Ladies and gentlemen, Welcome to the ST Microelectronics Capital Markets Day 2020 Strategic Update Presentation Conference Call and live webcast. I'm Myra, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference has been recorded. The presentation will be For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast.
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Jake starts with you.
Good morning, everyone. Thank you for joining the 4th and last session of our Capital Market Day 2020. The presentation of our strategic update. Jean Marc Sherry, ST President And Chief Executive Officer, will allow this session. He will be joined by Marco Cassis, our President of Sales, Marketing, Communication And Strategy Development, Ario Bellazar, our President of Technology, Manufacturing And Quality, and Lorenzo Grandie, our President of Finance, Infrastructure And Services And Chief Financial Officer.
Their presentation will be followed by a Q And A session, similar to the prior to ones, we will host it on an audio mod only. This live webcast and presentation materials can be accessed on ST's Investor Relations website. And a replay will be available shortly after the conclusion of the event. The presentations will include forward looking statement that involve risk factors that could cause ST's result to de firm materially from management's expectations and plans. We encourage you to review the Safe Harbor statement in ST's most recent regulatory filings for a full description of these risk factors.
Also, to ensure all have an opportunity to ask questions during the Q And A session. Please limit yourself to one question and a brief follow-up. With this, I will now turn the floor over to Jean Marc.
So good morning, everyone, and thank you for attending this final part of ST 2020 Capital Markets Day. I hope that the first three events focused on our 3 product groups. I've given you a deeper understanding of ST product strategies, leading position and our success factors or differentiators. Today, after my introduction, our goal is to go more into details on 3 topics: the evolution of our served market and our end market strategies with macro, and update on our technology and manufacturing strategy with OREO, and our financial model and mid term target with Lorenzo. Now I take the opportunity to confirm first that we are determined to continue to make us stronger.
We have the ambition to outperform the market we serve and become a sustainable and profitable $12,000,000,000 company in the midterm. This stems from our balanced markets position, a focus on high growth applications, and our solid product, IP Technology Portfolio. It is supported by our operating this and by a number of improvement or transformation programs, we are engaged in. We have fueled our ambition and our executing our plan, however, under market conditions that are notably different, compared to when we met in May 2019. 1st, our served market has a rule did not grow substantially during the past 2 years.
Certainly, we are currently witnessing a significant turnaround but with very different dynamics in our verticals compared to those we were expecting. Also, we need to take into account the U. S. China trade war implications. With the defector on Margot so far, preventing us from selling our custom design solutions to an important customer.
For a period of time, this will have an impact on the heavyweight content value we will able to extract from both personal electronics and communication infrastructure end markets. Finally, Coming back to the different verticals dynamics, the automotive sum should grow about 13% on average over the next 3 years. But starting from a 9% decrease in 2020 versus the 2019 levels. The industrial sum should grow 5% but with a 3% decrease in 2020 versus the 2019 levels. This situation in the two end markets where we are broadly exposed is not going to help offset the impact on our work plan or the likely trade war related revenue losses.
This despite the fact that we continuously outperform these 2 verticals for multiple years across semiconductor market cycles. Based on our latest assessment and current visibility, We have built a sales and operating plan to reach $12,000,000,000 full year revenues by 2023. With a corresponding operating margin model that delivers between 15% 17%. We will maintain a solid financial position in the period, followed with a strong ability to generate free cash flow Importantly, we will continue to invest in Product And Technology R&D to fuel the pipeline of opportunities we see. I would like to confirm as well.
There is no change in ST's strategy and market's focus strategic objective and value proposition. I will briefly outline each of these now. 1st, about our strategy. It is based on: a model of organic growth toward $12,000,000,000, with small and targeted strategic acquisitions. Internal design and manufacturing as the core of our operational activities, complemented with about 30% external activities, with selected partners and maintaining and improving a solid capital structure.
Our strategy stems from the 3 long term enablers: smart mobility, power and energy, and IoT and 5G. These are driving our investments and road map decisions. Ultimately, helping solve some of the major challenges our customers and the world are facing. Next, our end market focus. We are addressing the Automotive And Industrial Markets with a broad approach, leveraging all business models and ST key enablers to reach leadership positions.
We are addressing personal electronics, communication equipment and computer peripherals, so a more selective approach With custom design business model, taking advantage of the key capabilities that differentiate us. Here as well, we leverage our general purpose product portfolio across these markets, targeting high volume applications. We address these end markets with a well balanced go to market approach directly or through great partnership with distributors. Providing our over 100,000 customers product, design on our property technologies, or selectively external ones. Concerning our strategic objectives.
In Automotive, we have determined to achieve leadership in car electrification, and digitalization. In industrial, we aim for leadership in unbundled processing, to accelerate growth in analog and sensors, to expand on power energy management, and to accelerate growth with industrial OEMs. In personal electronics, we target leadership in selected high volume smartphone applications with differentiated product or custom solutions, And we want to leverage In communication equipment, computers and peripherals, we address the market similar to personal electronics with a selective approach. And finally, our value proposition, which underlies all the choice we make For our shareholders, we are committed to return value in line with our sustainable profitable growth objective. For our customers, we provide the differentiating enablers they need to succeed in their markets.
These enablers are technology, IP, products, application now and the associated ecosystem. A key factor is also our independent, reliable and secure supply chain to support their growth. For all other stakeholders, people, communities and society at large, Our value proposition is a strong commitment to sustainability. This short video will give you an introduction before give you the details.
Technology is intent to make people's lives better. This means living, working and playing in healthy, safe, and inclusive environment. Making this reality is an essential goal that we cannot achieve alone. We're convinced that technology plays a key role both in helping to meet the needs of our customers and in solving in environmental and societal challenges. As a technology company, sustainability is nothing new to us.
It has been a core part of our business for more than 25 years. Now we want to take the next step to go beyond our current goals and achievements. As make of semiconductors that are used in products across the globe. We know what interconnectedness means. Separate commitments are vital, but we can achieve much more and recommit collectively.
To working together towards a sustainable world.
So indeed, today, we are announcing that ST stepping up its ambition and plans for the sustainability of its operations. We plan to become carbon neutral by 2027, for the fortieth anniversary of ST's creation. We have built a comprehensive roadmap to carbon neutrality, which includes 2 specific targets: 1st compliance with a 1.5 degree sales use scenario, defined ex the Paris COP 21 by 2025. Which implies a 50% reduction of direct and indirect emissions compared to 2018. 2nd, we intend to source 100 percent renewable energy by 2027.
We will also implement collaborative programs and partnerships in all our ecosystems. To promote carbon neutrality among stakeholders and to encourage environmental innovations. It is with a great pleasure that I would like to complete my introductory speech today to announce that in January, we will welcome ST's new president of Human Resources and corporate social responsibility. Rajita D'Souza. Rajita brings with her 27 years of experience in an international carrier, built with 4 major European, NUS Manufacturing And Services Companies.
Rajita will be a perfect fit with ST's management team to successfully address the value challenges I have shared with you today. I will now leave the stage to Marco, Mario and Lorenzo to share with you our plans to make ST even stronger, with our mission to outperform our served markets. Becoming a $12,000,000,000 profitable company in the midterm, while continuing to demonstrate resilience within the current changing dynamics and keeping a solid financial structure. Thank you for your attention. I am now pleased to hand over to Marco Casis.
Thank you, Jean Marc, and good morning, everybody. My presentation is designed to give you more details on our served markets evolution in the context of this unprecedented year, as well as on our strategy and updated approach by end market. We experienced the headwinds, but the strength of our product portfolio and customer base gives us the ability to cope with happening on the market. We are convinced that ST is well positioned to outperform its served markets in our strategic focus areas. So let's begin.
Let's start by looking at the development of the market over the past few years. After 2 years of strong growth, our served markets at low or no growth in 20192020. For 2020, the current WSTS forecast is for our sum to be up overall 2.4% with significantly different dynamics by end market. We are not equally exposed to all parts of the market. As Jean Marc just mentioned, in Automotive And Industrial, we are broadly exposed In personal electronics, computer peripherals and communication infrastructures, we have a more selective approach.
So our performance depends less on the overall market trend. Taking this into account, we estimate the growth of our effective market to be overall flattish in 2020. In both cases and based on our Q4 revenue guidance, we will clearly outperform the market this year. Looking at our server markets, we see that for Automotive And Industrial, 2020 is a kind of reset here. In the midterm, the automotive sum will grow at 13% on average over the next 3 years, but from the very low 2020 levels.
Industrial will be growing 5%, but again, from low 2020 levels. And these dynamics are somewhat reversed for the other 2 markets. You can see in this chart, the delta between the latest forecast for the 2020 sum and the forecast from May 2019, we see that the SAM is significantly lower for both automotive and industrial, while it has increased for personal electronics and communication equipments, computers and peripherals. But we did perform well this year. One of our points of strength is the solid position we hold across all the markets we serve.
You can see here that in product areas where we target to be broad, we have leading position across our portfolio. And in those markets, where we also have a selective product approach or we invested early in innovation, like in silicon carbide, we are market leaders. Our go to market approach is well balanced. Today, we serve over 100,000 cars with a differentiated model, depending on the customer type. Our model for serving our customers has not changed And we had a balance here between customers from our end markets, including new entrants to the top 10 in line with our strategic focus areas.
Bosch, Continental, Intermodal, Intermodal, and Tesla from Automotive Apple Huawei and Samsung for personal electronics, CNHP and Seagate from communication equipments, computer and peripherals. For industrial, due to the fragmented nature of this market, we do not yet have a top 10 customer, although as you will see later, we work with many of the top flares. Our sales are balanced across the regions in which we design in our products as well as by customer type and channel. This balance has shifted somewhat in the 9 months of 2020, reflecting the weakness in the automotive and industrial markets in the first half of the year. The same dynamics are visible from lower distribution sales and lower revenues coming from European customers due to their exposure to Automotive And Industrial.
I will move now to a discussion of our end markets. For each, I will start with a recap on our strategy and approach then move to discuss the key changes in the market and any adaptation of our strategy. I will then give you some more color on the market trends and how we are addressing them. This will be linked to what you have already seen in the presentation from my colleagues of the product groups. Let's start with Automotive.
Here, our objectives are to lead in car electrification and digitalization. As Marco Monty has already explained, our business model is to collaborate with car manufacturers, TS1 and the technology leaders, to develop Leading Edge Automotive Solutions. We also partnered with distribution to address a broader customer base And we have specific solution we deploy here, such as the Full Kids. We also have specific partnership in China that are crucial to long term success. So what are the key developments in the automotive markets?
