STMicroelectronics N.V. (NYSE:STM) Q1 2024 Earnings Call Transcript

Lorenzo Grandi : Front-end loading, Q2 is really the bottom, I would say, because in Q2 we see a front-end loading of 72% for our fabs, with a significant impact in terms of unloading charges. They will be in the range of 300 basis points on our gross margin in this quarter, so it’s an important impact. Notwithstanding this, with this level of revenues, we see our inventory increase in terms of value, because we were launching our production with a different expectation for the evolution of the second half. Well, the number of days will increase. We will continue to keep under control our inventory, so in the second part of the year, the unloading charges will continue to be material, and the level of saturation of our fabs will increase, but not so much.

It will remain in the range of 77%, so similar to the one of Q1, if you want. At the end, we do expect that our inventory exiting, our inventory with 110 days, 115 days, that is a little bit higher in respect to our model, if you want, but for a year like 2024, I think it’s controlled, it’s the right level.

Celine Berthier: And you had a follow-up?

Jerome Ramel: Thank you. Yes, I had a follow-up concerning China, all the fears around China ramping up capacity for 20 nodes and so on. What’s your view and current visibility on Chinese customers? I think recently you find some major silicon carbide deal with some OEMs in China, so I’d just like to understand how you see the dynamics there? Thank you.

Jean-Marc Chery : I think China is quite simple. China is no more a super moving market. It’s a market with some growth, where clearly you have competitors pretty aggressive, but not including Chinese, believe me, American and Japanese as well. And here, the CECP is always the same, is to have the right features and performance of our device and the right quality and the right price. However, I repeat that we have engaged ourselves in adequate strategy for our footprint. Of course, with our Sanan agreement for silicon carbide, but more-and-more, we are developing activity with Chinese foundry located in China for our microcontrollers, for our BCD and for our other power MOSFET. In such a situation, we have all the ingredients to compete in China because it is a key market for ST.

We believe, looking at the activity we have on design and development on our STM32, and when we organize a summit and when we see what we have in our pipeline, that ST will be a strong competitor in China for the future.

Jerome Ramel: Thank you.

Celine Berthier : With this, I think we are at the end of the time, so this concludes our call.

Jean-Marc Chery : Thank you.

Lorenzo Grandi : Thank you.

Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.