The trading market is ups and downs, and the market outlook is confusing… Facing the “Raksha Haishi” in the chip market, I believe everyone wants to have a pair of insight to see through it and predict the future as clearly as possible.
Recently, STMicroelectronics (ST) announced its second-quarter earnings. As an important electronic component manufacturer in the world, ST has a complete product portfolio and strong competitiveness in the fields of MCU, analog chips, MEMS and sensors. Its products are widely used in computing, consumer electronics, IoT and smart cars. Performance performance has always been regarded as a barometer of the industry. The revenue of each sector can reflect the situation and development trend of the entire industry to a large extent, allowing you to see through the “Raksha Haishi” in the chip market!
In the second quarter, the revenue increased steadily, and the auto-related business continued to grow
On July 27, ST announced at the financial report briefing for the second quarter of 2023 that the net income in the second quarter was US$4.33 billion, a year-on-year increase of 12.7% and a month-on-month increase of 1.9%. The gross profit margin was 49%, the operating profit margin was 26.5%, and the net profit was US$1 billion; the net income in the first half of the year was US$8.57 billion, a year-on-year increase of 16.1%, the gross profit margin was 49.3%, and the net profit was US$2.05 billion.
Among the various departments, the automotive and discrete device department (ADG) achieved revenue of US$1.96 billion, a year-on-year increase of 34.4% and a month-on-month increase of 8.2%, accounting for 45% of ST’s revenue, achieving four consecutive quarters of growth. The revenue of the Analog, MEMS and Sensing Division (AMS) was approximately US$940 million, a decrease of 12% month-on-month and a year-on-year decrease of 16.6%. The profit margin continued to decline for the third quarter. The revenue of the MCU and digital IC (MDG) department was US$1.427 billion, a year-on-year increase of 13%, showing a stable performance.
From the financial report data, we can see that during the period of industrial adjustment, ST’s performance growth continues, and the strongest driving force for growth comes from the field of automotive chips, which is still in wide demand. But on the other hand, the relatively weak growth of MCU and digital IC business, as well as the decline of analog/MEMS/sensing business, also show that ST is not completely free from the impact of the downturn in consumer electronics, but this impact is being suppressed by the automotive electronics business. Overwhelmed by strong growth.
It is also worth noting that the financial report shows that ST’s inventory cycle has risen from 104 days in the same period last year to 126 days today, and the inventory value has risen from US$2.31 billion in the same period last year to US$3.05 billion today. This clearly shows the impact of the consumer electronics downturn on ST. Like other original chip factories and electronics companies, ST also faces the task and challenge of destocking. For the third quarter, ST gave a median revenue forecast of US$4.38 billion in the third quarter, an increase of 1.2% compared to the same period last year and a 1.1% quarter-on-quarter increase, which can be said to be a conclusion that combines various favorable factors and challenges.
Demand for consumer electronics is sluggish, and the automotive industry has a huge boost
Judging from the financial report data, the overall performance of ST in the second quarter was stable, slightly better than expected, indicating that its judgment, foresight and corresponding layout of various business segments are in line with the actual situation. Among them, the profit of the analog/MEMS/sensor business continued to decline in the third quarter. Since this part of the business is mainly used in consumer electronics, it is enough to show that the demand for the consumer electronics market is still in a state of weak demand. Moreover, ST’s net profit in the second quarter fell by more than 50% compared with the first quarter. Although the upward momentum has not diminished, the impact of the industrial adjustment period is also obvious.
Under such circumstances, the rapid growth of the automobile track and the steady performance of the industrial sector have effectively compensated for this. Revenue has achieved four consecutive quarters of growth, which has become the pillar of revenue growth in the second quarter. As stated by ST President and CEO Jean-Marc Chery, net income in the second quarter increased by 12.7% year-on-year, mainly due to the continued strong growth of the automotive and industrial businesses. Obviously, the rapid development of new energy vehicles and automotive intelligence has formed a huge and direct impetus to automotive MCUs and power devices, and this impetus can make up for the downward trend caused by the sluggish demand for consumer electronics, which is enough to reverse the downward pressure Downfall.
It is precisely because of the strong driving effect of the automotive industry on revenue, and with an eye on the future, ST has made a big bet on the silicon carbide (SiC) chip track. Facing the growing demand for SiC in the fields of domestic new energy vehicles, industry, power and energy, on June 7 this year, ST and Sanan Optoelectronics jointly announced that the two parties have signed an agreement to jointly build a new 8-inch SiC device joint venture in Chongqing, China. manufacturing plant. At the same time, Sanan Optoelectronics will establish a wholly-owned local 8-inch SiC substrate factory as a supporting package.
Actions are the best interpretation of ideas. From ST’s industrial layout, we can more easily see its predictions on the industrial structure and market trends.
Extensive layout around the automobile industry
In fiscal year 2022, driven by strong automotive and industrial demand, ST achieved net revenue of US$16.13 billion, up 26.4% over 2021. This international manufacturer has long discovered new opportunities with its keen sense of smell and launched a new layout.
As early as the beginning of this year, ST revealed that it would invest about US$4 billion, mainly for expanding 12-inch fabs and increasing SiC manufacturing capacity. In the second quarter, the company announced that it signed a tripartite agreement with the French government and the wafer foundry GlobalFoundries to build a 12-inch wafer fab in Kroll, France. If the project is completed, it will help the company realize the previously set US$20 billion above the mid-term revenue target.
In terms of SiC, ST has established a joint venture with Sanan Optoelectronics, an important domestic compound semiconductor manufacturer, and is currently progressing smoothly.
In addition to China, the company will also increase investment in Italy and Singapore. It is estimated that by 2030, the annual revenue of silicon carbide will reach more than 5 billion US dollars. In addition, in the field of Advanced Driver Assistance (ADAS), the company continues to work closely with Mobileye, an ADAS solution provider under Intel. EyeQ6 products are now in production, and previous generations of products (EyeQ3, 4) are also in production.
To sum up, in the face of the continuous sluggish demand for consumer electronics, ST has made realistic judgments and forecasts on the current market situation and future development trends with its keen market insight. Chips, and even SiC devices with great development potential in the future, have been laid out in advance, and have formed enough profitability to make up for the downward trend of other business sectors. For the majority of IC distribution and spot distribution companies, the movement of the original factory has always been the core of the focus. The transformation trend of the car core shown in ST’s financial report, and its layout in the SiC field, will determine the future business direction. , will play an important guiding role.