CEOInterviews.AISTM Stock | STMicroelectronics NV Q4 2021 Earnings Call

J

Jean-marc Chery0:48

Good morning everyone. I'm Jean-Marc Chery, President and Chief Executive Officer of STMicroelectronics. I'm here with Lorenzo Grandi, President of Finance, Planning, and Control, and with Fleurieu, our Investor Relations Director. We are here today to present our 2021 full year and Q4 financial results.

Our global corporate role is to remain a key player in the semiconductor industry, with a strategy focused on systems, rich in applications, and with a strong industrial footprint. We will start with a presentation of the materials, followed by a Q&A session. The replay will be available on our website. The presentation contains forward-looking statements, which may differ materially from management expectations. Please review the safe harbor statement on Slide 2.

Let me start with some opening comments, starting with the highlights. 2021 was a record year for ST, with revenues of $12.76 billion, up 24.9% year-over-year. This was better than expected, driven by strong demand across all end markets and ongoing dynamic markets. Total revenue for the full year was $12.76 billion, up 24.9% year-over-year. This was a record year for the company.

The second half of the year was strong, with revenues at the high end of our business outlook. We had strong gross margin expansion, with a full year gross margin of 41.7%, up 360 basis points year-over-year. This was driven by favorable pricing, product mix, and manufacturing efficiency. Operating income was $2.28 billion, or 17.9% of revenue, up from $1.03 billion, or 10.1% of revenue, in 2020. Net income was $1.93 billion, or $2.12 per diluted share, compared to $0.96 billion, or $1.06 per diluted share, in 2020.

Our net income more than doubled, and we generated strong cash flow. Free cash flow was $1.37 billion, up from $0.62 billion in 2020. Our capital expenditure was $1.86 billion, which was one of the highest in our history. We ended the year with a net financial position of $1.92 billion, up from $0.96 billion at the end of 2020. This reflects our strong liquidity and our ability to fund our growth initiatives.

We will accelerate the execution of our strategy, which is focused on three strategic pillars: smart mobility, energy management, and industrial and personal electronics. These pillars are supported by our technology leadership, our manufacturing excellence, and our strong customer relationships. We are confident that we have the right strategy and resources in place to capture the opportunities in our end markets.

We plan to invest $12 billion in capital expenditure over the next five years to further increase our production capacity and support our strategic initiatives. This includes the first phase of our new 300mm fab in Agrate, Italy, which will be operational in 2024. We are also expanding our capacity in silicon carbide and in advanced packaging. These investments will enable us to support the strong demand in our end markets and to capture the growth opportunities in automotive and industrial applications.

In terms of our financial performance, we had a very strong year. Our revenues were up 24.9% year-over-year, driven by both volume and pricing. Our gross margin expanded by 360 basis points, driven by favorable pricing, product mix, and manufacturing efficiency. Our operating income was up 121% year-over-year, and our net income more than doubled. We generated strong cash flow, and we ended the year with a strong balance sheet.

Looking at our business segments, our Automotive and Industrial Group revenues were up 22% and 15% year-over-year, respectively. This was driven by the strong demand in automotive and industrial applications, and by the ongoing transformation of the automotive industry. Our Personal Electronics revenues were up 19% year-over-year, driven by the strong demand in smartphones and other personal electronics devices. Our Communications Equipment revenues were up 11% year-over-year, driven by the strong demand in wired and wireless communications.

Let me now provide some more details on our business segments. Starting with the Automotive and Industrial Group, which is our largest segment. Revenues were up 22% year-over-year, driven by the strong demand in automotive and industrial applications. The automotive market is undergoing a major transformation, with the electrification of vehicles, the increasing content of semiconductors per vehicle, and the growing demand for advanced driver-assistance systems. We are well-positioned to capture these opportunities with our broad portfolio of products and our strong customer relationships.

In the automotive market, we saw strong growth in all our product groups, including microcontrollers, analog, and MEMS. The demand for semiconductors in automotive applications is driven by the increasing content per vehicle, which is growing due to the electrification of vehicles, the increasing adoption of advanced driver-assistance systems, and the growing demand for infotainment and connectivity. We are a key supplier to the automotive industry, and we are well-positioned to capture the growth opportunities in this market.

In the industrial market, we saw strong growth in all our product groups, including microcontrollers, analog, and MEMS. The demand for semiconductors in industrial applications is driven by the increasing adoption of automation, the growing demand for energy efficiency, and the increasing use of digital technologies in industrial applications. We are a key supplier to the industrial market, and we are well-positioned to capture the growth opportunities in this market.

In the Personal Electronics segment, revenues were up 19% year-over-year, driven by the strong demand in smartphones and other personal electronics devices. The smartphone market is returning to growth, driven by the increasing adoption of 5G, the growing demand for advanced features, and the replacement cycle. We are a key supplier to the smartphone market, and we are well-positioned to capture the growth opportunities in this market.

