Against the backdrop of volatility in the global semiconductor industry, STMicroelectronics' Q2 2024 earnings report reveals a series of key financial metrics and business developments that reveal the challenges the company faces in the current market environment. China Exportsemi Web will try to analyze the industry situation behind it, as well as the response strategy.
Financial Reports Overview
STMicroelectronics' net revenue for the second quarter of 2024 was $3.23 billion, down 25.3% year-over-year. This significant decline reflects the challenging market environment, especially in the OEM and agency segments, where net sales revenue decreased by 14.9% and 43.7% year-on-year, respectively. Despite this, net revenue decreased by 6.7% sequentially, but this result was still 90 basis points higher than the median of the company's forecast, demonstrating the company's resilience in the face of adversity.
Gross profit vs. operating profit
Gross profit was $1.3 billion, down 38.9% year-over-year, while gross margin remained at 40.1%, in line with the median forecast in the company's guidance. Operating profit was $375 million, down 67.3% from $1.15 billion in the same period last year, and operating margin decreased to 11.6% from 26.5% in the second quarter of 2023, a significant change that demonstrates the urgency of cost control and market adjustment.
Figure: STMicroelectronics' net revenue for the second quarter of 2024 was $3.23 billion, down 25.3% year-over-year
Sub-product segment performance
- Analog, MEMS & Sensors (AM&S): Revenue decreased by 10.0%, mainly due to a decrease in the imaging business, with operating profit down 44.5% and operating margin from 20.0% to 12.4%.
- Power & Discrete (P&D) Sub-Products: Revenue decreased 24.4%, operating margin decreased 57.9%, and operating margin decreased from 26.4% to 14.7%.
- Microcontroller Sub-Products (MCU): Revenue decreased significantly by 46.0%, with operating profit down 87.1% and operating margin down 8.9% from 37.2% due to a decline in general-purpose microcontrollers.
- Digital ICs & RF Sub-Products (D&RF): Despite the growth in RF, overall revenue decreased 7.6%, operating profit decreased 23.8%, and operating margin decreased from 35.2% to 29.1%.
Market & Business Outlook
Jean-Marc Chery, President and CEO of STMicroelectronics, noted that while personal electronics revenue increased, automotive revenue was lower than expected, impacting overall results. In addition, the company's outlook for the second half of 2024 indicates full-year revenue planning in the range of $13.2 billion to $13.7 billion, with gross margin expected to be approximately 40%. For the third quarter, net revenue is expected to be approximately $3.25 billion, down 26.7% year-over-year and up 0.6% sequentially, with gross margin expected to be approximately 38%.
Response
In response to market challenges, ST has taken a number of concrete steps:
1. Capacity expansion and technology investment: The company is building a new full-process silicon carbide substrate plant in Italy and establishing a silicon carbide joint venture in China to meet the needs of automotive customers for electrification transformation.
2. Product structure adjustment: The company is improving the competitiveness of the microcontroller and power and discrete sub-product divisions through technological innovation and product optimization.
3. Market demand forecasting and supply chain management: The company is working with customers to better plan future demand and capacity to provide more reliable demand forecasts.
4. Technological innovation and R&D investment: The company continues to increase R&D investment, especially in the fields of power supply and energy management, Internet of Things and 5G.
5. Industrial Automation and Smart Manufacturing: The company has launched a variety of products and solutions in the industrial automation market, such as condition monitoring and predictive maintenance.
6. New energy vehicle market: The company plans to rapidly expand the production capacity of silicon carbide devices through a new silicon carbide plant and a joint venture with China's Sanan Optoelectronics to support the development of vehicle electrification in China.
7. Financial Strategy and Cost Control: The Company controls costs and maintains gross margin by optimizing product mix and selling prices, as well as increasing idle capacity expenditures.
8. Environmental sustainability: The company has committed to achieving carbon neutrality by 2027 and achieving full carbon neutrality within Scope 1 and 2 and partial carbon neutrality within Scope 3.
Conclusion
ST's Q2 2024 earnings report reflects the company's response and performance amid global semiconductor market volatility. Although facing the challenges of declining revenue and profit compression, the company has demonstrated its ability to adapt to market changes through product structure adjustment, technological innovation and market positioning. With the outlook for the third quarter and full year, ST is actively adjusting its strategy to achieve better performance in the next round of growth in the semiconductor industry. We look forward to ST's continued leadership in technology innovation in the future, advancing the use of semiconductor technology in more fields, and contributing to global scientific and technological progress."
