Microchip Manufacturer STMicroelectronics Reports Dip in Revenues

Microchip manufacturer STMicroelectronics revealed on Thursday that its revenues experienced a decline in the final quarter of 2023. The company also warned of a further slowdown in sales during the first quarter of 2024 due to the global manufacturing sector's slump.

STMicroelectronics, a Swiss semiconductor maker with major customers like Apple and Tesla, reported a 3.2% drop in fourth-quarter revenue, amounting to $4.28 billion. Although there was a slight increase in orders from the automotive industry, this growth was offset by slow sales to industrial customers.

Shares of STMicroelectronics' Paris-listed STMPA and STM fell by 1% on Thursday, despite having risen by 7% over the past year.

The company, formed in 1987 through a merger between rival state-owned chipmakers in France and Italy, attributed the decline in revenue to the global industry's slowdown. This decline has been evident in faltering manufacturing output over the previous year.

According to STMicroelectronics CEO Jean-Marc Chery, the company observed stable end-demand in the automotive sector but noted no significant increase in personal electronics. Furthermore, the industrial sector experienced further deterioration.

In the fourth quarter, the Geneva-based company witnessed a notable 21.5% increase in sales from its automotive and discrete group, which supplies chips to carmakers. This segment alone accounted for almost half of STMicroelectronics' total revenue, amounting to $2.06 billion.

STMicroelectronics Sales Report

In the fourth quarter of 2023, STMicroelectronics reported a significant increase in sales, with overall revenue reaching $4.23 billion. However, this positive trend was counterbalanced by a 25.8% decline in sales from its analog, MEMS, and sensors group, amounting to $993 million. This specific group specializes in producing chips essential for various functions such as smartphones, self-driving cars, and robots used in manufacturing processes.

Sales from STMicroelectronics' microcontrollers and digital ICs group also experienced a decline, dropping by 11.5% to $1.23 billion. Microcontrollers, which serve as self-contained computers, are widely utilized in devices ranging from cars and power tools to medical equipment and remote controls.

Consequently, the company's net income for the fourth quarter stood at $1.08 billion, exhibiting a year-on-year decrease of 1.8%. These lower sales figures have prompted STMicroelectronics to anticipate another significant drop in sales during the first quarter of 2024, estimating a decrease of 15.2% year-on-year to $3.6 billion. This decline can be partially attributed to a decrease in gross margins.

However, JPMorgan's analysts, led by Sandeep Deshpande, remain optimistic about the future prospects of STMicroelectronics. They believe that the company is well-positioned to benefit from potential improvements in the global semiconductor market. Recent signs indicate a recovery from the slump experienced in 2022.

JPMorgan's analysts specifically highlighted STMicroelectronics' consumer end market exposure, suggesting that it is likely reaching its lowest point and could potentially improve in the second half of 2024. Additionally, in the auto electrification market, STMicroelectronics holds a dominant position as a market leader in Silicon Carbide. Given the current shortage of Silicon Carbide, robust pricing is expected to be maintained, resulting in further advantages for the company.

STMicroelectronics remains focused on navigating the challenging market conditions and capitalizing on future opportunities.