Looking at our financials, we had a very strong year. Our revenues were up 24.9% year-over-year, to $12.76 billion. Our gross margin was 41.7%, up 360 basis points year-over-year. Our operating income was $2.28 billion, or 17.9% of revenue. Our net income was $1.93 billion, or $2.12 per diluted share. We generated strong cash flow, with free cash flow of $1.37 billion. We ended the year with a strong balance sheet, with a net financial position of $1.92 billion.

Looking at our geographic breakdown, revenues from the Americas were up 28% year-over-year, revenues from Europe, Middle East, and Africa were up 22% year-over-year, and revenues from Asia Pacific were up 24% year-over-year. We saw strong growth in all our end markets, driven by the strong demand for semiconductors in automotive, industrial, and personal electronics applications.

Looking at our manufacturing performance, we had a very strong year. Our manufacturing efficiency improved, and we saw favorable pricing and product mix. Our gross margin expanded by 360 basis points, driven by these factors. We also saw a significant improvement in our operating margin, which was up 780 basis points year-over-year. This was driven by the strong revenue growth, the favorable pricing and product mix, and the ongoing improvement in our manufacturing efficiency.

Now, let me turn to our financial indicators. Our net cash from operating activities was $3.6 billion, up from $2.1 billion in 2020. Our capital expenditure was $1.86 billion, which was one of the highest in our history. Our free cash flow was $1.37 billion, up from $0.62 billion in 2020. We ended the year with a strong balance sheet, with a net financial position of $1.92 billion. This reflects our strong liquidity and our ability to fund our growth initiatives.

Our financial position is strong, with a net financial position of $1.92 billion. This reflects our strong liquidity and our ability to fund our growth initiatives. We have a strong balance sheet, and we are well-positioned to invest in our future growth. We plan to invest $12 billion in capital expenditure over the next five years to further increase our production capacity and support our strategic initiatives.

Looking at our full year outlook, we expect to continue to see strong demand in our end markets. We expect revenues to be in the range of $15.5 billion to $16.5 billion for 2022, which would represent a growth of 20% to 30% year-over-year. We expect our gross margin to be in the range of 43% to 45%, which would represent an expansion of 130 to 330 basis points year-over-year. We expect our operating margin to be in the range of 20% to 22%, which would represent an expansion of 210 to 410 basis points year-over-year.

We will accelerate the execution of our strategy, which is focused on three strategic pillars: smart mobility, energy management, and industrial and personal electronics. These pillars are supported by our technology leadership, our manufacturing excellence, and our strong customer relationships. We are confident that we have the right strategy and resources in place to capture the opportunities in our end markets.

We plan to invest $12 billion in capital expenditure over the next five years to further increase our production capacity and support our strategic initiatives. This includes the first phase of our new 300mm fab in Agrate, Italy, which will be operational in 2024. We are also expanding our capacity in silicon carbide and in advanced packaging. These investments will enable us to support the strong demand in our end markets and to capture the growth opportunities in automotive and industrial applications.

In summary, we had a very strong year in 2021. We delivered record revenues, strong margin expansion, and strong cash flow. We are well-positioned to capture the growth opportunities in our end markets, and we are confident in our ability to deliver sustainable growth and profitability in the years ahead. We have a strong strategy, a strong team, and a strong balance sheet. We are excited about the future, and we look forward to continuing to create value for our shareholders.

Before we take your questions, I would like to remind you that we have a Capital Markets Day planned for March 22 in Paris. We have a very exciting program planned, and we look forward to seeing many of you there. We will provide more details in the coming weeks. Thank you for your attention, and we will now take your questions.

U

Unknown25:31

Thank you. The first question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you for taking my question. I have a question on the pricing and the supply chain. Can you comment on the pricing environment and the supply chain situation? And how do you see this evolving in 2022?

J

Jean-marc Chery26:00

Yes, thank you for the question. The pricing environment has been favorable, and we have seen an increase in pricing across our product portfolio. This is driven by the strong demand and the tight supply situation. We expect the pricing environment to remain favorable in 2022, although we expect some normalization in the second half of the year. Regarding the supply chain, we have been able to secure the capacity we need to support our growth, and we are working closely with our suppliers to ensure a stable supply of materials and components.

U

Unknown26:23

And my follow-up question is on the silicon carbide business. Can you provide an update on the silicon carbide business and the ramp-up of the new fab in Catania?

J

Jean-marc Chery26:40

Yes, the silicon carbide business is progressing well. We have started the ramp-up of the new fab in Catania, and we expect to reach full capacity in 2024. We have a strong pipeline of design wins, and we are confident that we will capture a significant share of the silicon carbide market. The silicon carbide market is expected to grow significantly in the coming years, driven by the increasing adoption of electric vehicles and the growing demand for energy-efficient power electronics.

