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Edited Transcript of STM.MI earnings conference call or presentation 24-Oct-19 7:30am GMT

Q3 2019 STMicroelectronics NV Earnings Call

Geneva Oct 26, 2019 (Thomson StreetEvents) -- Edited Transcript of STMicroelectronics NV earnings conference call or presentation Thursday, October 24, 2019 at 7:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Celine Berthier

STMicroelectronics N.V. - Group VP of IR

* Jean-Marc Chery

STMicroelectronics N.V. - President, CEO & Member of Managing Board

* Lorenzo Grandi

STMicroelectronics N.V. - President of Finance, Infrastructure & Services and CFO

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Conference Call Participants

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* Achal Sultania

Crédit Suisse AG, Research Division - Director

* Adithya Satyanarayana Metuku

BofA Merrill Lynch, Research Division - Associate

* Aleksander Peterc

Societe Generale Cross Asset Research - Equity Analyst

* Andrew Michael Gardiner

Barclays Bank PLC, Research Division - Director

* Anthony Joseph Stoss

Craig-Hallum Capital Group LLC - Analyst

* David Terence Mulholland

UBS Investment Bank, Research Division - Director and Equity Research Analyst - Technology Hardware

* Gianmarco Bonacina

Equita SIM S.p.A., Research Division - European Equity Research Manager

* Janardan Nedyam Menon

Liberum Capital Limited, Research Division - Technology Analyst

* Jerome Andre Charles Ramel

Exane BNP Paribas, Research Division - Analyst of IT hardware and Semiconductor

* Johannes Schaller

Deutsche Bank AG, Research Division - Research Analyst

* Matthew D. Ramsay

Cowen and Company, LLC, Research Division - MD & Senior Technology Analyst

* Sandeep Sudhir Deshpande

JP Morgan Chase & Co, Research Division - Research Analyst

* Sébastien Sztabowicz

Kepler Cheuvreux, Research Division - Head of Tech - Equipment Research

* Stephane Houri

ODDO BHF Corporate & Markets, Research Division - Research Analyst

* Tristan Gerra

Robert W. Baird & Co. Incorporated, Research Division - MD and Senior Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the third quarter 2019 earnings release conference call and live webcast. I am Myra, the Chorus Call operator. (Operator Instructions) The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Celine Berthier, Group Vice President, Head of Investor Relations. Please go ahead.

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Celine Berthier, STMicroelectronics N.V. - Group VP of IR [2]

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Thank you, Myra. Good morning. Thank you, everyone, for joining our third quarter 2019 financial results conference call. Hosting the call today is Jean-Marc Chery, ST's President and Chief Executive Officer. Joining Jean-Marc on the call today are Lorenzo Grandi, President of Finance, Infrastructure and Services and Chief Financial Officer; Marco Cassis, President of Sales, Marketing, Communication and Strategy Development.

These live webcast and presentation materials can be accessed on ST's Investor Relations website. A replay will be available shortly after the conclusion of this call. This call will include forward-looking statements that involve risk factors that could cause ST's result to differ materially from management's expectations and plans. We encourage you to review the safe harbor statement contained in the press release that was issued with the results this morning and also in ST's most recent regulatory filing for a full description of these risk factors. (Operator Instructions)

I'd now like to turn the call over to Jean-Marc, ST's President and CEO.

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [3]

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So thank you, Celine. Good morning, and thank you for joining ST on our third quarter earnings conference call.

Let me begin with some opening comments.

First, on Q3 and year-to-date. So Q3 net revenues at $2.55 billion and Q3 gross margin at 37.9% came in above the midpoint of our guidance driven by engaged customer programs and new products [doing] as expected, a soft legacy Automotive and Industrial market. Q3 operating margin was 13.1%, and net income was $302 million. On the year-to-date basis, we delivered revenues of $6.80 billion, gross margin at 38.4%, operating margin of 10.9% and net income of $640 million.

Second, on Q4. Our fourth quarter outlook is for net revenues to grow sequentially about 5% at the midpoint. Q4 gross margin is expected to be about 38.2% at the midpoint of our guidance and assumes about 120 basis points of unsaturation charges.

Based on our fourth quarter outlook for the full year 2019, we expect net revenues to be about $9.48 billion at the midpoint. This confirms a strong H2 over H1 growth, with a double-digit operating margin performance.

Now let's move to a detailed review for the third quarter.

Net revenues returned to year-over-year growth, up to 1.2%, driven by Imaging, Analog, Power Discrete and MEMS. On a sequential basis, we reported strong revenue growth, up 17.5%, driven by specialized imaging sensors, application-specific analog products, general purpose and secure microcontrollers, RF products for front-end modules, silicon carbide MOSFETs and digital automotive. This performance was partially offset by general purpose Analog and non-Power Discrete products. Legacy automotive products grew at a slower pace than expected.

Our gross margin was 37.9%, 40 basis points above the midpoint of our guidance. Unsaturation charges represented 110 basis points, lower than our expectation of 140 basis points on better loading in our digital wafer fab.

Our net operating expenses were $631 million.

Moving to our profitability. Operating margin was 13.1%; net income, $302 million; and diluted earnings per share, $0.34. Net cash from operating activities was $429 million in Q3 and was $1.09 billion for the first 9 months. Capital expenditures were $244 million in Q3, similar to the year ago quarter. On the year-to-date basis, we have invested $937 million for CapEx.

As anticipated, we returned to positive free cash flow in Q3 at $170 million.

During Q3, we paid cash dividends of $54 million and completed $62 million of share buybacks.

Now let's move to our fourth quarter outlook.

We expect net revenues to increase about 5% sequentially at the midpoint of our guidance. All 3 of our product groups will contribute to the sequential growth, with MDG expected to be the stronger contributor. Our guidance assumes a contribution from improving market conditions as well as from our engaged customer programs and new product introductions.

Our gross margin guidance at the midpoint is 38.2%. So we see some sequential improvement in gross margin at the midpoint. We do anticipate unsaturation charges to continue, estimated at about 120 basis points. On a year-over-year basis, to decrease -- the decrease of the gross margin will be about 180 basis points.

Q4 net operating expenses are expected to be between $620 million to $630 million.

Let me now share with you some important business, market and product dynamics, starting with Automotive.