Here, I will not list again everything that has already been discussed, but to summarize, the longer term trends, whether in technology, legislation or consumer behavior, confirm the strategic direction we have taken to focus our investment on car electrification and digitalization. The main market changes compared to the last Capital Market Day have been the deterioration of the environment with car sales down by 20% in 2020, This has put higher pressure on legacy automotive business, closely links to volumes. In parallel, the automotive industry has adopted accelerated path toward greener and safer cars. In light of this, our strategy in automotive remains unchanged. As described by Marco Monty, our reaction has been to accelerate our ongoing action plans to better serve macro trends.
This includes expanding our electrification programs based on the silicon carbide, IGBT, microcontrollers and smart power solution, as well accelerating partnership in Asia for electrification. We have also increased our efforts on gallium nitride material. Another example has been to refocus of efforts on L2L2 plus plus program in ADAS in line with customer demand. I would like now to reiterate what Marco Monty presented in the ADG presentation. ST is the only company among the top automotive players that grew on average in the last 3 years by more than 10% per year.
The industry in the same period grew by 5% and the top 3 players by 2%. Also in the first half of twenty twenty, we believe that ST gain and gain market share, driven by our efforts on electrification and EDAS where we clearly outperformed the market. The automotive Semiconductor market is driven by the combination of car volumes and silicon content. After a difficult 2020, car volumes are forecast to recover and grow over the next 3 years. We've still quite some variability in the forecast and with a significant shift of mix between internal combustion engine and electric or hybrid vehicles.
This is an important factors being one of the key drivers for Silicon Content Growth in the coming years. If we look now at the total automotive semiconductor market growth, not just our server market here, We can see that the majority of this growth is clearly coming from car electrification and digitalization. Both of which are doubling in value in the barring from around $400 in an internal combustion engine vehicle to 700 in an hybrid. To well over 1000 in a fully electric vehicle. This is driving the electrification time growth.
ADAS growth is driven on the short term by an increased provision of middle level L2 plus plus ADAS systems in entry level car models even if we see a confirm the strategic direction we have taken to focus our investment on currentification and digitalization. And despite the short term headwinds, Automotive remains an important growth driver. Let me now move to Industrial. As already outlined, our objectives here are leadership in embedded processing, acceleration of growth in handling sensors, expansion in power And Energy Management and acceleration of growth with industrial OEMs. Here, we use our deep industrial knowledge to develop solution optimized for specific applications, and we combine these with our broad portfolio.
The industrial market is highly fragmented. We target industry leaders with specific products adapted to their needs and then address the wider market with the same product as well as with the rest of our portfolio. Looking first at the key industrial market developments. The pandemic had a negative impact. This is particularly true for factory automation an important part of this market.
This has resulted, as we have seen, in a significant industrial market forecast decline versus previous expectation. But with favorable growth rates in the next 3 years. This growth is mainly driven by automation and motor electrification as well as a need for higher power efficiency, battery charging, sensors and data centric industrial IoT. Here, again, our strategy has remained the same, and we have made significant progress in its deployment. We have strengthened our industrial embedded processing offering with portfolio extensions, ecosystem, investments and the connectivity acquisitions.
We also strengthened our power offering with Silicon Carbide and gallium nitride investments, agreements and acquisitions. And we added additional field resources and customer support structures, including 2 new competence centers that were opened in China. Semiconductor Content Growth in industrial is coming from some common trends, automation factories, buildings and homes, the need for higher power efficiency and data centric industrial IoT applications within the main industrial application, those where it is focused are among the largest and with the highest growth. They offer many opportunities for ST in the areas where we are targeting to accelerate growth embedded processing, analog and sensors, and power and energy solutions. ST is in a great position to address these opportunities and expand its presence, thanks to our broad portfolio and strong existing market position.
Overall, we are number 5 in the industrial market with key areas of strength. In micro components, we are number 5. But within this area, we are number 1 in 32 bit microcontrollers. We entered the NPU market recently and we expect to grow significantly our position here. In Power Discrete Technologies, we are number 3 with high ambitions, as you have seen.
We are number 5 in Analog and number 10 in industrial sensors, areas where we are investing in new and innovative products. Let's look now at the embedded processing market in more detail. These are markets set to grow 5.4% compounded through a combination of general purpose microcontrollers and microprocessors. The main growth drivers of this market for industrial are the need for features and the functionalities that support the trends I mentioned earlier. This includes more wireless connectivity, more security, ultra low power, motor control and power system digitalization.
And of course, artificial intelligence. Our strategy here is, since quite some time, to leverage our leadership position in MCUs and strengthen in parallel our offer across the growth drivers I have just outlined. Also, we expand our NPU offer. This is what we are doing, as you have seen, includes that land presentation. Moving now to the power market for industrial.
This is another large opportunity. Here you see some of the application where we are particularly focused and already well positioned. All of these have power semiconductor content exceeding a third of the total content and ST as the know how and breadth of portfolio to be able to address In the presentation of AMS, Beretta Vineyards mentioned how we are seeing a number of emerging applications in industrial IoT becoming reality now. These applications are all driving a demand for sensors and connectivity on top of embedded processing. Here, source that enable AI on the edge of the edge.
So in industrial, we are advancing our strategy to expand our presence in two ways. First, through the breadth of our portfolio, leveraging our leadership position in embedded processing and also accelerating our go to market strategy with OEMs beyond our traditional strengths in the distribution channel. Moving now to Personal Electronics. Here, our main focus is on smartphone application specific products that are also suited for other personal devices. We also take advantage of our general Parcos portfolio for the broader personal electronics market.
We build dedicated products for some top smartphone players and they have a number of market leading products for other players. As you will see later on we see growing opportunities already materializing in meaningful revenues also in the wearable and accessories market, as well as in gaming and personal care devices. The main developments of the personal electronics market are well known to all of us. 1st, the U. S.-China trade war it has changed the smartphone player landscape with market share shifts among the key players.
The second is macroeconomic. In 2020, smartphone sales will decline. Sales were very weak during the first half, mainly due to the lockdown measure and rebounded during the second half. We also started to see 5G smartphone sales taking off and the strong e SIM adoption with shipments doubling in 2020 versus 2019. As another direct result of the pandemic, the work from home effect positively affected accessories and other personal electronic sales.
Our end market approach has remained largely unchanged. We have progressed in expanding our portfolio, as you have seen in Bear Days presentation, we are also developing our next generation optical sensing solution to consolidate our position as a leader, and we have launched and open market wireless charging solution. We are also accelerating our efforts in customs, analog solutions. On the go to market approach, we are leveraging our strong customer relationship to sell our broad portfolio. Our focus in smartphones include the areas where we have been focusing on already for many years and where we have mapped leading positions and leading IP and technology.
So optical sensing solutions, custom analog and power management secure solutions, including secure element, NFC and E SIM, as well as sensors like our motion and environmental sensors. Our 5G RF business has clearly been impacted by the situation related to the U. S.-China trade war. However, The investment that we have made there in terms of technology and IP development will be beneficial for our IoT strategy going forward. On top of these focus areas, we are bringing more content per device through our general purpose microcontroller and analog portfolio.
And as I have already mentioned, accessories are a significant opportunity, both in the short and in the long term. Here, you can see the STsomicomdoctor content that a true wireless stereo headset can contain. This has been a real boom for our sensor business as you can imagine, since each headset contains multiple sensors and then multiplied by 2. So to summarize, on personal electronics, we are on track to be leader on selected high volume smartphone applications, with differentiated products or custom solution with an accelerated effort in custom analog. And on to our 4th end market, communications, equipment, computers and peripherals Here, we have 3 strategic objectives: 1st, to address selected high volume application with differentiated products or custom solutions.
These include solutions for data storage and printer cartridges, where we have ongoing long term relationships with key manufacturer 2nd, we address selected application in cellular and satellite communication infrastructure with specific ST mixed signal technologies. And third, we leverage our broad portfolio to address high volume applications like PCN servers with products from our power, analog sensor and embedded processing offer. There have been a free key market development in this area since our last Capital Market Day. We have seen the first deployment of LEO satellite constellations helping to drive ubiquitous Internet access complementing 5G. Also, in 2020, cloud and digitalization investment have been accelerated by the pandemic.
As these have become critical to ensure business continuity. And of course, in this area, there has been a significant impact of the U. S.-China trade war. In terms of key developments in our end market strategy, We are capitalizing on ST's know how to develop and manufacture products dedicated to high data rate communications such as 5G and LEO satellite constellations. We are also expanding our portfolio offering, computers and peripherals transitioning resources to new products, such as custom analogue devices, addressing growth areas.
So here, despite recent headwinds, we still see opportunities to leverage our specific know how. With that, I have come to the end of my presentation, and I would like to conclude with a few key points. We believe ST is well positioned to grow faster than our served market. Our strategy stands form long term trends, reshaping industries, societies, and ultimately, our customers' business models. We work with customers to address the need for smarter mobility solution driven by electrification and digitalization, the need for much more efficient power and energy management across all devices and systems.
And we support them in the large scale deployment of the internet of things accelerated by the rollout of 5G connectivity. Thank you. It is now my pleasure to hand over to Aria Belletta.
Thank you, Marco. Good morning and good afternoon to everyone. I am pleased to give you an update As you know, we are an independent integrated device manufacturer. Our manufacturing machine is a key enabler supporting our product and market strategy and plans. Our objective is to offer our customers the best product with the highest quality, service and security of supply.
This has been more important than ever during this unique year. We manage our manufacturing through a balanced utilization of internal and external production. In our internal front end fabs and backend plants, we manufacture our portfolio of differentiated products and technologies. We have established integrated competence centers of Manufacturing Technology Development at our 11 sites located in EMEA and Asia. May support the introduction of new products and accelerate time to market and time to volumes.
We complement our internal capability through partnership with Silicon Foundries and assembly and testing subcontractors. This allows us to serve our customers with multiple and flexible sourcing options both on Standard Technologies and Leading Edge FinFET Simos Technologies and others. These partnerships represent about 30% of our activity. I was sure to give you an update on the 4 major programs that we have represented at our 2019 Capital Markets Day. First, wide bandgap technologies, silicon carbide and gallium nitride.
