STMicroelectronics (STM.US) delays long-term financial targets, CEO says governments distort markets
1min read One of Europe's largest semiconductor companies, STMicroelectronics (STM.US) on Wednesday delayed its long-term financial targets, after three cuts to its annual revenue guidance this year, as it expects a prolonged downturn in demand for industrial and automotive chips to last until 2025.
STMicroelectronics expects its annual revenue to reach $20bn and its operating margin to be over 30% by 2030, from its previous target of 2027.
The company said it would benefit from its strong position in China and its participation in parts of the AI market, such as power chips for data centres and “edge” AI chips for electronic devices.
Chief executive Jean-Marc Chery said the rise of Chinese carmakers, along with government incentives and export restrictions, had “really changed the market dynamics”. STMicroelectronics sells chips to companies such as Tesla.
He said at an investor day that governments had “distorted the semiconductor industry landscape and led to abnormal supply chain behaviour such as double booking, excess inventory and serious overcapacity investment”.
STMicroelectronics is a beneficiary of European aid, but Chery said he expected capital spending to fall over the next three years.
Chery expects the weakness in the automotive market to be offset by strength in the industrial and electronics markets in the second half of next year, though 2025 will be a transitional year for revenue and operating margin.
Analysts welcomed the news, saying it was positive for STMicroelectronics, which has been hit hard by the downturn in the industrial market and has seen its share price fall 49 per cent so far this year.
Stifel said: “STM today reiterated its financial targets, confirming our view that the weakness the company is currently experiencing is cyclical, not structural.”
STMicroelectronics added in a statement ahead of the investor day: “Compared to the current cost base, we expect to save millions of dollars by 2027.”
STMicroelectronics said it would launch a plan across the company to reshape its manufacturing business when it reported third-quarter results, but did not detail where the savings would come from.
Investors and analysts will be looking for details on the plan at the investor day on Wednesday.
As of the close of trading on Wednesday, STMicroelectronics was down 1.1 per cent before the market opened.