In July, we said we were operating under 2 opposite market dynamics: challenging in Automotive legacy, but very healthy in smart mobility applications driven by the electrification and digitalization of car systems and platforms. In early September, we confirmed this view, saying that we would keep on tracking the situation closely for September and then October. What we are seeing today is that the legacy Automotive business, closely linked to car registrations, is recovering at a slower pace compared with what we were expecting when entering the second half.

In smart mobility applications, car digitalization and electrification, positive market dynamics are there indeed. Our innovative technology and product portfolio enables us to support our customers' shift to more electrification and more digitalization.

In car electrification, we provide technology and products for all flavors of vehicles from the mild hybrid to full electrical vehicles with a broad range of products. We saw continued traction and additional design wins with our silicon carbide MOSFET and diodes in applications like onboard charging and DC-DC conversion. We announced that we will supply high-efficiency silicon carbide devices to Renault, Nissan and Mitsubishi for advanced onboard chargers.

Overall, we can confirm that we are on track for over $200 million of revenues with silicon carbide devices this year.

We have successfully completed our key milestone evaluation of silicon carbide wafer manufacturer Norstel. Therefore, we have decided to exercise our option to purchase the remaining 45% stake. We expect to close this acquisition during Q4. It is part of our plan to install internal substrate production capacity to support the programs of our Automotive and Industrial customers from 2021.

We also continue to progress on IGBT MOSFETs and Power Modules, with a number of design wins in applications like traction inverters in electrical vehicles. Our offer for car electrification goes beyond power with a complete range of products such as protection devices, gate drivers, battery management solutions and microcontrollers. I will mention one example. During the quarter, we won a design with a major electrical vehicle manufacturer. Our 32-bit automotive microcontrollers will be at the heart of electrical vehicle charging adapters.

Car digitalization for us includes ADAS systems, V2X communications and the range of systems from embedded control units to domain controllers using our MCUs. Here, we continued to build momentum. An example I can mention is a design win with a European Tier1 for our automotive microcontroller in a stand-alone body gateway. That's the central communication node inside a vehicle, enabling cross-domain communications and connected services.

Moving now to Industrial, our second broad area of focus, and where we plan to accelerate our growth.

The market dynamics of the third quarter were still soft overall, with mixed performance across applications and products. However, there are some positive signs.

First, the inventory correction at distributors, which has been impacting our general purpose microcontrollers business for several quarters, is now over. This business grew over 25% sequentially.

Second, the positive sign we started to see since March for the point-of-sales increase at distributors worldwide are still there, with the exception of Europe.

Power devices demand is facing different dynamics. Demand is strong for silicon carbide MOSFET, IGBT and low-voltage Power MOS, while high-voltage Power MOS and non-Program Discrete are still suffering from soft end-market demand, amplified by an inventory correction due to short lead time of the industry.

Moving now to a short review of our achievements in the quarter for Industrial.

One of our targets for this market is leadership in Industrial embedded processing solutions. To that end, we are strengthening our hardware, software and ecosystem offering around our microcontroller families. During the quarter, we introduced new hardware, such as our first STM32 in an 8-pin package. This further expands the market we can address to simple embedded projects that need 32 performance in a compact and cost-effective form factor. We also added to STM32 ecosystem with the release of a number of software packages.

In Q3, we also introduced new analog products for Industrial, addressing lighting, power supply and factory automation applications. We won a number of new designs with metering, industrial sensors, Intelligent Power Modules and Power Discrete for applications such as power tools, induction heating, home automation, white goods and industrial compressors.

Moving now to Personal Electronics.

The current visibility we have is showing strong demand for our key products. As you know, in this end market, we target leadership in specific high-volume smartphone applications as well as associated wearable, gaming and accessories markets. During the quarter, we won designs and ramped production for new products in many categories. We were awarded design wins for our portfolio of sensors, Time-of-Flight, ambient light, motion and pressure sensors. We also had wins for secure solutions, wireless charging, touch and display products. In addition, we had design wins and ramped up shipments for motor drivers and display products for portable game consoles.

I will conclude with a few words on our objective to capture opportunities in 5G devices with RF mixed-signal technologies and products. During the quarter, we were awarded wins for digital and mixed-signal ASICs for RF-SOI designs to be used in 5G smartphones and devices.

5G is an area of focus also for our efforts in the communication equipment market, on top of satellite communications and cloud computing.

During the quarter, we continued to execute on programs and also won new designs across a range of applications. This includes a design with our latest generation of Global Navigation Satellite System, ICs, chosen by an important provider of global internet access.

To conclude my remark takeaway. During the third quarter, we reported strong sequential growth, double-digit operating margin, a strong increase in net income and a return to positive cash flow.

For the fourth quarter, we expect to see, at the midpoint of our guidance, sequential revenue growth and an improvement in our gross margin. We do expect further improvement in our operating profitability and free cash flow generation as well.

Combining together Q3 revenue results and our Q4 outlook at the midpoint, we are in line with our expectations of a strong sequential growth H2 over H1, with an uplift in revenues close to $1 billion. For the full year 2019, we expect net revenues to be about $9.48 billion at the midpoint.

Our engaged customer programs and new product introductions across the end markets we target are well on track and based on important secular electronic demand drivers: smart mobility, power and energy, and the IoT. This enables us to better navigate the macroeconomic and the market dynamics, both short and long term.

Thank you for your attention. We are now ready to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Stephane Houri from ODDO.

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Stephane Houri, ODDO BHF Corporate & Markets, Research Division - Research Analyst [2]

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A question on the sequential evolution you're expecting for Q4. You said that you expect all the divisions to grow sequentially. But notably, you talked about MDG as probably the biggest driver for Q4. Can you help us understand a little bit better if it is only linked to the end of the inventory correction that you have talked about? Or is there anything more, i.e., market share gains with the new range that you have launched?

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [3]

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As I have said during my address, I think there is 2 positive points. First of all, we continues to see a POS sequential increase from March. So this is the point #1. As I've told you, the level of inventory now in distribution at -- for MCU is at a standard level or slightly below standard level. So this, we are in a, let's say, a healthy situation where you have a POS increasing, a level of inventory at the standard, okay, to support demand, and more important in such market conditions is to be capable to make [TAM] business quarter to quarter because when you are facing, let's say, such business condition, your visibility is limited, but it is not an issue as far as you have a strong capability to make TAM business quarter to quarter, and this is exactly the situation we have, and we offer short lead time to our customer. And with our strong product portfolio, we are able to support their demand.

