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STMicroelectronics Doubles Q2 Net Income

Monday, August 1, 2022

STMicroelectronics has reported net revenues of $3.84 billion in the second quarter of 2022, up 28.3% year over year and above the midpoint of its guidance, and raised its full-year revenue outlook.

In the second quarter, the revenue growth was accompanied by improved profitability: The operating margin reached 26.2%, up from 16.3%, and the net income more than doubled year over year, from $412 million to $867 million.

Buoyed by two consecutive quarters of growth, STMicroelectronics recorded net revenues of $7.38 billion, up 22.9% year over year, for the first half of 2022.

At the company’s earnings call today (July 28), STMicroelectronics CEO Jean-Marc Chéry said that “demand remained strong” and outlined the “improved visibility,” the ability to “secure our supply chain,” the “opportunity to increase our manufacturing capacity,” and the favorable pricing environment.

Higher prices = higher profits

Year-over-year quarterly profit growth was driven by three components: favorable pricing, product mix, and volume.

“The price component is in the range of 40% on a year-over-year basis,” said STMicroelectronics CFO Lorenzo Grandi in a Q&A session. “When I look at the guidance for the current quarter, we do not expect any significant price increase and prices will be more or less stable in that respect.”

Price dynamics differ from market to market. “We have a price increase in automotive, mainly driven by the fact that there is a significantly higher demand than what we were able to produce,” said Grandi.

However, he continued, “When we look at markets like personal electronics, we have more of a stabilization than an increase in prices.”

Saturated capacity

All three product groups achieved double-digit revenue growth in the second quarter of 2022 on a year-over-year basis:

“Our backlog exiting Q2 covered six to eight quarters of planned capacity, depending on the product type,” said Chéry. “Book-to-bill is well above parity. Our manufacturing capacity is fully saturated.”

During the Q&A session, he specified, “We have 2022 sold out and we basically have 2023, which is either sold out or practically sold out, depending on the product group. In automotive, the full capacity of 2023 is sold out. So when asked when we believe we’ll come back to normal lead times, capability to replenish inventories, I always say, of course, not before the end of 2023 and then in 2024.”

In the automotive and industrial B2B — factory automation, robotics, and industrial infrastructure — markets, Chéry said the demand from customers is “huge” and “we have multiple calls every week to find solutions to supply them.” Chéry, however, acknowledged “some signs of softening in Chromebooks, notebooks, PCs, and mid-end and low-end Android smartphones, but not so much in accessories.”

Adjusted guidance

For the third quarter, closed on Oct. 1, 2022, STMicroelectronics expects to report net revenues of $4.24 billion, up 32.6% year over year and 10.5% sequentially, with a growth margin of about 47%.

During the third quarter and the second half of the year, AMS will be the main growth driver, followed by ADG and MDG. “This is not a surprise, because in the second half and particularly in Q3, personal electronics is a strong driver,” said Grandi, specifying that ST sees strong traction with continued growth in both the ADG and MDG product groups.

For fiscal year 2022, STMicroelectronics now anticipates revenues in the range of $15.9 billion to $16.2 billion, representing growth of about 25% to 27%, and a gross margin at about 47%.

The group’s previous revenue guidance was in the range of $14.8 billion to $15.3 billion.

“Our Q2 financial results, and plan for the full year 2022, are aligned with ST’s strategic focus on core business and targeted high-growth areas,” said Chéry, confirming the 2022 capex investment range of $3.4 billion to $3.6 billion.

By: DocMemory
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