U

Unknown27:05

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the automotive market. Can you comment on the demand in the automotive market and the outlook for 2022? And how do you see the semiconductor shortage impacting the automotive market?

J

Jean-marc Chery27:31

Yes, the demand in the automotive market remains strong. We are seeing a continued increase in the content of semiconductors per vehicle, driven by the electrification of vehicles, the increasing adoption of advanced driver-assistance systems, and the growing demand for infotainment and connectivity. We expect the automotive market to grow in 2022, although we are aware of the challenges related to the semiconductor shortage. We are working closely with our customers to support their production needs, and we are confident that we will be able to meet the demand.

U

Unknown28:06

And my follow-up question is on the industrial market. Can you comment on the demand in the industrial market and the outlook for 2022?

J

Jean-marc Chery28:22

Yes, the demand in the industrial market remains strong. We are seeing a continued increase in the adoption of automation, the growing demand for energy efficiency, and the increasing use of digital technologies in industrial applications. We expect the industrial market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown28:44

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the capital expenditure. Can you provide more details on the capital expenditure plan for the next five years? And how do you see the return on investment?

J

Jean-marc Chery29:08

Yes, we plan to invest $12 billion in capital expenditure over the next five years. This investment will be focused on increasing our production capacity, particularly in 300mm wafers, and in expanding our capacity in silicon carbide and advanced packaging. We expect this investment to generate a strong return on investment, driven by the strong demand in our end markets and the favorable pricing environment. We are confident that this investment will enable us to capture the growth opportunities in automotive and industrial applications.

U

Unknown29:36

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the personal electronics market. Can you comment on the demand in the personal electronics market and the outlook for 2022? And how do you see the smartphone market evolving?

J

Jean-marc Chery30:00

Yes, the demand in the personal electronics market remains strong. We are seeing a continued increase in the adoption of 5G, the growing demand for advanced features, and the replacement cycle. We expect the smartphone market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown30:22

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the gross margin. Can you comment on the drivers of the gross margin expansion in 2021? And how do you see the gross margin evolving in 2022?

J

Jean-marc Chery30:45

Yes, the gross margin expansion in 2021 was driven by favorable pricing, product mix, and manufacturing efficiency. We expect the gross margin to continue to expand in 2022, driven by these factors. We are also benefiting from the ramp-up of our new 300mm fab, which is more efficient than our 200mm fabs. We are confident that we will achieve our gross margin target of 43% to 45% in 2022.

U

Unknown31:03

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the silicon carbide business. Can you provide an update on the silicon carbide business and the ramp-up of the new fab in Catania? And how do you see the silicon carbide market evolving in the coming years?

J

Jean-marc Chery31:25

Yes, the silicon carbide business is progressing well. We have started the ramp-up of the new fab in Catania, and we expect to reach full capacity in 2024. We have a strong pipeline of design wins, and we are confident that we will capture a significant share of the silicon carbide market. The silicon carbide market is expected to grow significantly in the coming years, driven by the increasing adoption of electric vehicles and the growing demand for energy-efficient power electronics. We are well-positioned to capture the growth opportunities in this market.

U

Unknown31:44

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the automotive market. Can you comment on the demand in the automotive market and the outlook for 2022? And how do you see the semiconductor shortage impacting the automotive market?

J

Jean-marc Chery32:09

Yes, the demand in the automotive market remains strong. We are seeing a continued increase in the content of semiconductors per vehicle, driven by the electrification of vehicles, the increasing adoption of advanced driver-assistance systems, and the growing demand for infotainment and connectivity. We expect the automotive market to grow in 2022, although we are aware of the challenges related to the semiconductor shortage. We are working closely with our customers to support their production needs, and we are confident that we will be able to meet the demand.

U

Unknown32:30

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the industrial market. Can you comment on the demand in the industrial market and the outlook for 2022?

J

Jean-marc Chery32:50

Yes, the demand in the industrial market remains strong. We are seeing a continued increase in the adoption of automation, the growing demand for energy efficiency, and the increasing use of digital technologies in industrial applications. We expect the industrial market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown33:05

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the capital expenditure. Can you provide more details on the capital expenditure plan for the next five years? And how do you see the return on investment?

J

Jean-marc Chery33:29

Yes, we plan to invest $12 billion in capital expenditure over the next five years. This investment will be focused on increasing our production capacity, particularly in 300mm wafers, and in expanding our capacity in silicon carbide and advanced packaging. We expect this investment to generate a strong return on investment, driven by the strong demand in our end markets and the favorable pricing environment. We are confident that this investment will enable us to capture the growth opportunities in automotive and industrial applications.

U

Unknown33:47

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the personal electronics market. Can you comment on the demand in the personal electronics market and the outlook for 2022? And how do you see the smartphone market evolving?