2nd, power modules packaging. Serve our 300 millimeter front end fabs plan and pause our manufacturing outsourcing strategy. But before discussing in detail this area of focus, I would like to confirm our commitment and investments in technology R&D. Supporting a wide portfolio of technologies that are the foundation of our differentiated product offer across our reference and market. In front end, on top of our internal developments, we also rely on the collaboration with Silicon founders in Leading Edge CMOS Technologies.
Including 7 nanometers and 5 nanometers for Infat, mostly for automotive ADAS application. Also in the can, we complement our wide offer of packaging solution with established collaboration with subcontractors. Especially in the areas of power modules as I will come back to later. Let me now update you on our strategic programs in manufacturing. Summarizing the changes and evolutions versus the 2019 Capital Markets Day.
Following this summary, will go into more detail on each of these programs, starting with widebandgap Technologies. Here, we have expanded our power mast pet front end capacity and for packaging, we have also qualified a ramp in mass production, a second source in Boscura, Morocco, We have made progress in the integration of the Nostel team. We are preparing for internal mass production of silicon carbide substrates. In gallium nitride, we have installed an internal full process capability. We are capitalizing on the acquisition of Exagan, and we have activated a collaboration with TSMC.
The 2nd major programs in power modules. For this, we have set up internal capacity at and then and start the production in collaboration with the subcontractor. The 3rd program is around our 300 millimeter plants, Here, in 2020, we have increased production capacity at coal, France and progressing the construction of the new fab in Agrata, Italy. Concerning manufacturing manufacturing and outsourcing, we have now increased the percentage of foundry utilization to a level of about 25% and progress in the qualification on each of these programs, I just described. I will start with the wide bandgap technologies.
In Silicon Carbide, we are further investing in capacity expansion and technology evolution at our 150 millimeter manufacturing plant in Catania. We have accumulated impressive experience and reached full maturity in volume manufacturing, yields and automotive grade quality. We also continue to capitalize on the strength of our manufacturing MR and D competence center in Catania. To introduce and ramp up new products, and perform new customer qualifications. We are migrating our production to the 3rd generation of power Mosfet, process technology, still in planner transistor structure.
We continue developing the next process generations, including a trend structure transistor, based on the superjunction architecture. In line with our target to achieve $1,000,000,000 revenues by 2025, We have plans to multiply by 10 times the capacity initially installed in 2017. For this purpose, we have installed equipment and we qualify in 2021, a second production line at our Singapore manufacturing campus. Concerning silicon carbide substrates, we confirm our strategy for vertical integration of the silicon carbide supply chain. We have completed the acquisition and progressed in the integration of our Sweden Silicon Carbide affiliate, ST in Austin.
We started to source a small portion of subsidy for our production from the north chopping pilot line. We are making progresses in the development of the 200 millimeter crystal growth process, where the industry will progressively migrate in the second half of this decade. We are well ahead in the design and the site identification for a new plant for mass production of substrates. We have the objective to start production in 2022 and achieve more than 40% of internal sourcing by 2024. Summarizing our overall silicon carbide strategy.
Our power Moscow Technology map will drive the production evolution to the next few years, from generation 3 to generation 4 based on our competitive and robust plan and transistor architecture. While we see the introduction of trench based transistor in the midterm. On the capacity side, as said, we are expanding in Catania and we are investing in 2nd line in Singapore in 150,000,000 meter. I would like to clarify that the equipment we are installing are 200 millimeter compatible and ready for this future diameter conversion. In backend, we have now 2 lines, both automatically qualified in Shenzhen and Buskura.
Concerning the substrate supply, I confirm we have 4 suppliers qualified in production. And with 2 of them, Cree and Cy Crystal, we have signed a multi year supply agreement. We have taken major steps in the direction of vertical integration with the completion of the acquisition of Nordstel now 100% owned. And we invested in R&D as most scale capacity nor chopping, where we are focusing of our development on 200 millimeter crystal. We will communicate in due time about our new initiative on the internal mass production of silicone carbide substrates.
Please complete our view on the silicon carbide manufacturing. Moving now to gallium nitride. For radio frequency, GaN, we have installed a 150 millimeter production line in Catania, where we are in qualification phase. In the future, we left the option to convert the production to 200 millimeter to cope with the technology evolution and business demand. For Power GAN, we have installed internal 200 millimeter epitaxy tool at our tools plant in France, and we have now the capability to run a full man factory inflow internally.
We continue our technological collaboration with CA Lat on both Diodes and transistors architecture. At the same time, we are capitalizing the acquisition of the Exegant team Competences, both in terms of design and gallium nitride epitaxial growth. In order to accelerate our access to the market, while we continue to build a competitive internal road map, we have established a partnership with TSNC addressing both discretes and integrate GaN in system epacket solutions. Power modules is another very important area of focus for our Became Manufacturing to support our power technology strategy. We have a well established competence center in Catania, and we have started an advanced power package lab at our Shenzhen plant as well.
In Shenzhen, we are today in production with power modules of values complexity, and we have full control of a related supply chain of materials and sub components. We can produce both standards and customized solution based on the embedding of both silicon and silicon carbide devices. The production capacity in Shenzhen is under expansion, and we have an active partnership in particular for APAC drive solutions with an Asian subcontractor. I will now move to 300 millimeter strategy evolution. Today, our 300 millimeter footprint is based on our Clot 300 fab and the number of collaborations with Silicon Foundries.
As already announced, we have started the construction of the new 300 millimeter fab at our Agrata site in Italy, having, as a main mission, the develop the structure to dramatically expand our top internal 300,000,000,000 meter capacity in support of our differentiated product portfolio in digital and power technologies. Including the expected growth in Silicon Foundries, our 300 millimeter production base is set to increase materially. In Kroll, we have further increased our production in 2020, mainly in specialized imaging sensors, microcontrollers and FPSOI. By expanding our cleanroom and installing new equipment. Going forward, the fab can be further expanded in similar modular way through step by step extensions of the current building and facilities, sizing the fab to the evolution of the market demand.
In Agratin, during 2020, we have progressed in the construction of the building and then installation of the first elements of the fab facility. In the 1st phase of the investment, we will install our development and 1st industrial deployment line to prepare for process and product qualification. Expected by the end of 2022. After that, we will modulate the production investment and ramp up according to the market demand. During this year, we have continued to work on scaling up critical analog and power process modules in Cloud 300.
This will allow us to accelerate our learning curve when the AgradeFA will be ready to start. The Agrade toolset will be fully competitive where we quote 300, in order to enable fast process exchange and the maximum flexibility between the two fabs, especially in Anadaximos and other derivative technologies. Let's move now to our strategy in outsourcing. We confirm that the partnerships with Silicon Foundries is a key ingredient of our strategy, mainly on 2 aspects. First, to provide our customer with multiple sourcing options for both industry standard technologies and for a number of its key proprietary technologies we transfer.
2nd, to gain access to advanced CMOS FinFET nodes below 18 nanometers, where huge internal investment are not justified by the size of our business. Our current level of foundry outsourcing is about 25% and we want to retain the flexibility to further modulate this percentage according to production needs. To set the ground for this, we are currently executing the transfer and the qualification of additional technology families, such as embed a novel attack memory in 14 nanometer IGBT and PowerMOS, and we're looking for additional opportunities. At OSATs, we are producing about 35% of our back end production value and we plan to remain stable around this level. Moving now to capital investment.
Our 2020 CapEx plan is about $1,000,000,000 to $2,000,000,000. These investments are designed to support both the execution of our short term business plans as well as our strategic initiatives. About 1 third of the 2020 CapEx is supporting our major key programs described today. For example, the 300 millimeter strategy mostly for the construction of the Aggretive fab, but including also the expansion of the cold clean rooms. Process capability in gallium nitride and the installation of a joint MEMSLab in Singapore for piezo materials.
About 40% of the CapEx has been dedicated to capacity growth, to support our sales in the second half of this year and begin in 2021. In Catania and startup of Singapore. Equipment for capacity growth in Kroll, both 200 and 300 millimeter in FDSOI, embed the number of time memory, Anurag CMOS and Imaging and became assembly and testing. For the remaining CapEx portion, As you know, in 2020, we faced some challenges in some of our fabs to adjust to sudden changes in our markets. Anurong and power fabs, reducing legacy technologies in automotive and industrial, have been and still are affected by unloading.
As a consequence, we had to devote some CapEx to move up faster the technologies at those steps. To complete the CapEx feature, we have invested in advanced VCD mix, technology and D, as well as in several programs for the reduction of environmental impact as well as the automation We confirm that manufacturing is a key enabler to support SD strategy and, importantly, our custom Our production sources strategy is based on a balanced make or buy model and strong relations with foundries and OZET. We have provided an update today on the status and evolution of 4 major strategic programs. First, Power Technologies, investment in production, expansion and technology development for Silicon Carbide, Gallium nitride, and vertical integration of Silicon Carbide substrates. 2nd, power modules packages.
3rd, expansion of 300 millimeter manufacturing footprint with the construction of the new fab in Agrade for Analog And Power Technologies, and modular growth of coral in a cluster model that also includes the silicon foundries. And 4th the extension of the technologies are flexible at boundaries in order to increase the make or buy options at support of our growth. In line with this, our 2020 investments at $1,200,000,000 are designed to support longer term strategic programs as well as immediate capacity and technology mix evolution. Thank you for your attention. It is now my pleasure to hand over
Good morning, everyone, and welcome to our last presentation on this 2020 STIC Microelectronic Capital Market Day. My colleagues during the session dedicated to product groups drove us through ST product portfolio, and product roadmaps. We went through our business opportunities in automotive and in smart mobility, driven by digitalization and electrification. Our roadmap in image sensor addressing personal electronics and now diversifying in other markets. Our large and analog portfolio, supporting our penetration in the industrial market, as well as our MEMS and microcontroller products that are progressively including more and more features.
From connectivity to artificial intelligence at the edge, a wide and consistent product portfolio, pervading all market targeted by ST. This morning, Marco and OREO gave to you a comprehensive view of our strategy to address our servant market and our manufacturing strategy and technology roadmap. All these to show that ST is a unique company addressing secular growing markets with key intellectual properties, core competencies in technologies, and innovative products supported by world class manufacturing asset. All these ingredients to make a state to play a leadership role in the Semiconductor Industry. Let's move now to illustrate how all these ingredients will translate in value creation for our shareholders.