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Lorenzo Grandi, STMicroelectronics N.V. - President of Finance, Infrastructure & Services and CFO [4]

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Jean-Marc, Lorenzo speaking. If I can add. We talk about MDG, so there is the component that is related to the microcontroller. But in this area, we have also, let's say, the digital, and we have customer programs that will contribute to this. It's not only...

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Stephane Houri, ODDO BHF Corporate & Markets, Research Division - Research Analyst [5]

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Okay. And if I can have a follow-up on the margin because it seems that your gross margin is resisting a little bit better than you initially thought earlier this year. So is it coming from the forex side of loading or the product mix? What is, in your view, the main element?

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Lorenzo Grandi, STMicroelectronics N.V. - President of Finance, Infrastructure & Services and CFO [6]

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About the level of margin -- Lorenzo speaking. When we were discussing about the gross margin -- but looking at the gross margin of the quarter, let's start it from the gross margin of Q3. Where it comes the better result than respect our original guidance is mainly driven by a lower level of unloading charges. This lower level of unloading charges are due mainly to the fact that our production was increasing in order to follow better revenues than expected for the quarter. There is also some component. This -- the unloading charges accounted for around 30 basis points of improvement in respect to our original guidance. The remaining 10 basis points, substantially, is the better-than-expected exchange rate. So at the end, let's say, the gross margin came a little bit better on the way that we have a better level of loading. For Q4, we always said that our view was that the lowest point for our gross margin this year should have been Q3, and this indeed is confirmed. Let's say, in next quarter, we are guiding it to be slightly above 38%.

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Operator [7]

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The next question is from Andrew Gardiner from Barclays.

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Andrew Michael Gardiner, Barclays Bank PLC, Research Division - Director [8]

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Two, if I could. One, on the comments on Automotive and then another one on the sort of gross margin and utilization. Just in terms of Automotive, Jean-Marc, you mentioned that the -- sort of the trends that you're seeing in the legacy business have been sort of worse than you'd anticipated when entering the second half when we last spoke around July. Can you confirm, though, it is indeed recovering, right? You feel that there is a bottom in that part of the market. It's just that the pace of recovery there is slower than you would have hoped. And I'm just wondering, what kind of perhaps sort of order linearity have you seen through third quarter and into October so far? Is there a consistent trend, albeit one that's just a bit weaker than you thought? And then I'll follow up on the utilization.

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [9]

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So I confirm exactly what you have understood from my address. Clearly, when we entered in third quarter, our expectation was a recovery, an improving condition for our legacy product. And we always said, and I repeated early September, that mid-September to mid-October will be a critical period to assess the dynamic. What we can confirm that we see improving market condition, but clearly, at a lower pace than expected. So you see the point #1. My other point, we do not usually comment. We will see improving booking trends on the Automotive legacy, which is, let's say, making us -- makes the assessment that things are improving. And you know, it is based on car registration. Now what we can say, clearly, we can say that we acknowledge that there is a kind of consensus that we will see improving worldwide combustion engine-based -- internal combustion engine-based car registration starting now and certainly next year. But what is difficult to assess globally, it is, oh, it will propagate through the automotive supply chain, and oh, it will be transformed in semiconductor demand. Today, what we can only say, we say. We expected improving market conditions for legacy. Yes, it is happening at a lower pace than expected. So this is really the point I can share with you.

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Andrew Michael Gardiner, Barclays Bank PLC, Research Division - Director [10]

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Okay. And then if I could ask another one on the fab utilization. Lorenzo, you said that sort of the 4Q guidance clearly confirms that your 3Q has been the low point for gross margin, and it seems like utilization level is at a similar level for fourth quarter. How are you starting to plan for 2020? I realize it's early, but just in terms of your conviction around trends into 2020 and therefore what that can mean for fab utilization late this year and into early 2020?

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Lorenzo Grandi, STMicroelectronics N.V. - President of Finance, Infrastructure & Services and CFO [11]

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Well, let's say, the fab utilization in Q3 was in the range of 77%, and this was the loading. As you rightly say, in Q4 will be similar, slightly below because you see that, overall, the unused chargers are a little bit increasing because we move from 110 basis points in Q3 to 120 basis points in Q4. So we will be more in the range of 75%. What about, let's say, the unsaturation trend in the next quarters? In 2020, our plan is to keep our inventory under control. There will be some smoothing effect in the first part of the year, but we want, of course, to not increase in a significant way our inventory. So the expectation is that we will have an unsaturation in the first part of the year, in the first half of the year. And this is mainly driven by the fact that there is a significant change in the mix, the demand, the technology. We've -- that is mainly impacting our mature technology. For sure, the level of unsaturation charges will depend on the evolution of the market condition and our plan for 2020. At this stage, my expectation, as I said, is that there will still have a level of unsaturation in the first half of the year, and we expect that to improve in the second part of 2020.

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Operator [12]

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The next question is from Aleksander Peterc from Société Générale.

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Aleksander Peterc, Societe Generale Cross Asset Research - Equity Analyst [13]

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I just have a little follow-up question on ADG, where you say that the revenue decreased in Automotive. Could you maybe quantify maybe your year-to-date overall Automotive sales, how they evolved as of last year or for the third quarter alone, whichever you can provide? And also, in Power Discrete, you had an increase in the quarter. Could you be more specific on which customer segments were behind that? And then just finally, on geography. You were implying previously that Europe was lagging in certain markets in terms of the path to recovery. Is that still the case today?

