STMicro Sees Declining Demand for Automotive Chips Next Quarter

(Bloomberg) -- STMicroelectronics NV, the chipmaker that supplies Apple Inc. and Tesla Inc., said that declining demand for semiconductors for automobiles will cause a drop in sales this quarter.

The European company, whose competitors include Texas Instruments Inc. and Infineon Technologies AG, sees second-quarter net revenues falling to about $2 billion compared with $2.2 billion a year earlier, it said in a statement on Wednesday.

Key Insights

• First quarter revenue rose 7.5% to $2.23 billion due to higher sales of imaging chips, used in smartphones, as well as its analog and microcontrollers business.
• In January, before virus-related lockdowns had hit most of Europe and the U.S., the company estimated $2.36 billion for the quarter.
• Gross margins were 37.9% compared to the company’s previous estimate of 38%.
• Adjusted net income rose to $192 million.

Forecast

• “Our second quarter outlook is taking into account the declining demand environment, especially in automotive, as well as the ongoing operational and logistics challenges due to current governmental regulations,” the company said in the statement. “We anticipate that all of our manufacturing sites will be operational. Some of them will run at reduced capacity.”
• The company sees revenues for fiscal 2020 at $8.8 billion to $9.5 billion as growth picks up in the second half of the year.
• Growth in the second half will be related to “already engaged customer programs and the removal of supply constraints.”
• STMicro will reduce its capital spending for 2020 to $1 billion to $1.2 billion, down from an earlier target of $1.5 billion.

Virus Impact

• The company will cut its 2019 dividend to 16.8 cents per share from 24 cents.
• Apple warned in February that fallout from the novel coronavirus may cause it to miss sales targets this quarter following manufacturing delays and closed stores.

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