STMicroelectronics Q4 2021: Earnings Beat Expectations Driven by Automotive and Industrial

STMicroelectronics one of the leading electronics and Semiconductor manufacturer has announced its Q4 and 2021 Financial Results. Overall the French-Italian multinational Chip maker Net Revenues and the performance exceeded our expectations.

  • Net revenues increased 24.9% to $12.76 billion in 2021, due to strong performance across the Automotive and Discrete Group (ADG)* and Microcontrollers and Digital ICs Group (MDG)**.
  • Net revenues of $3.56B for 4Q 2021 increased 11.2% on a sequential basis with ADG and MDG up 22.0% and 15.4%. The Analog, MEMS and Sensors Group (AMS)*** was flat.

Exhibit 1: Quarterly Revenue by Segment

STMicroelectronics Revenue by Segment
*Automotive and Discrete Group (ADG) comprising of Automotive ICs, discrete and power transistor products.
**Microcontrollers and Digital ICs Group (MDG) comprising of secure microcontrollers, EEPROM memories, and digital ASICs.
***Analog, MEMS and Sensors Group (AMS) comprising of low-power devices for IoT, and battery-operated devices.
  • Gross margins increased to 45.4% from 38.8% in the year ago quarter because of the improved product mix, favorable pricing, and manufacturing efficiencies.
  • Automotive was driven by the strong demand for vehicles, lean inventories across the supply chain and rebound from difficult supply chain dynamics in 2020. The transformation towards the electrification and digitalization of vehicles is further driving the increase in semiconductor content.
  • Industrial also saw a continued demand in high-end and consumer, again driven by the electrification and digitalization which are driving the semi content. Factory automation along with the power applications (including renewable energy, motion control, power tools and home appliances) were the main drivers.
  • Personal Electronics are driven by smartphone market growth in 2022, 5G adoption, and seasonality in 4Q 2021. Also, the demand for accessories was strong Smartwatches, TWS, gaming consoles etc.
  • Communication Equipment and Computer Peripherals: Adoption of 5G and demand for PC and notebook, also LEO satellites launch or ramp-up drove the revenues.
  • Product segments:
  • ADG revenues grew 32.5% annually, both the subgroups Automotive and Power Discreet recorded double-digit growth.
  • AMS revenues grew 18.8% annually, complemented by growth in imaging product sales.
  • MDG revenues increased 24.3% annually, microcontrollers (the largest subgroup) also reported double-digit growth partially offsetting the decline in RF communication revenue.
  • Forecast: 1Q 2022 net revenues to be around $3.5B at mid-point, a 16.1% YoY growth and a sequential decline of 1.6%.
  • For the full year 2022, revenue guidance is in the range of $14.8B to 15.3B, a growth of 16% to 20%. This is driven by focusing on the three segments, Smart Mobility, Power Energy Management, IoT and 5G.
  • Demand and Supply: Demand to remain strong but still be impacted by supply with pandemic impacts to continue in 2022. Inventories of the products across the distributors were lean. Bookings are strong and backlog visibility is now about 18 months, which is well above its planned manufacturing capacity for 2022.
  • CAPEX investment and Expansion:
  • Investing $2.1B towards additional capacity, a mix change in manufacturing footprint for wafer fabs, (digital 300mm in Crolles, analog 200mm in Singapore, SiC 150mm in Catania and Singapore) and semi assembly and test operation.
  • Investing $900M in the 300nm wafer fab (in Agrate Italy), and GaN technology and raw material for SiC.

Key Takeaways

  • The focus on IoT and 5G will be STMicro’s long-term growth enabler.
  • Investing in production of 300mm wafer to help alleviate the global chip shortage as well as the production of chips for customers like – Tesla and Apple (STMicro’s main customers), should lead to continuous growth.
  • Concentrating on research and development in silicon carbide (SiC), and gallium nitride (GaN) technology for industrial, automotive and aerospace applications will be an added value proposition and can be profitable for STM.

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