J

Jean-marc Chery34:10

Yes, the demand in the personal electronics market remains strong. We are seeing a continued increase in the adoption of 5G, the growing demand for advanced features, and the replacement cycle. We expect the smartphone market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown34:27

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the gross margin. Can you comment on the drivers of the gross margin expansion in 2021? And how do you see the gross margin evolving in 2022?

J

Jean-marc Chery34:50

Yes, the gross margin expansion in 2021 was driven by favorable pricing, product mix, and manufacturing efficiency. We expect the gross margin to continue to expand in 2022, driven by these factors. We are also benefiting from the ramp-up of our new 300mm fab, which is more efficient than our 200mm fabs. We are confident that we will achieve our gross margin target of 43% to 45% in 2022.

U

Unknown35:06

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the silicon carbide business. Can you provide an update on the silicon carbide business and the ramp-up of the new fab in Catania? And how do you see the silicon carbide market evolving in the coming years?

J

Jean-marc Chery35:28

Yes, the silicon carbide business is progressing well. We have started the ramp-up of the new fab in Catania, and we expect to reach full capacity in 2024. We have a strong pipeline of design wins, and we are confident that we will capture a significant share of the silicon carbide market. The silicon carbide market is expected to grow significantly in the coming years, driven by the increasing adoption of electric vehicles and the growing demand for energy-efficient power electronics. We are well-positioned to capture the growth opportunities in this market.

U

Unknown35:47

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the automotive market. Can you comment on the demand in the automotive market and the outlook for 2022? And how do you see the semiconductor shortage impacting the automotive market?

J

Jean-marc Chery36:12

Yes, the demand in the automotive market remains strong. We are seeing a continued increase in the content of semiconductors per vehicle, driven by the electrification of vehicles, the increasing adoption of advanced driver-assistance systems, and the growing demand for infotainment and connectivity. We expect the automotive market to grow in 2022, although we are aware of the challenges related to the semiconductor shortage. We are working closely with our customers to support their production needs, and we are confident that we will be able to meet the demand.

U

Unknown36:34

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the industrial market. Can you comment on the demand in the industrial market and the outlook for 2022?

J

Jean-marc Chery36:57

Yes, the demand in the industrial market remains strong. We are seeing a continued increase in the adoption of automation, the growing demand for energy efficiency, and the increasing use of digital technologies in industrial applications. We expect the industrial market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown37:12

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the capital expenditure. Can you provide more details on the capital expenditure plan for the next five years? And how do you see the return on investment?

J

Jean-marc Chery37:35

Yes, we plan to invest $12 billion in capital expenditure over the next five years. This investment will be focused on increasing our production capacity, particularly in 300mm wafers, and in expanding our capacity in silicon carbide and advanced packaging. We expect this investment to generate a strong return on investment, driven by the strong demand in our end markets and the favorable pricing environment. We are confident that this investment will enable us to capture the growth opportunities in automotive and industrial applications.

U

Unknown37:55

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the personal electronics market. Can you comment on the demand in the personal electronics market and the outlook for 2022? And how do you see the smartphone market evolving?

J

Jean-marc Chery38:18

Yes, the demand in the personal electronics market remains strong. We are seeing a continued increase in the adoption of 5G, the growing demand for advanced features, and the replacement cycle. We expect the smartphone market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown38:38

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the gross margin. Can you comment on the drivers of the gross margin expansion in 2021? And how do you see the gross margin evolving in 2022?

J

Jean-marc Chery39:00

Yes, the gross margin expansion in 2021 was driven by favorable pricing, product mix, and manufacturing efficiency. We expect the gross margin to continue to expand in 2022, driven by these factors. We are also benefiting from the ramp-up of our new 300mm fab, which is more efficient than our 200mm fabs. We are confident that we will achieve our gross margin target of 43% to 45% in 2022.

U

Unknown39:21

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the silicon carbide business. Can you provide an update on the silicon carbide business and the ramp-up of the new fab in Catania? And how do you see the silicon carbide market evolving in the coming years?

J

Jean-marc Chery39:45

Yes, the silicon carbide business is progressing well. We have started the ramp-up of the new fab in Catania, and we expect to reach full capacity in 2024. We have a strong pipeline of design wins, and we are confident that we will capture a significant share of the silicon carbide market. The silicon carbide market is expected to grow significantly in the coming years, driven by the increasing adoption of electric vehicles and the growing demand for energy-efficient power electronics. We are well-positioned to capture the growth opportunities in this market.

U

Unknown40:05

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the automotive market. Can you comment on the demand in the automotive market and the outlook for 2022? And how do you see the semiconductor shortage impacting the automotive market?

J

Jean-marc Chery40:29

Yes, the demand in the automotive market remains strong. We are seeing a continued increase in the content of semiconductors per vehicle, driven by the electrification of vehicles, the increasing adoption of advanced driver-assistance systems, and the growing demand for infotainment and connectivity. We expect the automotive market to grow in 2022, although we are aware of the challenges related to the semiconductor shortage. We are working closely with our customers to support their production needs, and we are confident that we will be able to meet the demand.