Today I will cover 2 main topics: the recent past our financial results and the midterm future, an update on our midterm financial model. So let's start to review and comment the ST company results. Last time we met, almost 2 years ago, at our 2019 Capital a day in London. I started my speech showing a similar table covering the company results from 2015 to 2018. Over that time frame, we delivered a significant revenue growth, improved profitability, and strengthen our financial position, easy life for our CFO, with the revenues growth consistently outperforming the market.
Gross margin improving for more than 600 basis point, additional 1,000,000,000 of net income, and free cash flow increasing by more than 60%. But at that time, many of you rightly were asking me and the management team about a steerability to be less volatile than in the past and more resilient on the results in a more adverse market environment with low or no growth. I was lucky. The following 2 years added to my result, a summary table, 20192020 gave me the opportunity to answer to this question about our degree of resilience. After 2 years, 20172018, with the market at double digit growth came 2 years with no or low single digit growth.
In addition, we experienced an increased tension in particular, the U. S. And China. And finally, a worldwide pandemic is still not yet over. Really a perfect environment to test our ability to deliver in adverse condition.
I could not more to try to convince you about the ST reduced volatility on the results. Let's have a short look over the last 2 years. We continue to grow. This year, we will outperform the market, showing a growth compared to 2018. At almost reaching the $10,000,000,000.
Gross margin, even materially impacted by unloading charges, especially this year, still a range around 39% 37% in the 2 years. Our operating margin remained above 12% And our EBITDA and the ability to generate the cash were not reduced, maintaining intact our ability to invest for Let's now go in some more details about this 2 last years. Over the last 2 years, most of our quarterly revenues has been increased on a year over year basis, with the exception of the 1st 2 quarters of 2019, where our market experience and inventory correction mainly at our distribution customers, strongly affecting our microcontroller and analog products and revenues. And in Q2 this year, where the impact of COVID 19, in particular, for the automotive market, brought a severe drop in demand. Despite the challenges, we maintain revenues substantially stable in 2019 and revenue growth in 2020.
Revenues, particularly strong in the second half of the year, outperforming our service market, And this, despite the current consequences of the U. S.-China trade war, where, as you know, one of our top 10 customer will not contribute to the revenues in Q4. On the top line, resilience is evident. This result on our revenues is not coming by chance. The breadth of our product portfolio our diversified addressed markets and the wide and in many case, tight relation with our customers support us in a performing, in a challenging market environment.
This chart illustrates how different see that the dynamics in the top line among groups, regions and customers have been balancing each other and enable to mitigate adverse market condition. As an example, 1 year 2019, MDG was facing a strong inventory correction the distribution channel. The other two groups grew outperforming their reference market. On the contrary, When in year 2020, the strongest negative market impact was on the automotive, MDG together with AMS was one of the strongest drivers of our growth. Similarly, for the region of origin of our customer, you see how the red and the green arrows move in the 2 years with the strength in some customer end markets balancing weakness in some others.
In these last two years, we performed well with our major customers, And this has more than balanced the more difficult market condition faced by our distribution channel. Distribution, however, remains one of the main focus of our go to market, representing around 30% of our revenues and strongly recovering in the second half of this year. Our wide portfolio, technology flavors, market diversification, addressing secular growth drivers, strongly helped in balancing the weakness with the strengths resulting for the company in an overall outperformance of our service market. Now gross margin. In 2018, our gross margin reached 40% with no unused capacity charges, high level of our fab utilization.
Moving into 2019, with progressively deteriorating market conditions, utilization rate of our fabs was declining. And in Q2, we started to be impacted by unloading. Anyway, we were able to maintain our gross margin well above 38% at 38.7 percent or 39.4 percent, excluding unused capacity charges. This year, 2020 was even more challenging. The level of unsaturation charges including the ones generated by the workforce related restriction imposed by the pandemic lockdown reached around $160,000,000 compressing our gross margin now expected for the year at 37 percent or 38.6 percent excluding unused at the midpoint of our Q4 2020 guidance.
We suffered some degradation but for sure with significantly less volatility than in the past, where our gross margin was much more severely packed in adverse market condition. Q2 2020 has marked the bottom. And from there, we are now back on a recovery path with Q4 at the midpoint above 38%. We are not yet back to the ultimate condition in our manufacturing infrastructure. We still expect a short terms and balanced technology mix.
In respect to our capacity, so as I already said that during Q3 to 2020 earnings release, we still foresee few quarters with some unloading charges. An important ingredient for our margin expansion is the leverage on OpEx. From 2018, we increased our net OpEx by around 5%. Moving from quarterly average of $610,000,000 to around the $640,000,000 in 2020. Excluding the positive non recurrent R and D grants, catch up expected in Q4 this year.
I would qualify this result as a good control of our expenses. Allowing the company to maintain a Our focus in controlling expenses, however, did not translate that remains the lifeblood of ST. Looking at the last 3 years, we spent $4,500,000,000 in R And D, representing about 15% of our revenues. To support our organic growth, we invested a few 100,000,000 to acquire focus and specialized companies, reinforcing our product portfolio in areas like wide band gap materials and connectivity. And we invested $3,600,000,000 in CapEx maintaining on the state of the art our manufacturing infrastructure and technology development, while preparing the company future competitiveness with our strategic initiatives.
All these maintaining and improving our solid capital structure ST exited the third quarter of 2020 with $3,500,000,000 of liquidity. After distributing $128,000,000 of cash dividend and after repurchasing $125 $1,000,000 of our common shares. Constantly improving over the last years. In Q3, we redeemed the first tranche of our 2017 convertible bond, and we launched a new one for $1,500,000,000, very positively received from the market. And finally, we expect to exit the year with a stronger free cash flow and further stronger net financial position.
One healthy balance sheet for a healthy company ready to capture growth opportunities in our service markets. We are very pleased to see that in the financial market appreciated the work done to make our company more solid and less volatile. And our trust in the perspective of a profitable growth in the coming years. Our common shares have outperformed our peers in the SOX index. From December 31 2015, to the present, our total return to shareholders, including dividends, increased 5 84%.
Versus 3 61% of the socks. ST stock price at each IS level since 2001. I would like to thank all of our shareholders for their trust and support. They have shown to our company. But It isn't the first time I speak to you about the midterm financial model for our company.
Last time, was at our Capital Market Day in May 2019, where I was commenting our $12,000,000,000 model. Few things have changed since then. And I would like to share with you how these changes will translate in our financial model. Our visibility today regarding our market dynamics, the consequence of what we call the trade war, The demand shift in technology and the currency evolution is certainly different in respect to the one of almost 2 years ago, creating opportunities and headwinds. Let's start from the evolution of our market.
In May 2019, we were assuming a soft servant market in the year 2019 followed by at around 4% to 5% compounded annual growth rate for the following years. This together with the enabler customer programs and market share gains should have allowed ST to reach our $12,000,000,000 target revenues. At that time, we position either around rate in the second half of twenty twenty one. Or for the full year 2022. As Marco was showing a few minutes ago, clearly, our server market has not evolved as expected.
Year 2019 was as anticipated a soft year, but definitely this year, 2020, is well below our original expectations. And the dynamics by end market have been also quite different from what we were projecting. Our Automotive And Industrial Summit, where we compete with broad offering and why the market reached decline in 2020 instead of growing. The recovery is now expected at a pace similar to the one originally expected, but starting from a lower market size. On the contrary, personal electronic and communication equipment, computers and peripheral, where we compete with more selected business opportunities, leveraging on our strengths perform better than expected in year 2020 and are expected to do so also in the future.
This has helped us significantly in 2020. Unfortunately, the impact of the trade war will partially limit, in the medium term, our ability to extract additional content and fully benefited from these favorable dynamics. While we are fully confident to achieve our $12,000,000,000 target Now we see it delayed in respect to to our regional expectation, to be reached by 2023. The turmoil we experienced this year in the automotive arena and partially also in the industrial not only resulting in a reduced size of our market, but also accelerated the change of the product demand to our more advanced technologies. During his presentation, Marco Monti has shown how we are now experiencing car electrification, ADAS application, as well as new architecture of the electronic in the car.
And how the weight of the traditional automotive core electronics in ADG is decreasing faster as a percentage of their revenues. Marco was telling us that while at the beginning of 2019, at our Capital Market Day, He was expecting traditional automotive represent around 50% of his sale in midterms, Horizon, Now this expectation is below the 40% of midterm sales. Good news for our product mix, that will be enriched with more complex and performance products. Less good news for our manufacturing infrastructure In order to follow this evolution, we needed to convert some excess capacity for our legacy products to our more advanced technology, faster than originally expected. This need a little of time and additional CapEx.
In the meantime, the short term imbalance between demand and available capacity will result in some temporary unloading charges. As well as CapEx adding depreciation not immediately compensated by product mix. The $12,000,000 compared to what we were thinking at the beginning of 2019 will be reached with more products requiring high CapEx technology, respect to the ones requiring no Oulu CapEx. More accretive product mix to gross margin at the cost of higher level of depreciation. Another moving part has been the currency exchange rate.
ST is a global company with a strong European base our manufacturing infrastructure range from Europe to Asia. While our revenues are mainly denominated in U. S. Dollars, our cost basis and our expenses are quite exposed to Europe. As you all know, we adopt an hedging policy on our cost and our expenses, to mitigate possible volatility of the euro dollar exchange rate.
To allow us to mitigate swing short term, but of course, not fully protect us from midterm evolution of the exchange rate. When we look at where we stand at 20 months ago and where we stand today, the euro are significantly appreciated compared to the U. S. Dollars. At that time, our expectation was for an average eurodollar in the midterm period of around 1.12.
And we were modeling our financial target based on debt assumption. Currently, debt assumption appears out of date. While it's always difficult to assess the evolution of our midterm period of the exchange rate, as of today, We are modeling our financial midterm target, assuming euro dollars exchange rate at 1.16. In the chart, we offer you a sensitivity analysis of the company resulted to this parameter. For 1% ovarian of the euro dollar exchange rate, we have an impact from $8,000,000 to $10,000,000 on our operating income per quarter.
Substantially equally split from impact on gross profit and impact on expenses. Our midterm plan is still to reach the $12,000,000,000 revenues through organic growth. But as already highlighted, with around 1 year delay in respect to our original view, due to market condition. At this level of revenues, our gross margin is now expected to be between 39% 40%. Assuming optimized loadings, with an operating margin between 15% 17%, thanks to the leverage on expenses.
