The industry is recovering from the closure of automotive factories during the Covid-19 pandemic and the general slowdown, says the chief executive of STMicroelectronics, Jean-Marc Chery.

The company saw $4.32bn revenue for the first half of 2020, up 1.6 percent on the first half of last year, with income of $282m, down 17 percent.

“During the second quarter, we returned to normal operations, supporting our customers’ demand and continuing to ensure the health and safety of our employees,” said Chery. “Q2 net revenues decreased 6.5 percent sequentially. As expected, this was due to the decline in Automotive, Analog and Imaging products, partially offset by growth in Microcontrollers, Digital and Power Discrete. The first half of 2020 reflects year-over-year growth of 1.6 percent, driven by Analog, Imaging and Microcontrollers, partially offset by Automotive and Power Discrete.

He sees the recovery starting, even with automotive. “Looking at the third quarter, we expect sequential revenue growth of 17.4 percent at the mid-point,” he said. “

“ADG [Automotive and Discrete Products] saw a 17.8 percent decrease on legacy automotive while power discrete grew,” he said. “In Q3 we will see a growth in automotive – we are convinced at Q2 is the bottom of legacy automotive and we will see market recovery in Q3 with acceleration in September and Q4 as well,” he said. “We saw recovery in France in June and S Korea supporting the anticipated recovery in Q3 and Q4.”

“In smartphones we saw increasing demand for wearables and gaming accessories – we serve this market with sensors, secure solutions and power management. During the quarter we saw an Increasing number of design wins in 5G models,” he said.

The political situation with Huawei as a customer is not an issue, he says. “Among the products we ship to them includes custom devices, application specific and standard products,” he said. “ST will comply with the laws and applicable regulations as we support our customer – we see no impact in Q2 and none in Q3 and some impact in Q4 that is already in the guidance.”

In automotive, there is significant growth in L2 and L3 levels of autonomy using ST’s image sensors he says. “We expect in 2021 one third of cars produced will use ST imaging. Our partnership with Mobileye shows a very good dynamic in Q2.”

The closures and slowdown also means inventory in distribution increased. “During the second quarter our inventory increased as one of our priorities was getting production back so it rose to 129 days,” said Lorenzo Grandi, chief financial officer of STMicroelectronics. “In H2 we will continue to monitor the inventory and in Q3 I expect the number of days to go down to 115 to 120 days and then to 95 to 100 days,” he said.

Chery reiterated at the $12bn target for revenues will be achieved in the next three years. The company will spend $1.2bn on capital expenditure, up from $500m during the pandemic.

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