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [14]

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Okay. Thank you. So I'll take the question. What I can say that we assess and look our overall Automotive segment year-to-date facing a market of car registration decreasing slightly above 5%, ST is increasing year-to-date about 5% compared to same period last year year-to-date. So as we said, our capability to enable solutions for our customers to execute their transformation to more electrification and more digitalization has enabled us to grow much faster than the market we are facing from car registration perspective. So this is the point. And we do believe that at the midpoint of our guidance of Q4 and the full year at $9.48 billion for overall ST, we will conclude the year for Automotive with a growth full year 2019 versus 2018 about 5%. So on the Power Discrete, more clearly, Power Discrete is driven by our performance on the silicon carbide MOSFET and diodes and, let's say, pushed by the performance of a very important customer. But as I said during my address, IGBT MOSFET and low-voltage Power MOS also are key contributors to the growth. Where we are facing a different dynamic now is high-voltage Power MOSFET, certainly linked to some inventory correction because now, for this device, the industry lead times are quite short, and the end demand also is suffering because of the overall industrial market weakness.

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Aleksander Peterc, Societe Generale Cross Asset Research - Equity Analyst [15]

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And on geography?

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [16]

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On the geography, so on geography for Power Discrete, not for Automotive, huh?

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Celine Berthier, STMicroelectronics N.V. - Group VP of IR [17]

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I think your question, Aleksander, is it for -- the question on geography is just for Power Discrete or is it more global?

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Aleksander Peterc, Societe Generale Cross Asset Research - Equity Analyst [18]

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No. It was a general question. You were referring on the last quarterly call to Europe lagging and you saw some pockets of weakness extending actually at the last call. So I was wondering if this has changed somewhat in the current period overall for the group.

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [19]

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No. We confirmed overall, okay, for, let's say, geographic that we see the POS, let's say, increasing sequentially materially in Asia, in America as well, but in, let's say, a slower pace. But in Europe, for sure, it is still decreasing. And we do believe it is consistent with the macroeconomic condition in Europe and in Central Europe related to the Industrial market.

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Operator [20]

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The next question is from Sandeep Deshpande from JPMorgan.

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Sandeep Sudhir Deshpande, JP Morgan Chase & Co, Research Division - Research Analyst [21]

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Could I ask about a view of your visibility that you have into design win activity into 2020? I mean, clearly, in a year when the semi cycle is so weak, this year, you've had significant new design win activity, which has held up your sales much better than your peer group. So I mean, do you have visibility in how this design win activity looks into 2020? That's my first question. And my second question is in terms of the mix as such really. I mean is the -- I mean in terms of the long-term guidance on margin from the company, is the intention that the gross margin of the company remains at the kind of peak levels you saw last year? Or is it that you intend to change the mix over the next few years to reach the midterm operating margin target?

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [22]

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So I let Lorenzo to answer at gross margin midterm, even if I would be pleased to answer, but I will let Lorenzo to answer, and I will come back on the design win.

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Lorenzo Grandi, STMicroelectronics N.V. - President of Finance, Infrastructure & Services and CFO [23]

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Our internal gross margin midterm, we confirm -- if you take, let's say, today the gross margin -- how we run in terms of gross margin, if you take, let's say, the gross margin at midpoint of Q4 for the year, it will be in the range of 38.4% for the full year 2019. And this gross margin is overall impacted by around 80 basis point of unsaturation. In respect to this gross margin, so we -- it means that if we exclude the unsaturation, we are above 39% with an impact on manufacturing efficiency that is not the best, because you know that when the fab are not fully loaded, they're not at the best. We confirm that our medium-term target for the gross margin is in the range of 40%, 41%. The main driver, it will be, for sure, let's say, optimization of our manufacturing efficiency with the loading. We see some improvement also in the mix, but [we] will not be the strongest driver in term of gross margin improvement.

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [24]

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Well, about the design win and what I can say about 2020, well, clearly, what we are, let's say, acknowledging now that, first, we are monitoring for sure all the funnel of opportunities we have with our new product, new design, either when they are, let's say, general-purpose device or application-specific device. And this funnel of opportunities is growing. And the commercial rates to transform these opportunities, win real business is accelerating. But I have to say it is, let's say, this kind of phenomena is very one-on-one when you go through a tough market condition. So you have an acceleration of new products and new applications, and you have the deceleration of mature products and mature technology. So this is exactly the phenomena we have more. And here, again, ST overall, and then I can discuss on what market, but overall, with our, let's say, wide-bandgap materials, so silicon carbide, GaN, low-voltage Power MOS. So we address very well all the opportunities in Automotive and Industrial power and energy control. With our microcontroller at 40 nanometer today, we address, okay, the domain microcontroller. With our advanced BCD, we address also all the opportunities for Automotive and (inaudible) for the industrial, and last but not the least, in personal electronics. Clearly, our Time-of-Flight, ambient light sensor, our secure solution, our wireless charger and the RF mixed-signal technology to address the front-end module receive a great appetite from our customer. So I have to say that 2020, it's too early to disclose anything about 2020, but certainly, ST will take benefit next year about the new product and program growing as we have done this year.

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Operator [25]

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The next question is from Sébastien Sztabowicz from Kepler Cheuvreux.

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Sébastien Sztabowicz, Kepler Cheuvreux, Research Division - Head of Tech - Equipment Research [26]

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So could you please comment a little bit on the dynamics you are seeing with the Chinese smartphone OEM and notably following the Huawei component ban? Have you seen any kind of pickup of demand, while those guys are accelerating, I would say, the shift away from U.S. players? And also on Industrial general-purpose Analog, when do you expect to see the end of the inventory correction?

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [27]

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I am sorry, but I will not be really a contributor to your question. Okay. Well, first of all, about the OEM you have spoken about, I will not comment. You know that it's a policy of ST to do not comment specific customer. What I can say is that this is important customer for ST. It is fully embedded in our strategy to address high-volume applications but being very selective for smartphone. Again, we target sensors, MEMS and specialized imaging. We target embedded processing solutions, embedded [field]. We target wireless charger. And okay, I think it's something -- you have seen something public. And then, okay, and we target certain modules with our technology. And the demand is strong, okay, for our key products and technology. Now our Industrial general-purpose Analog, at this stage, it's very difficult to see when we can state that the inventory correction will end driven by end demand growing and inventory level coming back to standard. So for the time being, I will be prudent to not give any time schedule of the end of the inventory reduction.

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Operator [28]

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The next question is from David Mulholland from UBS.

