ST tips restructuring program and a weak start to 2025

European chip company STMicroelectronics NV has disclosed a “resizing” program that is being drawn up with the goal of saving the company close to US$1 billion per year in operating costs by 2027.

The plan was mentioned with few details alongside the company’s 3Q24 financial results in which ST unusually also forecast two quarters ahead anticipating a revenue decline between Q4 2024 and Q1 2025 that will be “well above normal seasonality.”

In the financial results statement ST CEO Jean-Marc Chery said that as part of attempts to address weak markets ST would be accelerating its transition to manufacturing on 300mm-diameter silicon wafers at fabs in Agrate, Italy, and Crolles, France and the move silicon-carbide on to 200mm wafer in Catania, Italy.

Chery threw in at the end, “. . . and resizing our global cost base” He added: “This program should result in strengthening our capability to grow our revenues with an improved operating efficiency resulting in annual cost savings in the high triple-digit million-dollar range exiting 2027.”

Chery said that production on 300mm-diameter wafers rather than 200mm ones produces a productivity benefit of 20 percent at least. It remains unclear whether ST will close any 200mm wafer fabs or fab lines as part of the move to 300mm wafer production.

In the conference call to discuss the financial results the company was asked what scale of one-time charge would be required to cover severance and other costs associated with producing an US$800 million cost saving in 2027. Lorenzo Grandi, CFO, said it was too early to provide those details.

Weakness abounds

In the 3Q24 ST made net profit of US$351 million on total revenues of US$3.25 billion. The revenue was flat sequentially but down 26.6 percent year-on-year.

“Q3 net revenues were in-line with the midpoint of our business outlook range. Our revenues, compared to our expectations, were higher in personal electronics, declined less in industrial and were lower in automotive,” said Chery in the statement. He added: “First nine months’ net revenues decreased 23.5 percent year-over-year across all reportable segments, particularly in microcontrollers, which is impacted by a continuing weakness in the Industrial market.

It is notable that all of ST’s business segments reported declining sales year-on-year although single-digit percentage growth sequentially.

ST’s microcontrollers segment was worth US$829 million in 3Q24, up 3.6 percent sequentially but a 43.4 percent drop from US$1.47 billion in the same quarter a year before. This left the Analog, MEMS and Sensors (AM&S) business unit as ST’s largest. Chery said the loss of market share in China was one of the reasons for the decline in microcontroller sales.

Forecasting 4Q24 ST said it is expecting total revenues of $3.32 billion, up 2.2 percent sequentially but down year-on-year by 22.4 percent. This would put ST’s full year 2024 revenues at US$13.27 billion, a decrease year-on-year of 23.2 percent and a further drop from previous guidance. The weak forecst was due to lower revenues expected in automotive and industrial partly offset by higher revenues in personal electronics.

Chery confirmed the company’s capex would remain at US$2.5 billion for 2024 but said that it would reduce in the following three years.