STMicroelectronics, the European chipmaker, predicted a decrease of over 15% in first-quarter revenue on Thursday, falling significantly below market projections. This decline is attributed to weakened demand in the automotive sector and a continued decrease in orders from the industrial industry. The company, boasting clients such as Tesla and Apple, anticipates first-quarter revenue to be $3.6 billion, down from $4.25 billion in the previous year. This forecast is approximately 11% below the consensus estimate from analysts, as indicated by a Reuters poll.
Analysts said the outlook was disappointing because of a continuing weakness in automotive chips and a slowdown in industrial equipment sales, especially in China. “The Q1 outlook is clearly below expectations, and the outlook for 2024 shows a steeper decline,” wrote JPMorgan analysts led by Sandeep Deshpande. “The company is still positioned to benefit from the rebound in the semiconductor market in the second half of 2024, as auto end-market related exposures appear to be bottoming and the company is a leading supplier of Silicon Carbide, which remains in short supply,” they added.
STMicro said it had achieved design wins in the computer peripherals and telecommunications segments, where it is a market leader, and in the automotive sector. It added that the company has also secured contracts for its time-of-flight sensors, secure elements, and microcontrollers in the consumer electronics segment.
In the automotive sector, STMicro’s EV customers have maintained momentum in new shipments despite weaker economic conditions, with the company winning orders for SiC chips, silicon MOSFETs, and onboard charging MCUs, as well as microcontrollers for zone control in legacy vehicles. The company also won design wins in the communications and computer hardware sectors, including secure solutions, microcontrollers, and MEMS sensors.
The company’s AMS business, which includes analog, power discrete, and microcontrollers, posted a 4.2% rise in revenue, boosted by growth in the telecommunications and computer hardware segments. Its industrial business saw a 2.6% drop in revenues due to lower demand from some significant automotive clients and a general slowdown in the global economy.
Nevertheless, STMicro is optimistic that the chip market will rebound in the year’s second half. Its clients, which include electric carmaker Tesla and smartphone maker Apple, are expected to start production of new models that will require more advanced electronic components, a key driver for demand. The company also has a large customer base in China, where the government is pushing consumers to buy more electric cars.
The company, which has a market capitalization of about $16.8 billion, has a debt-to-equity ratio of 39% and a free cash flow of $2.6 billion in the last fiscal year. The company is reducing its debt, which is expected to be below 40% of its capital base by 2020, as part of a plan to reduce its leverage in the next decade. The firm is also expanding its presence in Asia to offset a slowdown in the global chip market. It plans to open a new plant in China in 2025 to meet increasing demand for its advanced chip technologies.