Euro chipmaker STMicroelectronics saw revenue and net income slump in Q2 of this year, blaming low demand in the automotive sector while orders elsewhere failed to meet expectations, in a hint that the semiconductor industry is still in a rough patch.

The Swiss-based Franco-Italian semiconductor maker said in its results for the quarter ended June 29 that revenue came to $3.232 billion, down 25.3 percent on the same period last year and also slightly down from Q1.

Meanwhile, net income for the quarter was $353 million, down a whopping 64 percent on the figure of over a billion reported a year ago and also more than 30 percent down from Q1.

Back in January, STMicro reorganized itself into two product groups: Analog, Power & Discrete, MEMS and Sensors (APMS), and Microcontrollers, Digital ICs and RF products (MDRF).  Both saw a year-on-year decline in revenue, with APMS down 16.2 percent while MDRF shrank 35.5 percent.

Despite this, president and CEO Jean-Marc Chery tried to strike an optimistic note, saying in a statement that net revenues were above the midpoint of STMicro's business outlook range, driven by higher revenues in its Personal Electronics segment, and that its gross margin was in line with expectations.

Chery said that the revenue drop was mainly driven by a decrease in the company's Microcontrollers and Power and Discrete segments, adding: "During the quarter, contrary to our prior expectations, customer orders for Industrial did not improve and Automotive demand declined."

Looking ahead, the chipmaker is expecting net revenue for Q3 to be about $3.25 billion, just barely up from this quarter by about 0.6 percent and representing a decline of 26.7 percent over the same period a year ago, if it pans out as forecast.

"We will now drive the company based on a plan for FY24 revenues in the range of $13.2 billion to $13.7 billion. Within this plan, we expect a gross margin of about 40 percent," Chery said.

That revenue forecast is a readjustment from what STMicro was expecting back in January, when it said it expected this to be in the range of $15.9 billion to $16.9 billion for this year.

STMicro is set to receive €2 billion ($2.17 billion) from the EU under the European Chips Act to build a manufacturing plant in Italy for silicon carbide (SiC) high-power semiconductors used in electric vehicles.

The company is also pushing ahead with more share buybacks, which will likely please shareholders.

During Q2, the company paid cash dividends to its stockholders totaling $73 million and made an $88 million share buyback, completing the share repurchase program it launched in July 2021.

However, in June STMicro announced a new share buyback plan comprising two programs totalling over $1 billion to be executed within a three-year period.

Other semiconductor makers also seem to be struggling, with the exception of those in the lucrative memory market and specialist chips such as GPUs.

Earlier this week, Dutch rival NXP Semiconductors reported Q2 revenue of $3.13 billion, meeting estimates but forecasting lukewarm growth as it also faces sluggish demand from the automotive sector.

Texas Instruments also reported Q2 revenue down 16 percent from the same quarter a year ago at $3.82 billion, which it attributed to declining demand from the industrial and automotive sectors, but the company saw its share price rise as it forecast income for Q3 in line with analyst expectations.

Analysts at fintech, investment, and banking corp ING have said that the global car market is hitting some "speed bumps."

ING analysts said earlier this year they expect a much slower pace of sales after a strong increase in 2023 and "given a muted macroeconomic backdrop." ING added: "Another factor reflected in our forecasts is the expected slowdown in the rate of proliferation of electric vehicles, which has been supportive during the last couple of years." In February, it forecast global car sales growth of 2.6 percent in 2024 as a whole. ®

https://www.theregister.com//2024/07/25/stmicroelectronics_q2_weak_demand/