Inventory correction to hit ST in 2024
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STMicroelectronics is expecting significant inventory correction in the industrial market in the first half of 2024 that will hit its results.
ST expects revenue to fall from $17.3bn in 2023, reported today, to around $16.5bn as a result, with a cut in capital expenditure from $4bn to $2.5bn.
“The first half of 2024 will be impacted by a significant inventory correction in industrial,” said Jean Marc Chery, CEO of ST. “Accelerated deterioration in industrial is materially effecting the microcontroller business. In discussion with our customers we are convinced the inventory correction will end by the end of Q2 and expecting a rebound in H2,” he said.
“Revenues increased 7.2% to $17.29 billion [in 2023] and net income increased 6.3% to $4.21 billion. We invested $4.11 billion in net capex while delivering free cash flow of $1.77 billion.”
“We continue to protect strategic capacity in SiC and GaN, then the designs related to BMS and powertrain, advanced BCD, all the device and technology related to the growth in satellite. Where we are modulating capex is on all other capacity increase in the normal way. The good news is our flexibility, our capacity to move form 4.1bn to 2.5bn, This demonstrates that we can continue to focus on our ambition of $20bn plus revenue.”
The company is aiming for $20bn revenue by 2027, and returned to the top ten semiconductor vendors in 2023..
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On a year-over-year basis, automotive and power revenues increased 21.5% in 2023, while AMS and MDG decreased 25.8% and 11.5% respectively.
“In Q4, our customer order bookings decreased compared to Q3. We continued to see stable end-demand in Automotive, no significant increase in Personal Electronics, and further deterioration in Industrial,” he said.
“Our first quarter business outlook, at the mid-point, is for net revenues of $3.6 billion, decreasing year-over-year by 15.2% and decreasing sequentially by 15.9%. We will drive the company based on a plan for FY24 revenues in the range of $15.9 billion to $16.9 billion and $2.5bn investment in net capex.”
Automotive and power is the growth driver for 2024, despite replenishing inventories for a major ADAS maker and falling fees for companies wanting to pay to reserve capacity.
“In automotive we saw strong demand in all geographies alongside inventory replenishment and capacity fees,” he said. It had $1.14bn revenue in silicon carbide (SiC), up over 60% with 160 projects over 100 customers including Airbus for electric aircraft. “This continues to give us confidence for SiC revenue of $2bn in 2025,” said Chery. The company has a goal of $5bn SiC revenue by 2030.
He points to $800m of revenue in 2023 that will not be repeated in 2024. “Automotive will grow $800m, 13%, [in 2024] completely offset by the inventory reset of industrial and then personal electronics will be flat with the soft increase in the smartphone market,” he said.
“In Industrial power and energy are still strong but towards the end of the Q3 we saw reducing demand accelerating in Q4,” he said.
Earlier this month ST announced a new organization to deliver enhanced product development innovation and efficiency, time-to-market as well as customer focus by end market. ST will be re-organized into two Product Groups, split into four Reportable Segments and the existing sales and marketing organization will be complemented by a new application marketing organization focused by end markets across all Regions.
The new organization implies a change in reporting which will apply from the start of this year.
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