CapEx in the period, we arranged between $1,500,000,000 to $1,700,000,000. I acknowledge something has changed irrespective what I was presenting some time ago. But some, but some has not. And what has not changed will be the ability of the company to solidly deliver at that level of revenues free cash flow well in excess of $1,000,000,000 after a level of investments, supporting expected revenue growth, the financing of our strategic initiatives and possibly some father's moat acquisition to complement our technology and product IP portfolio, but allow me to give you a little bit more color on the various dynamics. This year, at midpoint of our guidance, we will reach $9,970,000,000, very close to the $10,000,000,000.
May contributors to our midterm revenue growth are expected to be automotive, mainly driven by car electrification, including silicon carbide, and digitalization, as well as on our traditional automotive business, largely thanks to the recovery of car production volumes. Personal electronic will continue to be an important driver. Our selected customer programs have been a strong enabler to increase our penetration in this market, together with the application specific standard product and also standard products like our SDM 32 microcontrollers. Now more and more pervasive in mainly smartphone accessories, Industrial, with analog sensor and microcontroller, will expand. Many new programs are starting in the fields Yealink's revenue increase in the short and medium term as well as increased appetite in the mass market.
And in distribution for our product offer now complemented both in analog and in microcontroller with more and more features. For a large variety of application. In communication, equipment and computer peripheral Revenues opportunity will shortly materialize, like the 1 in low orbit satellite constellation. Including satellite and associated user terminals of power management solution for servers, CPU, GPU, SSD, SSD, SSD, With this level of revenue growth, we will expand our profitability target to reach a level between 15% to 17% and expansion between 300 to 500 basis points. Compared to the level we expect to close the current year.
As I have already mentioned, in Q4 2020, we will have 1 time catch up in R and D grants, not any longer recurrent. We will face some FX headwinds, and the normal price pressure of our market over the period. This price impact, medium term, will be substantially offset by improved mix. Moving forward, product mix benefit will overcome the price erosion, bringing a net positive contribution At $12,000,000,000, we will run at full capacity without unloading charges. The improved manufacturing efficiency boosted by optimal loading of our manufacturing infrastructure will materially contribute to our margin expansion, only partially offset by the higher level of depreciation resulting from the investment additional needed to rebalance our technology mix capacity.
To sales leverage, with expected growth in expenses well below the revenue growth. When comparing our current midterm model with the 1 share at our Capital Market Day in 2019, We have lost something in profitability when reaching the $12,000,000,000 revenues. I tried to depict in my presentation, the major changes. So market dynamics impacting revenues evolution in time and product mix. The consequent need of higher investment, improving mix, but at the same time, increasing depreciation burden.
At about 1 year more in expenses dynamic debt at $12,000,000,000, implying to lose some leverage. Exchange rate will place an additional detractor. All in all, anyway, our EBITDA will only marginally being impacted, and our ability to generate cash will substantially remain at the same level of 1 of the one I was presenting to you a few months ago. All our product groups will contribute to support our midterm financial model, leveraging revenues growth and specific margin expansion drivers. Over the period, ADG at low to mid teens level.
AMS are mid to high teens level and NTG at high teens to around 20%, a well balanced contribution to the company profitability. Our capital allocation remains unchanged. 2 main pillars to sustain our growth and to secure shareholders' return. Sustained growth through maintaining efficient and expanding our manufacturing infrastructure, preparing the further next step of our company, supporting our strategic investment like the mover to 12 inches expansion on new material and fostering open innovation. Our CapEx needs for the growth will be At the same We will continue to complement our IP and product portfolio with target strategic acquisition in a make or buy balance secured shareholder returns, where we do intend to continue to use in the next years, cash dividend as our primary means to distribute wealth to our shareholder, consistent with our expected cash generation.
And in addition, to continue with the share repurchase programs. In conclusion, I open my colleagues and I have during these days offer to you a compelling value proposition. Indeed, ST had demonstrated capacity to deliver growth. Results, ending these last periods to be resilient to address condition. Not only the company has right future ahead, and we are aiming for a stronger and even more resilient company.
We see significant opportunities to grow our revenues, improve our profitability and make us stay financially stronger. Ultimately, we are focused on
Thank you, Lorenzo. We are now ready to take your
first question is from Matt Ramsay from Cowen. Please go ahead.
Yes, thank you very much for the presentations and good morning everybody. I guess for my first question guys, I guess I'm not that surprised to see a bit of, underwhelming our conservatism around the top line revenue targets for the longer term model but I was surprised a little bit at some of the dynamics around margins. One of the things that shows up in Lorenzo, your slides this morning is both comparing, I guess, the 2020 model versus 2023 and also your old view of the medium term model versus the new view is a pretty significant sales price decline headwind. I wonder if you guys might expand upon that a little bit and talk about the different pricing dynamics in the different markets that you're seeing now? And then I have a follow-up.
Florento will take the question.
Sure. Good morning to everybody and thank you for your question. When we look in respect to the model that we have developed, let's say, in 2019, the model that we have today. I would say that in terms of the assumption of dynamic in the pricing, we have not actually changed our view in the sense that at the end that we have taken an assumption in term of the evolution of the price that is the one substantially that we are we took at the time. In term of price pressure.
For sure, there is some, let's say, delay in the 12. So it means that the price dynamic, it includes substantially 1 year more. And this is actually something that we have embedded our model. It means that there is 1 year, let's say more of price decline. It's even true that on the other side, we were improving somehow our mix that partially is compensated this.
But as I was trying to also explain that This improvement in the mix doesn't come free, especially on the short term period. It means that we needed to invest and we needed to invest a little bit at a higher level in respect to what was expected. When we enter in 2019, and we were describing our model. This means that, let's say, in the short term, this will be essentially offsetting the improvement in the mix. Medium term, let's say, I would say that this will help to improve our, let's say, positive mix in our gross margin.
But this, in the timeframe, let's say, to reach the $12,000,000,000 will not be so so significant. I really do expect that this will factor in much stronger, let's say, after the $2,000,000,000 or in a medium, longer term time in respect to the model. I hope this is clarifying a little bit to the question.
Yes. Thank you for that. I guess as my follow-up, if you look at the expansion of the SAM for the company between 2020 2023, I think, I don't know, I calculated between 4 5% depending on for the whole company as depending on the mix that you gave us. Automotive is going to significantly outperform that, I guess, 13% CAGR. But in the talks today and a couple of weeks ago in the auto talk, you guys talked about changing or accelerating change to the dynamics of legacy products versus electrification and intelligence products.
And with the expansion of the SAM and the growth there, but also below target model operating margin for your automotive business. Maybe you could talk a little bit about the dynamics of growth in operating margin of the legacy products versus the new products and how you expect that to change over time as profitability improves for some of the electrification this? Thank you.
Yes. I will take the question. The automotive in our model is for sure the group, one of the groups that is contributing more to the growth. This is driven by the growth of the market. We have seen was shown by Markku in his presentation.
And definitely also is the one when we are talking about the mix, is the one that is the main contributors, this change of the mix, it's not the only one and definitely, but it is one of the main contributors. So it means that at the end, automotive is a driver in term of improving in margins. Is a driver due to the fact that, 1st of all, there is a positive contribution of the mix even if, as I was saying already before, we needed to invest. We need to invest. So in short term, here, we will have the impact of the depreciation.
But definitely, the contribution will at the end, there is a positive And on the other side here is where we have the main benefit on the leverage on the expenses. Because, yeah, let's say in ADG overall, let's take in ADG, that includes, for sure, the strong contribution of automotive, here, let's say, we will have a positive impact in term of leveraging on the expenses. So the expansion of the operating margin operating profit in this group is expected to be one of the main contributors to our model.
Thank you very much guys. Appreciate it.
The next question is from Alexander Pederk from Societe Generale. Please go ahead.
Yes, good morning and thank you for taking the question. It would seem to me that the part of the lower margin guidance in your 12,000,000,000 model is higher CapEx. And I'm just wondering to what extent, this is a structurally higher CapEx given the nature of your markets as they are now? Or is it just a temporary adjustment, given the rapid shifts that we've seen in your end markets? And so against this backdrop, would you still drive the company towards the 17% to 19% margin company longer term?
Or is this 15 to 17 the best you can achieve, in the markets that you serve? Thanks.
Alex. Hey, K. I was going to
this question. In terms of CapEx, you're right. When you look at the Actually, what we have indicated is something higher than what was indicated in previous conversation that we had. This is a driven by 2 main ingredients, I would say. And that I would not qualify them, let's say, I would qualify them a little bit temporary.
On one side, there is, as I was explaining before, the fact that we need to definitely watch it accelerate our transformation in our fabtech technology. And this is now something that we see very clearly because we see that the demand is much stronger on technologies that are implying higher CapEx in respect to what was expected previously. We will do this investment. We do believe that this investment will yield profit for our company will generate, let's say, improving for our company in for our company in the medium term. On the other side, in this years in front of us.
Let's say, when we look at 2021, 2022, we have also significant amount of strategic initiatives that are putting the data set for the future of our work hub. And here of course, we are entering and affaking, which we need really to focus on these initiatives. There is definitely our, grow significant growth in silicon carbide. This will be a driver new white band material, like gallium nitride. So we needed to invest.
We needed to secure our growth here in order to achieve our target to 1,000,000,000. This is something that we are determined to achieve. And the second is our transformation for, from a to a 12 inches. This means that we needed to move it 300,000,000 is there. And in the period, we need definitely to be ready in order to face the next step for our company to add a $15,000,000,000 with an infrastructure in terms of manufacturing that is competitive.
And this is mandatory in order to be competitive in order really to have an improvement in our gross margin, a significant step forward on that. We need definitely to move to 300 millimeter. So yes, the next year, the next couple of years, we'll see, let's say, for the company, definitely an effort in terms of investment. As I was trying also to show to you is that the company in any case has the financial strength to keep, let's say, to maintain this kind of CapEx without degradating our ability, let's say then to generate a return for our shareholders and to maintain a significant solid net financial position for our company in the next couple of years.
Very clear. Thank you. Thank you, Alex. Next question please. The next question is from Andrew Gardiner from Barclays.
Please go ahead.
Good morning. Thank you for taking my question. If I could start just by saying that, yeah, I can understand sort of the qualitative statements you are making and indeed have been making over the last few presentations. Very bullish, recent updates have generally been very bullish. And yet the quantitative sort of manifestation of that in today's numbers is quite a bit weaker.
