STMicroelectronics warns of slowing revenue growth amid chip downturn
Franco-Italian chipmaker STMicroelectronics has warned revenue growth will slow in the coming months, but reiterated its full-year guidance despite a semiconductor downturn and US trade controls that have rocked the sector.
The diversified company reported robust demand on Thursday in its core automotive and industrial businesses, although there were signs of softening demand in the consumer electronics segment as fears of a global recession mount and demand for discretionary technology slows.
STMicroelectronics produces sensors and microcontrollers for everything from cars to industrial machinery and smartphones, none of which fall into the category of advanced chip production technologies for which the US has introduced export controls to China.
It has paid particular attention in recent years to increasing its range for the automotive market, which now accounts for more than a third of group revenues, including advanced driver assistance systems.
Chief executive Jean-Marc Chery said that strong demand in the automotive chip business reflected “the combined effects of the ongoing electrification and digitalisation transformation of the industry”, and noted that the company’s backlog remained above current and planned manufacturing capacity for 2023.
“Where demand is softening is pure consumer electronics. It is well known that there is market softening in consumer,” he added.
The company’s share price was down more than 7.75 per cent by midday at €32.2.
Chery said STMicroelectronics’ full-year revenue growth would stand at about $16.1bn, representing a 26.2 per cent increase, which is in line with the company’s previous estimate. He said that he expected fourth-quarter revenues to increase 1.8 per cent to $4.4bn.
So far, automotive-focused chip companies have posted results indicating they are relatively sheltered from the new export controls implemented by the US this month, that have sought to block China’s access to cutting edge chip technologies. Meanwhile, European chip equipment manufacturers have emerged as more vulnerable.
ASML, Europe’s largest chip equipment supplier, said the new export restrictions would have “limited impact” on the company, because it ships more mature chip production equipment to China, rather than the advanced technologies that Washington is targeting. It did however note that it could have an indirect impact on about 5 per cent of its backlog, given that total Chinese demand was expected to fall.
Meanwhile, Dutch chip equipment maker ASM International’s shares fell more than 7 per cent on Wednesday after it said that the new export controls would probably affect more than 40 per cent of its China sales.
STMicroelectronics posted net revenues of $4.32bn, beating the market consensus and translating into year-on-year growth of 35.2 per cent with a gross margin of 47.6 per cent, which the company attributed to continued robust demand for its product portfolio.
Analysts at Citi said that they were “encouraged by sustained revenue trends in the face of a weakening cycle” and noted that STMicroelectronics’ customer and market exposure was “better than peers, giving it greater resilience . . . which in turn enables record levels of profitability”.
The French chipmaker said its capital expenditure remained unchanged for this year at between $3.4bn and $3.6bn, which makes it one of the few chipmakers that did not lower its capex plans because of slowing demand. Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker and the barometer of the tech industry, has cut its capital expenditure by about 10 per cent to $36bn this year, while United Microelectronics Corp on Wednesday also slashed its 2022 capex by 16 per cent to $3bn.