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David Terence Mulholland, UBS Investment Bank, Research Division - Director and Equity Research Analyst - Technology Hardware [29]

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I just wanted to follow on a little bit from the first question, but more generically, in China. How has your business trended in this quarter and into Q4? And just part of the reason for asking was TI, a couple of nights ago, was a lot more cautious on their commentary into Q4. So I'm trying to understand what you think the delta might be between what you're seeing and how they're guiding for some of these markets into Q4 and whether some of that might be the strength you might be seeing in China.

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [30]

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Well, again, I think I do not want to, let's say, specifically speak about China. Okay. Again, it's more global for ourselves. So we address the mass market worldwide. Again, we see a POS increasing of our distributor in Asia, okay, with a strong base. In Europe, as I said, it is the reverse, okay, and for obvious reasons. And in America, it's okay. Now about China, again, China is an important region. Totally, let's say, important for us but totally consistent with our strategy to be a broad-range leader in Automotive and Industrial market. And you know that China in Automotive is the most important region because they produce about 20 million cars per year. So it's an important region. Industrial as well and in personal electronics where we target high-volume applications being selective, the appetite for our technology is very strong. So there is no more than that, and -- but for sure, China is an important region for ST.

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David Terence Mulholland, UBS Investment Bank, Research Division - Director and Equity Research Analyst - Technology Hardware [31]

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And then just one quick follow-up. On the contrary, you've been giving around Automotive and the design win traction you've been talking about for a couple of quarters now in both IGBT and silicon carbide. Can you just help us to quantify this? Is it possible to put a number on where you think you are in terms of value of design wins, even if it's over a multiyear period, but just something to get a gauge in on what that success has been?

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [32]

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No, we cannot give a specific, let's say, number on SiC and IGBT. Well, okay. Well, our number, okay, that I disclosed during the first quarter, was the number of programs on SiC, so 35. Now, I simply said that now it's moving to 40.

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Operator [33]

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The next question is from Matt Ramsay from Cowen.

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Matthew D. Ramsay, Cowen and Company, LLC, Research Division - MD & Senior Technology Analyst [34]

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Jean-Marc, I think I wanted to follow up a little bit to David's last question contrasting your microcontroller business to Tex. And I know that they recently made some pretty sharp changes in their distribution strategy, trying to go a bit more direct, taking Avnet out of their mix, for example. I think some of the prior questions were around your business trends in China. But I think I wanted to see if you might comment on how you're seeing the overall distribution landscape given the changes at TI and maybe some distributor-friendly business on your side contributing to some of the strength. And then I have a follow-up.

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [35]

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Well, we fully -- I fully respect TI's strategy and the consistency, okay, of what they are doing. About ST, you know that it is slightly different because our partnership on distribution is mainly targeting demand creation. And we are very pleased with the partnership and various cooperation we have across the world and especially in Asia about this activity of demand creation, which is, let's say, very complementary of the outstanding ecosystem we have developed around the STM32. Because you know that one of the many strengths of ST is the broad range portfolio we have in STM32, with a very strong ecosystem around that in terms of user application, in term of tools to support the design, prototyping and so on, so forth. So we are very pleased, okay, with our partnership with the distributor between the demand creation and the strong ecosystem we offer to them. So this is our strategy.

But as I said, this year, we suffer and we were one of the companies -- I don't see it as really the healthiest last year, okay? One, end of August last year, of course, okay, we are seeing inventory correction, okay, during the past few quarters, but since March, the POS is continuously increasing. The [circuits] are at the right level, the design wins are coming, the funnel of opportunity is growing and the conversion rate is increasing. So we are pleased with this strategy. And then, okay, TI is following another one, but again, okay, we have a lot of respect and we see the consistency of TI. So we have no more comments about that.

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Matthew D. Ramsay, Cowen and Company, LLC, Research Division - MD & Senior Technology Analyst [36]

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That's helpful perspective. Just a quick one, Lorenzo, on operating expenses. It looks like you're going to be around 2% to 3%, something like that, higher OpEx this year. Is that sort of a growth rate we should anticipate? Or it seems like the opportunity funnel is widening a bit, so I just wonder on spending levels going forward into next year.

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Lorenzo Grandi, STMicroelectronics N.V. - President of Finance, Infrastructure & Services and CFO [37]

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Yes. On expenses, actually, in Q3 expenses, when we talk about expenses, we talk about the net expenses, including also the line of other income and expenses that we have, SG&A, R&D and other income and expenses. If you look in Q3, our expenses came at $631 million. This is a little bit on the high side of what I was saying entering the quarter. If you remember, I was talking about $620 million, $630 million as a range.

What there will be in Q4 our expenses? My expectation for Q4 is I confirm that we will be between $620 million and $630 million. But in Q4, I do expect that to be on the low side of the range. And this is mainly driven by the fact that on the line other income and expenses will be much more positive than what we have seen in Q3 due to the fact that we will be in the condition to -- in some jurisdictions, to recognize a significant amount of R&D grants. So it means that, at the end, I would confirm what I have said last time during our last call that overall in the year the expenses will came at between 630 -- $620 million and $630 million if you take the average quarterly on our expenses.

The evolution of our expenses. For sure, next year, there will be some increase because there is some increase of activity, there is an inflation rate, these kind of things. But I repeat, there will not be a significant increase. We will increase, but we believe that the structure of the company at this stage is such that it can support the level of business that we have and the ambition that we have with this level of business. So you can factor in some increase in the range of 3% -- 3% to 4% but no more than that.

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Operator [38]

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The next question is from Achal Sultania from Crédit Suisse.

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Achal Sultania, Crédit Suisse AG, Research Division - Director [39]

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Just coming back to the silicon carbide business. Obviously, a lot of growth this year, it seems, is driven by one key customer in the U.S. You've announced a few design wins, but I think most of them are going to ramp in 2021 and beyond. That's my understanding. Maybe I'm wrong. So if that's the case, like, how should we think about the silicon carbide business next year, specifically in 2020? Is it still going to be predominantly driven by volume growth at a key customer or we can actually expect some new customer ramping already next year?

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [40]

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So if you allow me, for this year, I correct a little bit, okay, your assumption that our silicon carbide is only driven by one customer; it was valid for last year, so 2018, but not this year. This year, okay, we have a significant amount of other customers which have started mass production, and so for us, revenues, of course, in the second half of this year. So what you say is a little bit, let's say, valid for last year but not for this year.