U

Unknown40:50

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the industrial market. Can you comment on the demand in the industrial market and the outlook for 2022?

J

Jean-marc Chery41:14

Yes, the demand in the industrial market remains strong. We are seeing a continued increase in the adoption of automation, the growing demand for energy efficiency, and the increasing use of digital technologies in industrial applications. We expect the industrial market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown41:33

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the capital expenditure. Can you provide more details on the capital expenditure plan for the next five years? And how do you see the return on investment?

J

Jean-marc Chery41:55

Yes, we plan to invest $12 billion in capital expenditure over the next five years. This investment will be focused on increasing our production capacity, particularly in 300mm wafers, and in expanding our capacity in silicon carbide and advanced packaging. We expect this investment to generate a strong return on investment, driven by the strong demand in our end markets and the favorable pricing environment. We are confident that this investment will enable us to capture the growth opportunities in automotive and industrial applications.

U

Unknown42:16

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the personal electronics market. Can you comment on the demand in the personal electronics market and the outlook for 2022? And how do you see the smartphone market evolving?

J

Jean-marc Chery42:38

Yes, the demand in the personal electronics market remains strong. We are seeing a continued increase in the adoption of 5G, the growing demand for advanced features, and the replacement cycle. We expect the smartphone market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown42:56

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the gross margin. Can you comment on the drivers of the gross margin expansion in 2021? And how do you see the gross margin evolving in 2022?

J

Jean-marc Chery43:18

Yes, the gross margin expansion in 2021 was driven by favorable pricing, product mix, and manufacturing efficiency. We expect the gross margin to continue to expand in 2022, driven by these factors. We are also benefiting from the ramp-up of our new 300mm fab, which is more efficient than our 200mm fabs. We are confident that we will achieve our gross margin target of 43% to 45% in 2022.

U

Unknown43:37

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the silicon carbide business. Can you provide an update on the silicon carbide business and the ramp-up of the new fab in Catania? And how do you see the silicon carbide market evolving in the coming years?

J

Jean-marc Chery44:00

Yes, the silicon carbide business is progressing well. We have started the ramp-up of the new fab in Catania, and we expect to reach full capacity in 2024. We have a strong pipeline of design wins, and we are confident that we will capture a significant share of the silicon carbide market. The silicon carbide market is expected to grow significantly in the coming years, driven by the increasing adoption of electric vehicles and the growing demand for energy-efficient power electronics. We are well-positioned to capture the growth opportunities in this market.

U

Unknown44:21

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the automotive market. Can you comment on the demand in the automotive market and the outlook for 2022? And how do you see the semiconductor shortage impacting the automotive market?

J

Jean-marc Chery44:45

Yes, the demand in the automotive market remains strong. We are seeing a continued increase in the content of semiconductors per vehicle, driven by the electrification of vehicles, the increasing adoption of advanced driver-assistance systems, and the growing demand for infotainment and connectivity. We expect the automotive market to grow in 2022, although we are aware of the challenges related to the semiconductor shortage. We are working closely with our customers to support their production needs, and we are confident that we will be able to meet the demand.

U

Unknown45:05

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the industrial market. Can you comment on the demand in the industrial market and the outlook for 2022?

J

Jean-marc Chery45:27

Yes, the demand in the industrial market remains strong. We are seeing a continued increase in the adoption of automation, the growing demand for energy efficiency, and the increasing use of digital technologies in industrial applications. We expect the industrial market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown45:45

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the capital expenditure. Can you provide more details on the capital expenditure plan for the next five years? And how do you see the return on investment?

J

Jean-marc Chery46:09

Yes, we plan to invest $12 billion in capital expenditure over the next five years. This investment will be focused on increasing our production capacity, particularly in 300mm wafers, and in expanding our capacity in silicon carbide and advanced packaging. We expect this investment to generate a strong return on investment, driven by the strong demand in our end markets and the favorable pricing environment. We are confident that this investment will enable us to capture the growth opportunities in automotive and industrial applications.

U

Unknown46:30

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the personal electronics market. Can you comment on the demand in the personal electronics market and the outlook for 2022? And how do you see the smartphone market evolving?

J

Jean-marc Chery46:52

Yes, the demand in the personal electronics market remains strong. We are seeing a continued increase in the adoption of 5G, the growing demand for advanced features, and the replacement cycle. We expect the smartphone market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown47:10

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the gross margin. Can you comment on the drivers of the gross margin expansion in 2021? And how do you see the gross margin evolving in 2022?

J

Jean-marc Chery47:32

Yes, the gross margin expansion in 2021 was driven by favorable pricing, product mix, and manufacturing efficiency. We expect the gross margin to continue to expand in 2022, driven by these factors. We are also benefiting from the ramp-up of our new 300mm fab, which is more efficient than our 200mm fabs. We are confident that we will achieve our gross margin target of 43% to 45% in 2022.