So I'm struggling to just sort of to make those 2 things, come together. Obviously a lot of moving parts, in particular, in your slides there in the range. I was just wondering if we could go over two quick points on that. One in terms of revenue, it looks like you're forecasting a much lower level of growth in the engaged customer programs going forward over the next 3 years than we've seen over the last few years. Is that, is that separate from the trade war impact, which is, of course, also related to an engaged customer program.
So could we, when you talk about the trade war loss, that's obviously Huawei is significant, if not the vast majority of that. Is that separate from the lower growth you're costing and engaged customer programs? And then if that indeed is the case, what is that low level of growth for telling us? In terms of your expectations about new business, new content, potential pressure on legacy content there. It just seems quite a bit lower than we might have anticipated given what you've shown us in recent years.
And then also Lorenzo, if I could just come back to the earlier question on pricing. Are you suggesting that now because you've effectively rolled out another the year, sort of call it from 22 to 23, that's why the sort of the pricing has got such a significant impact on the margin target as a whole. It doesn't, again, so it wasn't totally clear as to why pricing now is so much worse in terms of the impact on the margin than what you were thinking it was going to be 2 years ago.
Thank you. So for the first question, okay, about the revenue, I will take it. Well, as I explained, obviously, in my introductory speech, okay, our revenue, dynamic, okay, to to go from, let's say, q this year where we will complete about a $10,000,000,000, let's say, revenue. To 12,000,000,000. So basically, there is, let's say, a 5 block.
One of the key drivers of the revenue growth for ST is a, is a, clearly, the next 3 years would be, what is related to car electrification and car digitalization. And again, and inside, okay, this dynamic, okay, silicon carbide would be a key growth driver, okay, going from this year, okay, below $300,000,000, but with a run rate at $300,000,000 to go to by 20.25 to $1,000,000,000 on a smooth way. So clearly, this is, okay, one of the big, the big driver. Then, okay, we have, let's say, engaged customer programs, okay, mainly, okay, in the shift of a personal electronics and communication equipment and computer peripherals. They will contribute, okay, as a second, let's say, let's say, order of magnitude, okay, to the growth.
Well, then this is what is related to the market. Clearly related to the market. There is 2 parts. There is, let's say, the industrial overall. And there is a automotive legacy.
Now about industrial, okay, our assumption, okay, our model, this is what I told you in my and what Marco and Lorenzo has said. Our assumption is a market we will, grow by 5% average. On the next 3 years, okay, but with 2020, decrease minus 3%. Well, about automotive, legacy. Well, clearly today, what we are seeing is a quite, let's say, incredible, okay, because the run rate, of the demand we have in, in Q4 and since September is equivalent a run rate of 1,000,000 of vehicles produced, okay, if we take it as a run rate full year.
And as Marco explained, it is clearly something we have not put in our model because in our model, okay, we have put, let's say, next year, something at the midpoint around 18,000,000 vehicles. 2022 around 87 and 2023, around Okay. So this is our model. So in our 12,000,000,000 dollars, let's say, so automotive legacy will contribute consistently with the assumption we have taken on overall, let's say, make sure produce. Yes, I confirmed to you that today this is absolutely not what the customer are requesting.
You know, that, okay, the overall supply chain is totally under stretch because of the situation. But for the time being, our model has been picked like that. Moving forward, if we have to adjust, okay, the company will adjust, but building our sales and operating plan, okay, we have decided that okay, the model and the visibility we have and the assessment we have and overall execution is something which is more in the range of what we disclaimed. More then, the debt collector, clearly, at this moment, we have received a fuel license during Q4 to supply, okay, our important customer in China, but only for very specific product. So clearly, our assumption is that on custom design, and you know that the custom design product, okay, were important for us to address this customer and especially addressing 2 very high growing applications.
The communication infrastructure for 5G and the front end module of smartphones for 5G. And clearly, okay, we have this content overall this potential revenue that ForeST was an important one versus the former plan we built, okay, 1 year and half ago. So this is an assumption we second because by fact, today, we have no license on custom design solution. We have licensed on standard product okay. So yes, we have taken into account.
But on custom design, we have not taken. So overall, okay, we have considered that the $12,000,000,000 revenue by 2023, acknowledging the very strong dynamic on car electrification and digitalization. The great dynamic on our engaged program is important customer on personal electronics mainly, but in some communication infrastructure as well. Then industrial market has 5% compound average growth. Automotive legacy based on the number of VACU, okay, we disclose to you, with the detractor, which is a custom design product, okay, we developed for a specific customer for 5G infrastructure and 5G device.
Moving forward, if we act on edge and if we are convinced the automotive will go faster, of course, we will adjust.
I'm going to take the question about the dynamic of the pricing. If you go to what I was showing in 2019, in a similar chart in which I was showing margin drivers midterm model, you will see that when I was merging price network matrix. And there was a red bar, let's say, that was the combination between, let's say, what was the dynamic of the price that we were envisioning at that time and the mix positive impact of the mix. The overall result was negative. That was the right path at the time.
Today has not changed significantly. If you compare the 2 chart, this this time, what I have done was simply to segregate the 2 components. On one side, you see the price on the other side that we see the mix improvement. If you merge it together, you will see that these are slightly improving in respect to what was our expectation of the time. I explained to you that the mix now is a little bit more accretive than what it was at the time.
So you see that at the end, there is no significant change in the assumption that we have taken irrespective to 3 years ago in terms of price dynamic for the market. We assume a price dynamic substantially similar moving forward that is reflecting the normal trend of our industry, let's say, where there is an expectation in price dynamic due to the learning curve. And this is substantially, let's say, offset by the manufacturing productivity improvement plus the overall in of the product mix. If you look at that, let's say, you will see that at the end, the assumption that is behind is not so significantly different or what it was in the in 2019. So this is a this is what I can tell you, let's say, no specific, let's say assumption of strong price decline than the normal one.
And you will see that already in 2019, when you see the chart that was combining the effect, I repeat the price, the network mix you will see that there was this, right, I read the box, let's say, that was one of the our similarly is now, let's say there is nothing really changed irrespective to that.
Okay. Just to make sure that we're talking the same chart, I mean, I'm looking on Slide 71. Where you're comparing the change in gross margin and operating margin. And on the top chart there, the bridge for gross margin, as you described, you've got your midterm 2019, 40% to 41% on midterm in 2019 CND 40% to 41%. The biggest detractor of gross margin to get us to what you've just told us is pricings.
Relative to what you had already told us in 2019. So that it looks on that chart as though the there was a significant incremental price decline relative to what you could see in 2019?
I see your point. It's 1,000,000,000 more of price decline. Offset by productivity improvement and by product mix improvement. You see there is 1 year more of dynamics. This is Adya.
If you if you're at the end, look at the gross margin, you see that when you compare this chapter, you see that at the end, pricing, productivity improvement, let's say, are offset mainly by FX, let's say, and this additional depreciation that needed to sustain the product mix. These are the main impact that we see irrespective what was our expectation in 2019. It's not a matter of pricing, the pricing and productivity meet and productivity improvements substantially offset each other. The problem is that the productivity mix, let's say, is not enough to slightly above let's say, the need of additional investment and depreciation. That's why I was saying a short term and let's say medium term and we are not enjoying fully the positive, but coming from the productivity mix due to the fact that we need to invest harder in order to achieve it.
And then you have the negative of FX. This is the way that I suggest to read at this chart.
Okay. Thank you.
Thank you. Thank you very much, Andrew, for your questions. And, next question please, Mara. The next question is from David Mulholland from UBS. Please go ahead.
Hi,
thanks for taking the question. I just wanted to to follow-up a little bit on what Andrew just asked on the decisions you've made around shifting the revenue target from 2022 to 2023. I know you hadn't given it officially last time. It was only in the Q and A, but in terms of the point we are right now in the cycle, You've obviously had to take some assumptions to come to that, but everything we're seeing from the industry right now is suggesting there's a very strong acceleration and things are getting better quicker than people expect or had been expecting, including potential letters to customers from companies including yourselves being reported that could be potentially positive for pricing. So I just wanted to understand what have you embedded from a general cyclical recovery perspective?
Because potentially, let's say, if the market does recover more strongly these things tend to surprise on the upside. You could be operating in a better environment than you thought before. And so have you basically kept a similar market assumption to what you thought before for 2022? Or are you assuming a smaller kind of organic market that you would have been addressing? And then we've obviously got the impact from those customers in that shift.
So I just wonder if you can talk a little bit about that because it feels to me a little timing wise, a difficult time to guide given how quickly the market could recover and it feels like you might have embedded a slightly more conservative assumption, how quickly the market recovers?
So why take it? And the macro will complement. Yes, clearly, when we look at the market dynamic today, and the momentum, compared to what we say, we see a few weeks, a few weeks ago, it's yes, very strong, okay. And by the way, okay, I can't confirm to you that, okay, in Q4, ST will deliver a revenue well above the midpoint of the guidance we provided to you, clearly. Point number 1.
Then, okay, when we look inside, okay, this delay, okay, we confirm what? We confirmed first, okay, by market. On automotive, okay. Clearly, the megatrend affirmative electrification, digitalization, okay, for the short term, are according, okay, what we anticipated. And when we look at the program, okay, we are going to remember, okay, mainly on silicon carbide and the sixty eight programs, okay, we have planned revenue extracted from this program, okay, according to the visibility we have, on the electrical vehicles and hybrid vehicle, okay, we see.
And at this point of time, okay, there is no reason, okay, we let's say, material change, okay, this forecast between 2020 to 2023 in term of, let's say, battery based or hybrid vacuums. Then the second point, I repeat on automotive. On Automotive legacy, okay, yes, okay, the current run rate, okay, and we still see September and if you remember, okay, we explained to, let's say, the market, the financial market that we have seen a very sudden demand increasing booming okay, moving basically from a run rate of, let's say, 1000000, 1000000 vehicles produced to now 1000000 products. And as a matter of present, okay, all the supply chain is over scratch definitively. Either from idea and from foundry, okay?
So the 200 millimeter wafer fab are fully booked, basically for 9 months. The 12 inches, okay, as well. So clearly, okay, there is something, okay, very, very strong on automotive. Is it sustainable, okay, for the full year next year? And meaning that 2021 will be already a year equivalent to beef or COVID.