And next year, yes, we will continue to grow at, let's say, an important pace. Okay. We are building capacity for that. This year, that's the reason why we invested, okay, a material amount of CapEx to support the perspective of growth for next year on silicon carbide. That's the reason why, okay, thanks to the fact that the milestone about Nortel has been reached, and we have decided now to take the full ownership of Nortel and forecast, okay, to start production by 2021.

So now, okay, next year, 2020, well, with the current visibility we have, will be another year of material growth for silicon carbide. We are on track. This year, we will outperform above $200 million and all our programs are on track to go to $1 billion by 2024.

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Achal Sultania, Crédit Suisse AG, Research Division - Director [41]

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Okay. One follow-up, if I may, on the margins. Like historically, microcontroller, I think, has been the highest margin business for ST. Obviously, we've seen improvement in AMS also recently, while MDG has gone down because of inventory correction. Is that still a fair assumption in the long term, that microcontrollers should still be well above every other product line in terms of EBIT margin contribution?

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Lorenzo Grandi, STMicroelectronics N.V. - President of Finance, Infrastructure & Services and CFO [42]

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In term of operating margin, yes, in the sense that, if you remember what we said and what is our view, we said that overall, we see, let's say, on the margin for MDG, that is including microcontroller, to be in the range of 20% operating margin.

When we look AMS in the average of the year or -- there is a strong seasonality in AMS, but we will be in the mid-high teens. And when we look, let's say, into ADG, we will be more in the mid-low teens and this I confirm. I confirm that this is more or less the mix that we will have among our groups for what concerns the operating margin.

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Operator [43]

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The next question is from Jerome Ramel from Exane BNP Paribas.

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Jerome Andre Charles Ramel, Exane BNP Paribas, Research Division - Analyst of IT hardware and Semiconductor [44]

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Jean-Marc, 2 questions. So the first one is concerning the 3D sensing. How do you see in the mid-long term the technology evolving with the current solution we have in the market on structured light and Time-of-Flight? How do you see the technology being deployed, let's say, within 2 to 3 years?

And the follow-up will be on the silicon carbide competitive landscape. How do you see -- why do you see the reason for being vertically integrated, which seemed to be the trend of you and your competitors, are going to look forward, which is unique in this important industry? We don't have any other sort of being vertically integrated with the width of supply. So yes, just your view on these 2 points.

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [45]

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So silicon carbide. Well, you know that the characteristic of any power device to drive the cost down and generate value expected by our customer is to really work on the device process itself, on the raw material cost down and to [revise] the design of the package of the module. And so both the wafer device and for, let's say, the raw material, for sure, the perspective to increase the wafer size will be a key growth driver for the cost reduction.

So ST, we do not want to be limited by anybody in our strong willingness to decrease the cost of this device. That's the reason why we have decided to control partially our supply chain. We always said that we do not intend to supply 100% of our raw material need. It's only to -- the intention to support a share of our internal need. That is the reason why, okay, we have signed a very important agreement with Cree, okay, 1 year ago. And the relationship with Cree is very good. But, okay, we want really to look deeply in the raw material in order to accelerate as fast as we can wafer size conversion and cost reduction. So this is about the silicon carbide.

More clearly, about the 3D sensing. Well, 3D sensing, well, for sure, for the time being, ST is really focusing on the structural light and 3D front facing with the important current customer we have. And our mission is to support at the best the performance improvement and the cost decrease of the solution. Overall, we do believe that the future of, let's say, 3D sensing, depth map sensing, face recognition will evolve to solution-based on the indirect Time-of-Flight, so -- and driven by cost-reduction objectives. So this is something, okay, we are convinced about. That's the reason why we are running development and we have a road map and equipped for that. Well, also, we consider that ambient light sensing is important device to have. Well, and then, okay, we know that the on-the-way players are highly interested in 3D sensing solutions for the (inaudible) And our road map is well adapted to that. Well, after, okay, you know, Jerome, that to comment more deeply is trying to speak about secrets and this one I cannot do.

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Operator [46]

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The next question is from Anthony Stoss from Craig-Hallum.

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Anthony Joseph Stoss, Craig-Hallum Capital Group LLC - Analyst [47]

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I wanted to follow-up on your comment that you expect your Auto business to be up about 5% year-over-year in 2019. When you look into 2020, I'm curious your thoughts on content expansion. For instance, if global auto units are flat, where do you think your revenue could grow in 2020? And then I had a follow-up.

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [48]

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Now on Automotive, okay, let's share together, let's say, a certain element of context and not make a prediction, okay, because this is not -- don't want to make predictions. So about element of context, okay? Okay, there is a really strong driver on electrification calling for silicon carbide MOSFET, diodes, IGBT and low-voltage PowerMOS. And mainly the low-voltage PowerMOS are for the 48 volt. Here, there is a strong demand of components and the growth will be sustainable and material in 2020.

Then there is digitalization. So digitalization for us is clearly ADAS. And you know that we have a strong partnership with Mobileye, V2X communication and associated component of ADAS, so it's not only the processor, but it is rather lidar sensor, let's say, sensor [fusion], the microcontroller, all these kind of stuff. There is V2X communication. And there is more and more the change in the architecture of vehicles moving from, let's say, a fragmented ECU to a domain controller. Again, here, similarly, the demand will continue to be very strong for next year.

Well, then about all the other legacy means powertrain [FST] for internal combustion engine, infotainment, so this kind of legacy product. What we acknowledge now? We acknowledge that, certainly for 2020, we will see improving condition for car registration about internal combustion engine vehicles. This year was terrible because of the whole -- okay, it's a drop of minus 5%, minus 6%, and especially in China, minus 10%. But we acknowledge that, for next year, certainly, we will see something stable, let's say, flattish, okay?

Now what is really challenging and difficult for the time being is to assess that this car registration stability, how it will propagate through the supply chain of the carmaker, of the automotive and how it will transform in semiconductor demand, because, let's say, a little bit disturbed, but some inventory correction here and there or a change of architecture, acceleration of system, and so on and so forth. So what we expect for 2020 is an internal combustion engine car registration flattish; situation improving in terms of supply chain struggling about the excess inventory here and there, and then a transformation in semiconductor demand. But it is still difficult to assess with a strong accuracy what is going on.