U

Unknown47:51

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the silicon carbide business. Can you provide an update on the silicon carbide business and the ramp-up of the new fab in Catania? And how do you see the silicon carbide market evolving in the coming years?

J

Jean-marc Chery48:15

Yes, the silicon carbide business is progressing well. We have started the ramp-up of the new fab in Catania, and we expect to reach full capacity in 2024. We have a strong pipeline of design wins, and we are confident that we will capture a significant share of the silicon carbide market. The silicon carbide market is expected to grow significantly in the coming years, driven by the increasing adoption of electric vehicles and the growing demand for energy-efficient power electronics. We are well-positioned to capture the growth opportunities in this market.

U

Unknown48:35

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the automotive market. Can you comment on the demand in the automotive market and the outlook for 2022? And how do you see the semiconductor shortage impacting the automotive market?

J

Jean-marc Chery48:58

Yes, the demand in the automotive market remains strong. We are seeing a continued increase in the content of semiconductors per vehicle, driven by the electrification of vehicles, the increasing adoption of advanced driver-assistance systems, and the growing demand for infotainment and connectivity. We expect the automotive market to grow in 2022, although we are aware of the challenges related to the semiconductor shortage. We are working closely with our customers to support their production needs, and we are confident that we will be able to meet the demand.

U

Unknown49:18

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the industrial market. Can you comment on the demand in the industrial market and the outlook for 2022?

J

Jean-marc Chery49:41

Yes, the demand in the industrial market remains strong. We are seeing a continued increase in the adoption of automation, the growing demand for energy efficiency, and the increasing use of digital technologies in industrial applications. We expect the industrial market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown49:59

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the capital expenditure. Can you provide more details on the capital expenditure plan for the next five years? And how do you see the return on investment?

J

Jean-marc Chery50:22

Yes, we plan to invest $12 billion in capital expenditure over the next five years. This investment will be focused on increasing our production capacity, particularly in 300mm wafers, and in expanding our capacity in silicon carbide and advanced packaging. We expect this investment to generate a strong return on investment, driven by the strong demand in our end markets and the favorable pricing environment. We are confident that this investment will enable us to capture the growth opportunities in automotive and industrial applications.

U

Unknown50:43

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the personal electronics market. Can you comment on the demand in the personal electronics market and the outlook for 2022? And how do you see the smartphone market evolving?

J

Jean-marc Chery51:07

Yes, the demand in the personal electronics market remains strong. We are seeing a continued increase in the adoption of 5G, the growing demand for advanced features, and the replacement cycle. We expect the smartphone market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown51:26

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the gross margin. Can you comment on the drivers of the gross margin expansion in 2021? And how do you see the gross margin evolving in 2022?

J

Jean-marc Chery51:49

Yes, the gross margin expansion in 2021 was driven by favorable pricing, product mix, and manufacturing efficiency. We expect the gross margin to continue to expand in 2022, driven by these factors. We are also benefiting from the ramp-up of our new 300mm fab, which is more efficient than our 200mm fabs. We are confident that we will achieve our gross margin target of 43% to 45% in 2022.

U

Unknown52:08

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the silicon carbide business. Can you provide an update on the silicon carbide business and the ramp-up of the new fab in Catania? And how do you see the silicon carbide market evolving in the coming years?

J

Jean-marc Chery52:31

Yes, the silicon carbide business is progressing well. We have started the ramp-up of the new fab in Catania, and we expect to reach full capacity in 2024. We have a strong pipeline of design wins, and we are confident that we will capture a significant share of the silicon carbide market. The silicon carbide market is expected to grow significantly in the coming years, driven by the increasing adoption of electric vehicles and the growing demand for energy-efficient power electronics. We are well-positioned to capture the growth opportunities in this market.

U

Unknown52:51

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the automotive market. Can you comment on the demand in the automotive market and the outlook for 2022? And how do you see the semiconductor shortage impacting the automotive market?

J

Jean-marc Chery53:15

Yes, the demand in the automotive market remains strong. We are seeing a continued increase in the content of semiconductors per vehicle, driven by the electrification of vehicles, the increasing adoption of advanced driver-assistance systems, and the growing demand for infotainment and connectivity. We expect the automotive market to grow in 2022, although we are aware of the challenges related to the semiconductor shortage. We are working closely with our customers to support their production needs, and we are confident that we will be able to meet the demand.

U

Unknown53:35

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the industrial market. Can you comment on the demand in the industrial market and the outlook for 2022?

J

Jean-marc Chery53:59

Yes, the demand in the industrial market remains strong. We are seeing a continued increase in the adoption of automation, the growing demand for energy efficiency, and the increasing use of digital technologies in industrial applications. We expect the industrial market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown54:18

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the capital expenditure. Can you provide more details on the capital expenditure plan for the next five years? And how do you see the return on investment?

