midpoint of our business outlook range. This revenue performance driven by strong demand in microcontrollers was partially offset by temporarily reduced operations at our Shenzhen, China manufacturing facility due to the pandemic, which impacted specifically our ADG [automotive and discrete] revenues,” said Chery.

He also points to the power outage at ST’s 200mm fab in Crolles, France, at the start of April and increasing costs of materials driving up prices, although margins are also increasing.

“We are facing on top of that our equipment supplier, our material supplier, our gas and chemical supplier are all facing complex logistics and shortages themselves. So all the supply chain is under tension,” he said.

“Revenue growth was accompanied by improved profitability gross margin at 46.7%, up from 39% and operating margin of 24.7%, increasing from 14.6%. Net income more than doubled to $747 million,” he said.

The demand continues to impact on the shortage of chips, even with less cars being made. “Demand continues to be strong,” said Chery. “Starting with the automotive market, we continue to see strong demand in Q1 with a lower number of vehicles produced worldwide compared with initial expectations. The strong demand reflected the combined effect of replenishment of inventories across the automotive supply chain and the ongoing electrification and digitalization transformation of the industry.”

Microcontrollers for automotive, industrial and consumer were a key part of the growth, he says. “I am pleased to announce that in 2021 we were ranked number one worldwide in general purpose microcontrollers. We continue to invest to further strengthen our STM32 family, offering an ecosystem with a particular focus on wireless connectivity, security and artificial intelligence.”

“Backlog visibility is still above 18 months and well above our current and planned 2022 manufacturing capacity,” he said. “The backlog we have is basically well above 30% to 40% of our manufacturing capacity. And we have already a backlog covering our planned capacity for next year okay close to 100%.

“For the second quarter, we expect net revenues to be about $3.75 billion at the midpoint, representing a year-over-year growth of 25.3% and a sequential increase of 5.8%. Gross margin in Q2 is expected to be about 46% at the midpoint. Our guidance includes the impact of the temporary reduced operations in Crolles, France, caused by the power outage extended to our site that occur at the beginning of April.”

“For the full year 2022, we confirm our plan to invest about $3.4 billion to $3.6 billion in CapEx to further increase our production capacity and to support our strategic initiatives, which includes the first industrialization line of our new 300mm wafer fab in Agrate, Italy.”

“We continue to drive the company based on a plan for 2022 revenues in the range of $14.8 billion to $15.3 billion, representing a growth of about 16% to 20%.”

www.st.com

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