What is really important at this stage is the capability for semiconductor vendors to be flexible enough, to be agile enough, to react very fast to the demand to customers. And I have to say that here, ST, with our internal manufacturing, we have a good strategic position to support this kind of market situation.

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Anthony Joseph Stoss, Craig-Hallum Capital Group LLC - Analyst [49]

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And then as a follow-up. You brought your inventory days on hand down to about 100 days in Q3. When I look at your revenue guide for Q4, it's fairly similar, up a little bit year-over-year, yet your inventory is about $200 million above where it was a year ago. Where -- what's the goal on inventory days on hand that you're comfortable with?

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Lorenzo Grandi, STMicroelectronics N.V. - President of Finance, Infrastructure & Services and CFO [50]

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Yes. About inventory, you're right. At the end of Q3, we were around 100 days of inventory. Our expectation for this quarter, Q4, is that the inventory will going down further in respect of where we stand today. We should be -- that will be below 100 days, in the range of 90, 95 days of inventory by year-end.

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Celine Berthier, STMicroelectronics N.V. - Group VP of IR [51]

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Thank you, Anthony. We are now close to the end of our call in theory but we are ready to take -- Myra, we will take the few questions that are left, no matter if we extend a little. So next question, please.

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Operator [52]

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The next question is from Johannes Schaller from Deutsche Bank.

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Johannes Schaller, Deutsche Bank AG, Research Division - Research Analyst [53]

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So on silicon carbide again, I mean a lot of the contracts in the market there, given that the volumes are quite low from your side but also from what your competitors like Cree has announced. I would assume a lot of these contracts are largely or de facto single-sourced at the moment. Can you share with us in terms of the competitive nature a little bit your expectation when these contracts will become multisource? Or actually, have you seen any contract in the market that is already multisource on silicon carbide in a meaningful way? And I have a follow-up on MDG.

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [54]

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Well, it's really difficult to comment about the multi-sourcing contract on silicon carbide for 2 reasons. For reason #1, okay, we do not disclose the discussion we have with our customers. This is point #1. And the point #2, silicon carbide MOSFET is a difficult device, okay? At ST, we have accumulated millions of PCs and thousands of wafer, so we are totally, perfectly comfortable with the [variability] of our device and the success rate of the codification we have at customer level. I am not so sure the competition is comfortable as well to be qualified on time on variability requested by automotive markets.

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Johannes Schaller, Deutsche Bank AG, Research Division - Research Analyst [55]

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No. That's clear. And on MDG, I mean you're running currently at a pretty similar revenue run rate what you had in Q4 2018, but your EBIT margins are about 200 basis points lower. I understand underutilization is some of that. But is there maybe also a pricing element, a mix element with more digital and other stuff in there? Could you maybe break that down a little bit more for us kind of where that headwind is coming from?

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Lorenzo Grandi, STMicroelectronics N.V. - President of Finance, Infrastructure & Services and CFO [56]

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In term of for MDG overall, it's true that we are running with an operating margin that is lower in respect to what it was. Here, we have some headwinds. One is, as you said, one is related to the fact that for sure manufacturing, even if I remind you that unsaturation charges are not charging the various segments but are in the others. Anyway, the impact of not good efficiency is definitely in manufacturing. Not good efficiency manufacturing is impacting the result.

Second ingredient is that the mix inside the group is not particularly favorable. It will improve definitely with improvement in the microcontroller, but it's not particularly favorable. For sure, these ingredients are not boosting our operating margin. These are, I would say, the main impact. Yes.

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Johannes Schaller, Deutsche Bank AG, Research Division - Research Analyst [57]

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Okay. So the non-microcontroller part has essentially held up better over the last few quarters than the microcontroller part and that has driven the deterioration in mix, and I would guess that will reverse somewhat in Q4.

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Lorenzo Grandi, STMicroelectronics N.V. - President of Finance, Infrastructure & Services and CFO [58]

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Yes. Exactly.

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Operator [59]

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The next question is from Janardan Menon from Liberum.

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Janardan Nedyam Menon, Liberum Capital Limited, Research Division - Technology Analyst [60]

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I just wanted to go back to the new program ramp, the design win activity that you talked about and the funnel of opportunities that you are seeing which is expanding even in the low part of the cycle. I was just wondering, how does that now relate to your midterm revenue target of a model of $12 billion that you talked about at your Capital Markets Day, given how those new programs have ramped in the second half of this year and the new design wins and activities that you are seeing? Does that make you more confident or less confident versus May in terms of achieving that within a midterm of the $12 million?

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [61]

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Okay. Related what we control by ourselves, means our new product introduction and road map and the related technology, we are on track with all the programs we are managing. We have no, let's say, time delivery [sleeping], clearly, whatever our industry of microcontroller for MDG, IMS or IDG. So at this stage, we confirm our confidence level, as we said at the Capital Markets Day, to reach $12 billion either as a run rate in the second half of 2021 or full year in 2022.

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Janardan Nedyam Menon, Liberum Capital Limited, Research Division - Technology Analyst [62]

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Understood. And just a follow-up on your RF front-end module business. You talked about some additional design wins on that. I was just wondering, are these new design wins at one customer or are you now having RF front-end module design wins at multiple smartphone OEMs?

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [63]

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Okay. It's mainly one customer.

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Janardan Nedyam Menon, Liberum Capital Limited, Research Division - Technology Analyst [64]

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Understood. And you talked about, on the analog application, specific analog strength in the second half. Is that predominantly on wireless charging that you're referring to? And once again, is that at one customer or is that at multiple customers that you're seeing that traction on wireless charging?

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [65]

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It's the wireless charging, multiple customers.

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Operator [66]

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The next question is from Adithya Metuku from Bank of America Merrill Lynch.

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Adithya Satyanarayana Metuku, BofA Merrill Lynch, Research Division - Associate [67]

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Just 2 questions if I could. Firstly, again, on the analog business in the quarter. You talked about growth, but you also mentioned general purpose analog was weak. I just wanted to get a bit more color on what exactly drove the growth within analog. Any color on what this product does and whether it was a specific customer or multiple customers would be helpful. And secondly, and then I've got a follow-up on the inventories after.

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [68]

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On analog, so what is related to general purpose in Industrial and distribution is still weak because of the over-inventory. So we are facing inventory -- steep inventory correction. And also, it is amplified in Europe.