J

Jean-marc Chery54:42

Yes, we plan to invest $12 billion in capital expenditure over the next five years. This investment will be focused on increasing our production capacity, particularly in 300mm wafers, and in expanding our capacity in silicon carbide and advanced packaging. We expect this investment to generate a strong return on investment, driven by the strong demand in our end markets and the favorable pricing environment. We are confident that this investment will enable us to capture the growth opportunities in automotive and industrial applications.

U

Unknown55:03

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the personal electronics market. Can you comment on the demand in the personal electronics market and the outlook for 2022? And how do you see the smartphone market evolving?

J

Jean-marc Chery55:27

Yes, the demand in the personal electronics market remains strong. We are seeing a continued increase in the adoption of 5G, the growing demand for advanced features, and the replacement cycle. We expect the smartphone market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown55:46

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the gross margin. Can you comment on the drivers of the gross margin expansion in 2021? And how do you see the gross margin evolving in 2022?

J

Jean-marc Chery56:10

Yes, the gross margin expansion in 2021 was driven by favorable pricing, product mix, and manufacturing efficiency. We expect the gross margin to continue to expand in 2022, driven by these factors. We are also benefiting from the ramp-up of our new 300mm fab, which is more efficient than our 200mm fabs. We are confident that we will achieve our gross margin target of 43% to 45% in 2022.

U

Unknown56:29

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the silicon carbide business. Can you provide an update on the silicon carbide business and the ramp-up of the new fab in Catania? And how do you see the silicon carbide market evolving in the coming years?

J

Jean-marc Chery56:53

Yes, the silicon carbide business is progressing well. We have started the ramp-up of the new fab in Catania, and we expect to reach full capacity in 2024. We have a strong pipeline of design wins, and we are confident that we will capture a significant share of the silicon carbide market. The silicon carbide market is expected to grow significantly in the coming years, driven by the increasing adoption of electric vehicles and the growing demand for energy-efficient power electronics. We are well-positioned to capture the growth opportunities in this market.

U

Unknown57:12

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the automotive market. Can you comment on the demand in the automotive market and the outlook for 2022? And how do you see the semiconductor shortage impacting the automotive market?

J

Jean-marc Chery57:36

Yes, the demand in the automotive market remains strong. We are seeing a continued increase in the content of semiconductors per vehicle, driven by the electrification of vehicles, the increasing adoption of advanced driver-assistance systems, and the growing demand for infotainment and connectivity. We expect the automotive market to grow in 2022, although we are aware of the challenges related to the semiconductor shortage. We are working closely with our customers to support their production needs, and we are confident that we will be able to meet the demand.

U

Unknown57:56

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the industrial market. Can you comment on the demand in the industrial market and the outlook for 2022?

J

Jean-marc Chery58:20

Yes, the demand in the industrial market remains strong. We are seeing a continued increase in the adoption of automation, the growing demand for energy efficiency, and the increasing use of digital technologies in industrial applications. We expect the industrial market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown58:39

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the capital expenditure. Can you provide more details on the capital expenditure plan for the next five years? And how do you see the return on investment?

J

Jean-marc Chery59:03

Yes, we plan to invest $12 billion in capital expenditure over the next five years. This investment will be focused on increasing our production capacity, particularly in 300mm wafers, and in expanding our capacity in silicon carbide and advanced packaging. We expect this investment to generate a strong return on investment, driven by the strong demand in our end markets and the favorable pricing environment. We are confident that this investment will enable us to capture the growth opportunities in automotive and industrial applications.

U

Unknown59:24

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the personal electronics market. Can you comment on the demand in the personal electronics market and the outlook for 2022? And how do you see the smartphone market evolving?

J

Jean-marc Chery59:48

Yes, the demand in the personal electronics market remains strong. We are seeing a continued increase in the adoption of 5G, the growing demand for advanced features, and the replacement cycle. We expect the smartphone market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown1:00:07

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the gross margin. Can you comment on the drivers of the gross margin expansion in 2021? And how do you see the gross margin evolving in 2022?

J

Jean-marc Chery1:00:31

Yes, the gross margin expansion in 2021 was driven by favorable pricing, product mix, and manufacturing efficiency. We expect the gross margin to continue to expand in 2022, driven by these factors. We are also benefiting from the ramp-up of our new 300mm fab, which is more efficient than our 200mm fabs. We are confident that we will achieve our gross margin target of 43% to 45% in 2022.

U

Unknown1:00:50

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the silicon carbide business. Can you provide an update on the silicon carbide business and the ramp-up of the new fab in Catania? And how do you see the silicon carbide market evolving in the coming years?

