Stmicroelectronics N.V. ((STM)) has held its Q4 earnings call. Read on for the main highlights of the call.
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STMicroelectronics’ recent earnings call highlighted a challenging fiscal year 2024, marked by significant declines in revenue, profitability, and market demand, particularly in the industrial and automotive sectors. Despite these challenges, the company showed a commitment to strategic advancements in silicon carbide, sustainability, and new product introductions. However, ongoing inventory challenges and underutilization charges contributed to a cautious outlook, with plans for strategic manufacturing and cost-saving initiatives to recover growth and profitability.
Growth in Silicon Carbide Engagement
STMicroelectronics reported strong momentum in its silicon carbide design-in activities, particularly in China. The company has achieved greater engagement with top Chinese carmakers than any other supplier, leading to a revenue of $1.1 billion for its silicon carbide products in the year.
Strategic Manufacturing Initiatives
The company announced significant manufacturing initiatives, including the construction of a new high-volume 200-millimeter silicon carbide facility in Catania, Italy. Furthermore, it launched a program to accelerate wafer fab capacity to 300-mm silicon and 200-mm silicon carbide, demonstrating a commitment to expanding production capabilities.
Sustainability Achievements
STMicroelectronics is making strides towards sustainability, aiming to be carbon-neutral by 2027. The company has reached agreements for renewable energy use in Italy, Malaysia, and France, showcasing its dedication to environmental responsibility.
New Product Introductions
The company introduced several new products, including silicon carbide MOSFET technology, the STM32N6 MCU series, and innovative smart sensors with edge AI processing for industrial applications, highlighting its continuous innovation.
Significant Revenue Decline
Net revenues for FY2024 decreased by 23.2% to $13.27 billion, with significant declines in the industrial and automotive markets. This downturn underscores the challenging market conditions faced by the company.
Decreased Profitability
Gross margin dropped to 39.3% from 47.9% in 2023, while operating margin fell to 12.6% from 26.7% in 2023. Net income decreased by 63% to $1.56 billion, reflecting the financial pressures on the company.
Inventory Challenges
The company faced delayed recovery and inventory correction challenges, particularly in Europe. The Automotive and Industrial markets showed a book-to-bill ratio below one, indicating ongoing difficulties in these sectors.
Underutilization Charges Impact
Unfavorable product mix and higher unused capacity charges contributed to a decrease in gross margin. Significant underutilization is expected to continue into the first quarter of 2025, posing further challenges.
Automotive Visibility Concerns
The automotive market’s visibility remains low, with a shift in orders coming with only two to three weeks’ notice. This uncertainty adds to the challenges the company faces in stabilizing its automotive sector.
Forward-Looking Guidance
For the fourth quarter, STMicroelectronics reported net revenues of $3.32 billion, a year-over-year decrease of 22.4% but a slight sequential increase of 2.2%. The company expects Q1 2025 revenues of $2.51 billion with a gross margin around 33.8%. It plans to invest between $2 billion and $2.3 billion in net CapEx for 2025, with strategic shifts aimed at long-term growth in silicon carbide and microcontrollers.
In conclusion, STMicroelectronics’ earnings call painted a picture of a year filled with challenges, particularly in the industrial and automotive sectors. Despite a cautious outlook due to inventory and underutilization issues, the company is making strategic moves in silicon carbide, sustainability, and new products, signaling a focus on long-term recovery and growth.