Then what has driven our growth on analog is related to application-specific, so either related to personal electronics, but seasonal effects on our design. And you know that, overall, our design this year, okay, is very strong dilution, and the market of [design] is decreasing 30%. But across the year, as the profile of the business is back loaded and it is linked to seasonal effect, and we have second benefit of this seasonal effect.

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Adithya Satyanarayana Metuku, BofA Merrill Lynch, Research Division - Associate [69]

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Understood. And just quickly following up on the inventories. I just wondered if you -- obviously, you talked about inventory correction being over in MCUs, but inventory correction is continuing in other parts of the market. So I just wondered if you could do a quick tour around the different verticals and talk about how you see inventories in the entire supply chain, in autos, in industrial and some of the key markets that you address. Any color here would be very helpful.

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [70]

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Well, inventory on what we monitor. Again, we see a standard level of inventory on the channel for MCU and MEMS. We still, let's say, excess inventory in general purpose analog, in high voltage power MOSFET and in, let's say, non-Power Discrete. And we see a healthy situation on low voltage power MOSFET and IGBT. Now that at our OEM, so when we address the strength of OEM is difficult to assess inventory level. Overall, more on that at the ST level, okay, you have seen that we are decreasing our inventory. So I think, for us, what is important is to have a distribution inventory level at the healthy situation in order to be sure that we will take immediately benefits of the end-demand increase, especially when it will happen in Europe. Unfortunately, for general purpose Analog, it will take a bit a little bit longer and for high-voltage PowerMOS and standard discrete. For the rest, okay, we are totally ready to enjoy a growth. And this is exactly what we have done on MCU, especially in Asia and on MEMS.

About the rest of the industry, well, difficult to say. I think important you read, okay, what the analyst -- industry analysts are providing you, okay? We know that some [IGM] are still at an important level of inventory. Foundry, I don't know. And this is what I can say.

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Celine Berthier, STMicroelectronics N.V. - Group VP of IR [71]

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Thank you. I think we have 2 more questions to come, Myra, so we will take those 2 ones here. The next question, please?

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Operator [72]

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The next question is from Tristan Gerra from Baird.

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Tristan Gerra, Robert W. Baird & Co. Incorporated, Research Division - MD and Senior Research Analyst [73]

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Could you expand on the potential content and revenue opportunity that you see from 5G trends, both on the device and infrastructure side over the next year? And also, expand on the opportunities you see with SOI.

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [74]

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Well, so you know that the (inaudible) module for 5G, so the content will increase and so this is the main difference between 4G and 5G. It is an increasing demand in the front-end module. So -- and the front-end module involving globally 4 blocks, so the filter, passive and (inaudible) for components, so -- then you have 4 amplifier, low-noise amplifier and switches. So the rest of our RF technology is a good technology as far as you continue to improve and enable performance for switches and low-noise amplifier.

In ST today, okay, we develop in the pace well-known, let's say, great technology, 8-inch of RF-SOI. And in part, we develop a road map to convert to 12-inch or 65-nanometer based on 65 SOI. And this technology is fulfilling the expectation of our customer in term of performance enablement. So this is where ST is and this is where ST is growing between the RF-SOI and the 65-nanometer SOI.

Well, then, there is other, let's say, opportunities for us related to 5G. More definitively, there is, in Automotive, the vehicle 2X connection. Industrial, we will have the IoT. That's the reason why, in our road map, we are developing a system-on-chip embedding a data cellular modem to address IoT for 5G. And it is a strong effort for the company, okay, to deliver to be able to deliver this kind of system-on-chip in the future. Well then, personal electronics, I have spoken about. It is mainly the RF module. And then in communication equipment, well, it is clearly that technology for millimeter wave communication links will be important like the GaN or the LT SOI. And this is where ST is focusing anyway. So this is basically a ballpark the picture I can share with you.

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Operator [75]

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Today's last question is from Gianmarco Bonacina from Equita.

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Gianmarco Bonacina, Equita SIM S.p.A., Research Division - European Equity Research Manager [76]

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Two quick questions from me. The first one is, if you can just confirm the final cash out for Norstel, if this will be in the region of $60 million.

And then the second one, in terms of the impact of destocking on your revenue for the full year '19. You are guiding for $9.5 billion, which is a 2% decline year-over-year. I wanted to know if you tried to make an estimate of how much this year overall destocking was a headwind for you on this figure.

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Lorenzo Grandi, STMicroelectronics N.V. - President of Finance, Infrastructure & Services and CFO [77]

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In term on Norstel, yes, I sort of actually confirmed, let's say, we have signed the agreement. The valuation is known. So the answer is in the range of $60 million. This is what will impact our cash flow in the next quarters.

In respect to how much has been the impact of the destocking, this is not easy to say. Let's say, in the sense that, of course, it's a component, the lower demand. I would say that probably on our decline in revenues has been probably a significant component. We start to see this already last year in the second half. But for sure, the first half of the year in 2019 has been significantly impacted. To be honest, to give you a hard number is not so simple, but I would say that at least let's say half of the decline is from (inaudible).

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Gianmarco Bonacina, Equita SIM S.p.A., Research Division - European Equity Research Manager [78]

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Okay. Maybe just a quick follow-up. In terms of your addressable market, do you have, let's say, an estimate for the full year '19 just to -- in terms of year-over-year change?

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Lorenzo Grandi, STMicroelectronics N.V. - President of Finance, Infrastructure & Services and CFO [79]

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In term of...

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [80]

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Value stream.

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Lorenzo Grandi, STMicroelectronics N.V. - President of Finance, Infrastructure & Services and CFO [81]

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Yes. Exactly. Let's say, what we see is that we should be in the range of minus 3%, minus 4%.

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Celine Berthier, STMicroelectronics N.V. - Group VP of IR [82]

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I think this concludes our Q3 earnings call. Thank you very much for your participation.

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Lorenzo Grandi, STMicroelectronics N.V. - President of Finance, Infrastructure & Services and CFO [83]

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Thank you.

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Jean-Marc Chery, STMicroelectronics N.V. - President, CEO & Member of Managing Board [84]

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Thank you. Bye-bye.

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Operator [85]

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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.