Today, this is not the assumption we have taken. This is something we will monitor, okay, discussing with our customer and believe me, we discuss basically every day, okay, with our customer. We discuss every day or to reason first liquid management of the supply chain in order to supply them. But we discussed with them to understand what will 2nd highlights next year in order also to drive our investment to drive our resources. And when we will be totally confident that it is moving forward to 2021 earlier equivalent of 2019, we will adjust ourselves.
But for the time being, this is not the assumption we have taken. So this is about automotive. We're then doing industrial market or industrial market again, the Delek is quite clear, Avia has recovered following a V shape, okay, and that's the reason why here we performed very well, thanks to our STM32, let's say, microcontroller, thanks to our power district. Now thanks to our analog product. And we have seen smoothly Europe and America okay, growing sequentially, okay, consistently with the expectation of the economies.
Our assumption is the industrial market as an average will grow compound average growth rate at 5%. So this is a second point, and we have planned our sales and operating plan accordingly. But then personal electronics and, clearly, okay, this year has been driven by 2 things. The famous effect of stay and work at home. So boosting, let's say, the full platform So, PC, tablets, smartphone and accessories.
And clearly, also a second effect has created some, let's say, your balance on the supply chain is a de facto Y Way embargo, okay, since September 50. Okay, and everybody knows that, okay, Huawei has built some inventory in order to face this situation. And in Q4, there is a seasonal effect, which is, okay, clearly related to the introduction of the new device of the well done, okay, California customer. More then, okay, our plan is based on the assumption of a smartphone, okay, which will be produced and sold, okay, next year. Okay, with a material change in 5G versus 4G and taking into account the assumption of the program we have.
But here, again, we have a major detractor compared to the past is we will make we will not take benefits of the 5G content. Why? Because of our custom design product and technology, we were supposed to sell to Huawei, aren't becoming 0, and we have taken the assumption to be 0, okay, next year and moving forward. But, okay, for sure, we'll have benefits of all the other program with all the other smartphone player, in the field of optical sensing solutions, secure solutions, custom analog solution, and general purpose, portfolio. Well, last but not the least, the communication infrastructure, again, a major detractor because our assumption is no revenue extracted from the important customer we have in China, but we will have other revenue, wisely leading to an important program we have with a low orbital communication infrastructure.
So this is the overall picture on which we are based on our sales operating plan. As usual, okay, this is a driver of our, let's say, our CapEx, our resources, our OpEx, consistently with our capability to generate cash flow as Lorenzo mentioned, okay, this capability to generate EBITDA is fully there and we will drive ourselves like that. We need to adjust Looking at the automotive industry coming back much faster, okay, to 2019, yes, we will do it and we will have the capability to do it. That's okay. We will communicate smoothly because today, we have a great visibility for Q4, Q1 and Q2.
But we will see for the full year, time will be.
That's great. And if I can just follow-up quickly on the margin and if you were, for instance, not to see that year delay that you've embedded in the margin targets, is it fair to say that you'd maybe be about a percentage point higher than the guidance you've given. If you do get to that revenue level by 2020 and you don't have to embed another year of OpEx expansion and so on, into the numbers?
You mean, if we will read faster the $12,000,000,000, I have understood correctly the question. Yes, I think that, yes, that in respect to what I was trying to explain. Yes, for sure. Some of these impact is also related to the fact that we reached the same level of revenues, a little remain with 1 year, let's put in this way of delaying it expected to what was originally expected. And this for sure, let's say, has not improved the ability to keep exactly at the same level the model.
Oh, for sure, anticipating this will be a benefit There are some impacted that at the end will remain there because at the end, you know, not too too high, there are finger, but For sure, the current situation about the currency is not helping our company. I was trying to to see. Of course, we will work in order to mitigate as much as possible. This, we needed to somehow let's say, to find some, to, let's say, improve our sales in order, let's say, to, absorb some of that. But will not be possible to absorb everything.
So yes, I would say an anticipation for sure will help. This is a there is no discussion
Just to put some numbers on it though, there's obviously a 2 percentage point change in the margin target 2020. Is it fair to say about a percentage point of that? Is that year delay and a percentage point is currency or how would you break that down?
In term if you want in term of currency, let's say substantially the impact overall is slightly below 100 basis points. And now let's say due to irrespective to the previous to the previous model, the rest, if you want, including everything, of course, including the on the operating margin, then of course, let's say, there are other ingredients that will be mitigated with an anticipation in our revenues.
That's great. Thank you very much.
Thank you, David. Next question please. The next question is from Sandeep Deshpande from JP Morgan. Please go ahead.
Yes. Hi. I'd like to actually just go back to that question, to that slide number 71 and the margin guidance, as such, really. So when you look at that, I mean, if you're saying that pricing was not the main delta because that was always there, which was offset by productivity, proven, etcetera. It looks like in terms of that first graph there on gross margin, that the incremental depreciation and that means more CapEx is having an impact on the margin.
And then on the second, in terms of the operating margin, you seem to have higher OpEx. So would you say that you under invested for a while and both in OpEx and CapEx, which is what these are catch up here, which is lowering the margin, because, I mean, there was this expectation that your margin would continue to improve because the delta here seems to be CapEx and the OpEx, because rather than the pricing, and then I have a quick follow-up on the revenue, but it's a small one.
No, okay. Of course, you can read in many ways. Let's say, but if you want, if you want, let's say, at the end, as I was saying, on the gross margin, you see that the pricing and productivity improvement substantially, let's say, offset each other. It's a little bit higher than pricing, but at the end of the productivity substantially, let's say, recovering that. There is on one side, let's say the product mix that is improving is on the green side.
But on the other side, you see that this comes cost of additional depreciation. So at the end, the overall effect is slightly positive, but not enough positive to offset it completely and to other comments, the world is the impact of a 1 year more in the in the learning curve on in terms of pricing. On the OpEx, on the OpEx, apart, let's say, the FX on the OpEx, you have to consider that there is at the same level of revenues, $12,000,000,000, 1 year more of dynamic in the OpEx. And this, of course, is a slightly reducing the leverage. And the leverage is not any longer.
The one that was expected in 2019 where we had, at the time, let's say, 2 years of, let's say, dynamic in the OpEx year, we have 3 years at the whole dynamic in OpEx. I don't know if you see the point, but for sure, this, at the same level of revenues is, is that somehow reducing the leverage that we can achieve on our OpEx. Is it clearly an answer? Yes.
Well, I understand, but you see the point is that you had given a mid term guidance, right? So it should have taken into account the OpEx. So that's why I'm not really understanding why there is a negative. I can understand the FX impact. FX is new, but I don't understand the OpEx impact as a additional OpEx when that previous guidance was not a particular year.
It was a mid term guidance, that's really.
Yes, but when we were giving this, let's say assuming that mid term guidance was, let's say, to achieve the $12,000,000,000 in 2022 substantial. Today, the same guidance at $12,000,000,000 is to achieve in 2023. So we have you see the point. So at the end, let's say OpEx cannot be stay at the same level that was expected because of course, at this point, let's say we have a dynamic inside the OpEx that is somehow increasing a little bit, OpEx. So we cannot at the same structure, let's say that we have it today, we do not envisage at any kind of a a year structural and things like that.
At the same structure, we have at least when you have more salary, you see the point. And then, of course, being at $12,000,000,000, we have a decent impact.
Okay. Thank you so much.
The next question is from Achal Sultania from Credit Suisse. Please go ahead.
Hi, good morning. Two questions please from my side. First, on the CapEx, if I look at the CapEx numbers that you've given, it seems like to have additional 2,000,000,000 of revenues over the next 3 years, you're planning to invest about $1,200,000,000 on top of what you're already spending $400,000,000 extra per year. So it just seems and then you're saying that you will probably reach full capacity utilization again of that $12,000,000,000 revenue target. So I'm just trying to understand that is that the ratio we should be looking at that you have to spend, to get extra every extra dollar of growth you have to spend that kind of CapEx in the future.
And if that's the case, shouldn't we argue that this CapEx number has to remain sustainably at a higher level going forward beyond 2023. And then secondly, if I look at the revenue guidance, that this 12,000,000,000 by 2023, it clearly seems that you're kind of implying that beyond the next year recovery in 2021, you're looking at more like 4% or 5% CAGR growth, which to us, it seems like, clearly, the expectations in the market is that auto and industrial probably are going to grow at a higher pace than that. So are you inherently implying that the rest your business, analog, sensor, MVG, all those things are probably going to grow, like low single digit or flattish beyond 2021.
Maybe, Achal, to help Lorenzo Jean Marc to answer your first question. Could you remind us how you did the calculation?
Yes, sure. So basically what I was saying is that your CapEx today is $1,200,000,000. And you're talking about one point $5,000,000,000 to $1,700,000,000 range in the midterm, which is about $400 extra per year. So to get to from $10,000,000,000 today of revenues to get to $12,000,000,000, that's $2,000,000,000 extra revenues. You're basically spending $400,000,000 on top of what the normal level of CapEx is per year.
And so that basically implies about 1,200,000,000 of additional CapEx to drive $2,000,000,000 of extra revenues. And so that's what I wanted to understand is that the ratio should be looking at for every extra dollar of growth in the future?
CapEx Model, okay, ballpark, okay, is for the technology mix and product portfolio we have, is basically if you want to go, let's say, $1, you have to spend, okay, for capacity increase, $0.8. So, it means you want to grow 10% per year of your sales. You have to grow, okay, to put CapEx for capacity of 8% of our sales. More than, okay, there is more than what we call a maintenance, okay, R and D spending, okay, CapEx for sustainability, okay, the carbon neutrality and so on. So ballpark, it is 7% of the set.
Of course, you have to discount it by your external manufacturing ratio. So clearly, if you make the computation, if you want to grow, 10% per year with external production, 25% you need to spend between 11% to 12% of your sales to grow 10% per year. Okay. From then here, SC, we have basically 3 programs, which are called this model. It is to prepare our 300 millimeter fab, okay, because here it's a huge, okay, called off CapEx without any generation of revenue between now and 2023, basically, the buildup of the building, the buildup of the facility, and the first industrialization line, okay, which is CapEx spent to prepare an objective, okay, to go to $15,000,000,000 by 20 simplify, as a target.