J

Jean-marc Chery1:01:14

Yes, the silicon carbide business is progressing well. We have started the ramp-up of the new fab in Catania, and we expect to reach full capacity in 2024. We have a strong pipeline of design wins, and we are confident that we will capture a significant share of the silicon carbide market. The silicon carbide market is expected to grow significantly in the coming years, driven by the increasing adoption of electric vehicles and the growing demand for energy-efficient power electronics. We are well-positioned to capture the growth opportunities in this market.

U

Unknown1:01:33

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the automotive market. Can you comment on the demand in the automotive market and the outlook for 2022? And how do you see the semiconductor shortage impacting the automotive market?

J

Jean-marc Chery1:01:57

Yes, the demand in the automotive market remains strong. We are seeing a continued increase in the content of semiconductors per vehicle, driven by the electrification of vehicles, the increasing adoption of advanced driver-assistance systems, and the growing demand for infotainment and connectivity. We expect the automotive market to grow in 2022, although we are aware of the challenges related to the semiconductor shortage. We are working closely with our customers to support their production needs, and we are confident that we will be able to meet the demand.

U

Unknown1:02:17

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the industrial market. Can you comment on the demand in the industrial market and the outlook for 2022?

J

Jean-marc Chery1:02:41

Yes, the demand in the industrial market remains strong. We are seeing a continued increase in the adoption of automation, the growing demand for energy efficiency, and the increasing use of digital technologies in industrial applications. We expect the industrial market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown1:03:00

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the capital expenditure. Can you provide more details on the capital expenditure plan for the next five years? And how do you see the return on investment?

J

Jean-marc Chery1:03:24

Yes, we plan to invest $12 billion in capital expenditure over the next five years. This investment will be focused on increasing our production capacity, particularly in 300mm wafers, and in expanding our capacity in silicon carbide and advanced packaging. We expect this investment to generate a strong return on investment, driven by the strong demand in our end markets and the favorable pricing environment. We are confident that this investment will enable us to capture the growth opportunities in automotive and industrial applications.

U

Unknown1:03:45

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the personal electronics market. Can you comment on the demand in the personal electronics market and the outlook for 2022? And how do you see the smartphone market evolving?

J

Jean-marc Chery1:04:09

Yes, the demand in the personal electronics market remains strong. We are seeing a continued increase in the adoption of 5G, the growing demand for advanced features, and the replacement cycle. We expect the smartphone market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

U

Unknown1:04:28

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the gross margin. Can you comment on the drivers of the gross margin expansion in 2021? And how do you see the gross margin evolving in 2022?

J

Jean-marc Chery1:04:52

Yes, the gross margin expansion in 2021 was driven by favorable pricing, product mix, and manufacturing efficiency. We expect the gross margin to continue to expand in 2022, driven by these factors. We are also benefiting from the ramp-up of our new 300mm fab, which is more efficient than our 200mm fabs. We are confident that we will achieve our gross margin target of 43% to 45% in 2022.

U

Unknown1:05:11

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the silicon carbide business. Can you provide an update on the silicon carbide business and the ramp-up of the new fab in Catania? And how do you see the silicon carbide market evolving in the coming years?

J

Jean-marc Chery1:05:35

Yes, the silicon carbide business is progressing well. We have started the ramp-up of the new fab in Catania, and we expect to reach full capacity in 2024. We have a strong pipeline of design wins, and we are confident that we will capture a significant share of the silicon carbide market. The silicon carbide market is expected to grow significantly in the coming years, driven by the increasing adoption of electric vehicles and the growing demand for energy-efficient power electronics. We are well-positioned to capture the growth opportunities in this market.

U

Unknown1:05:54

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the automotive market. Can you comment on the demand in the automotive market and the outlook for 2022? And how do you see the semiconductor shortage impacting the automotive market?

J

Jean-marc Chery1:06:18

Yes, the demand in the automotive market remains strong. We are seeing a continued increase in the content of semiconductors per vehicle, driven by the electrification of vehicles, the increasing adoption of advanced driver-assistance systems, and the growing demand for infotainment and connectivity. We expect the automotive market to grow in 2022, although we are aware of the challenges related to the semiconductor shortage. We are working closely with our customers to support their production needs, and we are confident that we will be able to meet the demand.

U

Unknown1:06:37

Thank you. The next question is from the line of [Analyst Name]. Please go ahead.

Yes, thank you. I have a question on the industrial market. Can you comment on the demand in the industrial market and the outlook for 2022?

J

Jean-marc Chery1:07:01

Yes, the demand in the industrial market remains strong. We are seeing a continued increase in the adoption of automation, the growing demand for energy efficiency, and the increasing use of digital technologies in industrial applications. We expect the industrial market to grow in 2022, driven by these trends. We are well-positioned to capture the growth opportunities in this market with our broad portfolio of products and our strong customer relationships.

STM Stock | STMicroelectronics NV Q4 2021 Earnings Call

About Jean-marc Chery