So it is the 1st strategic program. And the 2nd strategic program is a decision we have taken to go vertical in the power solution with Silicon Carbide. So means to build an infrastructure okay, in order to provide to ST by 2024, 40% of internal production for raw materials, silicon normal plan. And again, while for 2 reasons, in order, okay, to a, a major long term decrease our cost, of material to drive, okay, the process improvement, so which to move to 200 millimeter or Cmicombine raw material. But in last but not least, okay, I'm sorry for that, but for strategic independence, because, okay, today, the major vendor obviously can come by either American or Japanese.
And unfortunately, the recent event shown that we must be careful on this very strategic material, which is a silicon carbide. Which will drive all the electrification of application. So this strategy program basically are representing on the average of our plan in 2021 to 2023, per year average, something in the range to 3% to 4% of our sales. So at the end, okay, the model is 11.12 plus 3 to 4. So it's 15 to 16.
So the model is very clear. So when we will come back, okay, to a period, We would have completed our exceptional CapEx to build up the strategy I have described to you. Yes, we will come back, okay, to our CapEx model around 12% of our sales to sustain 10% growth.
Okay. That's clear. Thank you. And then the second part on the revenue side of things? Yes.
Yes, on the revenue,
I can take it. So again, we go back to 1st of all, Automotive, as Jean Marc has already said, our expansion is based on the growth of, units in terms of cars, which is maybe underestimating what is the actual run rate. But as we said before, if this trend will be confirmed, we will adapt to that. For the rest of the market, if you consider on the 3 years, overall, we grow compounded 8%, which is more than percent of the overall sum that we are addressing. And you need to consider that there is a part that we are going to we need to discount, which is the impact of the trade war,
we are going to lose the portion of
the 5G business that was embedded in our plan and now needs to be discounted
Yes, okay. But you're still, I think you're still maintaining that you can reach $15,000,000,000 by 2025. Which will probably imply a big acceleration in 2024 and 2025 much higher than the growth you modeled for for the
next 3 years. So strange. No, but first we have determined to achieve $12,000,000,000 by 2023. Okay, again, based on the assumption we share with you today, I repeat, okay, a vehicle produce per year, next year, a midpoint around 1,000,000 and then going back to, to 2019 level, okay, by 2020 is first assumption. 2nd assumption is industrial market going at 5% for industrial and then all of our engaged program and a number of phone and so on and so forth.
Yes, I confirm that, okay, answering this new, previous sales and operating plan, we are starting, okay, to build our next target, which certainly will be something about $15,000,000,000 by 2025. But okay, we'll have time to discuss this point with you.
We have time for 2 more questions, I think. So let's take one. Next question, please, Mylan. The next question is from Jerome Gourmet from Exane BNP Paribas. Please go ahead.
Just a quick one, Lorenzo, if the CapEx should be around $1,500,000,000 to $1,700,000,000 going forward, how should we model the depreciation for the next couple of years? And the second question concerning your outsourcing, which is already at 25%. Is that the max
you're going to go through or do
you think there's some room for further outsourcing? Thank you.
Okay. I go with, you know, at the end, today, let's say, our depreciation, including amortization, and let's say we will be close sorry?
No, no, please.
Okay. Some suggestions. We will be closer to $1,000,000. Then we will, we will, let's say, you should know that that substantially, let's say, this investment will the period that we will amortize this kind of investment that we are going to do we arranged between 7 years to 10 years, let's say. So these will be the addition in term of depreciation that you should consider, let's say, moving forward with this level of CapEx.
Because of course, let's say, investing in equipment is more to 7, 6 or 7 years, but 300 millimeters is higher than there is a facility. So this is the level that we should consider.
So Lorenzo, should we say that the depreciation and amortization are ballpark 10% of our revenue?
Yes, I would say so because at the end, let's say if we look in our model, let's say this level of depreciation and about in our model will be in the range of 1,000,000,001,000,000 something like that.
So about your outsourcing, we would have been very pleased, okay, to increase this outsourcing ratio. But the point is today is a 200 millimeter fab from Foundry, which are providing, okay, mature over the slash for MCU analog mix in your, okay, for our front end modules, or other custom and analog applications are are full. And there is no more investment in 200 millimetres. So today, okay, there is absolutely no flexibility, in the foundry, landscape on 200 millimeter. And clearly, on 12 inch, very, very similar to you, because there is a strong demand on, let's say, all advanced digital device, okay, driven by the strong demand on communication infrastructure and personal and personal electronics.
And all the peripheral device which are linked to this application which are in the next 200 millimeter and 300 millimeter fab as a demand is very, is very strong. And on top of that, the automotive industry short term demand, which are booming and, which has not been anticipated. Absolutely, not anticipated. So we would have been pleased to have, let's say, more flexibility outside from our foundry player and partner But today, we are first very happy to our internal manufacturing in order to address at the base our customer demand, okay, with the flexibility and IDM is the capability to provide.
Okay. Thank you. And maybe in Dustin vein, Jean Marc and Lorenzo, I think there was a lot of investors believing that with the current tight situation, we could see price increase within the industry. And you said that you haven't changed your ASP function in the guidance you get for the gross margin. So do you think that potentially something that could happen that we're going to see some price inflation because of the tight capacity or that's something that's anyway you're not betting on?
Sure. I take it and Lorenzo will complement well, here, okay, we have spoken about our midterm plan, our model and so on, okay, we don't let's say elaborate this kind of model based on what happened yesterday. Because imagine we have done our model in April. I remember. So imagine we have done in our field, okay?
So clearly today, there is let's say, a very tight situation overall worldwide and supply chain, okay, again, driven by various code. One code is absolutely not anticipated, a V shaped recovery of the demand on automotive, a very, very solid demand from personal electronics and communication infrastructure, a really solid demand from a into real, okay, in Asia and start of increasing demand in Europe. And this in an overall, let's say, a context, But yes, okay, when supply chain is struggling, okay, it is a full supply chain. So for materials, so rosilicon, okay, chemical, assembly material and so on and so forth. And here and there, okay, we may have some pension on price, which are, let's say, above the normal trend.
But here, we play let's say, with a with a normal trend because it is a midterm plan on NST, okay, never communicate on our tactics about price management because it is a really short term, okay, and, and we do believe that it is, it is information that is pure operation.
Yes. I would say that there is no, no, much more to add because in the end, as Jean Marc was saying, let's say, the model has been built, let's say, on an assumption that that is not taking iteration of short term events, all these kinds of things. For sure, as all the models, we have opportunities and we have threats, this is for sure, but But at the end, what we have taken was a normal evolution of the price that we see over a mid term or long term period our industry without taking into consideration the short term dynamics that on one side level, maybe on the other side, that would be somewhat less effective, but these are again, so that maybe we will discuss a little bit later on in the next months looking at how the evolution will be in the market.
Thank you, Giovanni, very significantly at this time, but we have time for our last question. The next question is from Aditya Nattu from Bank of America. Please go ahead.
Yes. Good. Good morning, guys. Thank you for squeezing me in. I just, I'll keep it short.
Just one question. You know, you talked about this low orbital, satellite infrastructure program, and obviously there are some, YouTube videos out there showing, you know, one of these, programs having in 100 of chips from ST. So, and there's also been an article on business insider about this. I just wondered if you could give us some color. I know you can't talk about specific customers, but I wondered if you might be able to give us some general color around how much content, these, sort of, these, reception devices can contain and how we should think about the opportunity from the low over to, internet streaming program.
And also I'm aware that one of your big customers has applied to get, to the FCC to deploy 5,000,000 terminals. So any color around this would be very helpful.
No, but here, we play a simply consistent with, let's say, the strategic objective, we disclosed to the math case since a long time. We are working on it, basically since 2015. So when I was, let's say, personally engaged in. Here, we are leveraging the unique capability of ST offering custom design solution on the radio frequency and analog mix in your technology. And, from a, let's say, nice and most technology 20 native decoy technology, as an example, which is a great technology, RF device, okay, very efficient.
So this is where we are. And now, okay, the program is starting, okay, in, in, in 2021 and should, contribute, okay, to the revenue growth of ST, between 2021 to 2023. Now, okay, I guess you understand, I cannot command, okay, specific to the customer as we are we have ever done, okay, for personal electronic as well, okay, and we say, yes, we are, yes, we have, we have the same information that you, showed by the Theragun. Definitively. So we are happy to see us in this application, but I must not, okay, comment more specific I simply say it is fully consistent, okay, with our strategic objective, okay, we share with you since
Understood. Maybe just a quick follow-up on that. You said you were personally involved with this program since 2015, usually for CEOs to get in a program, it has to be pretty big. How should we think about your personal involvement in this?
But because it was my job to do it, it was my job to do it at this point of time. Okay, if you remember, as a spider of time. I was a CEO, okay, focusing on the onboarding processing system. And No, I don't. I wish you down.
I wish you down. I wish you down. I wish you down a minute too. And, and yes, okay, we had, we had this, let's say, R and D discussion, opportunity distribution, and And then, okay, the program is, is flying back. Okay.
So we are very happy, very happy. But again, more important is to act consistently with our strategic objective. Okay. I repeat on personal electronics, communication infrastructure. We are very, very selective, to not defocus ourselves, but we leverage a strong capability STS in radio frequency and analog mix in optical sensing solution, in Secure Solutions, and in custom analog.
So this is simply the payback of our strategy.
Okay. So with this, we are at the end of the transition.
Yes. So thank you, Salin. Well, first of all, I would like to thank you for for your participation and the add ons to the this capital market debt event, okay, we were, let's say, being pragmatic for us to split in for events. Well, I expect, okay, from inflammation, transparency, market headwinds tailwinds, okay, it has fulfilled your expectation, facing this unprecedented year, okay, Moving forward, okay, we expect altogether that we will meet soon physically, okay, but at this stage, already difficult to say. I am convinced our company, will move towards this year.
Stronger than altering, okay, in 2020. We faced, okay, many, many events but the company is stronger. We are determined to achieve by 2023 according to the assumption we have taken a $12,000,000,000, being profitable and sustainable, mentoring our capability to generate cash, with an EBITDA, which will improve, okay, through the period. And, and yes, okay, a bit to company, moving to a dynamic, okay, to start from this age, by 2025, okay, revenue close to $15,000,000,000. So this is my takeaway.
So thank you again. Thank you for this year. Thank you for your questions. Thank you for your support. And looking forward to seeing you, I least to discuss and meet, okay, at our Q4 earnings end of January.
So and please enjoy the end of your festive period. More despite the various, local lockdown decision from country. So see you soon. Bye bye.