Ladies and gentlemen, welcome to the STMicroelectronics 4th Quarter and Full Year 2020 Earnings Conference Call and Live Webcast. I'm Moira, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. Star and ZERO.
The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Celine Berthier, Group Vice President, Investor Relations. Please go ahead, madam.
Thank you, Myra. Good morning. Thank you, everyone, for joining our 4th Quarter and Full Year 2020 Financial Results Conference Call. Hosting the call today is Jean Marc Chery, Estee's President and Chief Executive Officer. Joining Jean Marc on the call today are Lorenzo Grandi, President of Finance, Infrastructure and Services and Chief Financial Officer, Marco Cassis, President of Sales, Marketing, Communications and Strategy Development.
This live webcast and presentation materials can be accessed on ST's Investor Relations website. A replay will be available shortly after the conclusion of this call. This call will include forward looking statements that involve risk factors that could cause ST's results to differ materially from management expectations and plans. We encourage you to review the safe above statement contained in the press release that was issued with the results this morning and also in ST's most recent regulatory filings for a full description of these risk please limit your faith to one question and a brief follow-up. I'd now like to turn the call over to Jean Marc, ST President and CEO.
So thank you, Celine. Good morning, and thank you for joining ST for our Q4 and Full Year 2020 Earnings Conference Call. Let me begin with some opening comments. Starting with Q4. As announced on January 8, net revenues at $3,240,000,000 was up 21.3% sequentially, segment.
Significantly above the high end of our guidance. Our engaged customer programs in personnel electronics as well as continuous acceleration in demand, especially of automotive products and Microcontrollers were the main factors that contributed to this result. Q4 2020 gross margin was 38.8%, 30 basis points above the midpoint of our guidance. Our operating margin was 20.3 percent and our net income was $582,000,000 Moving to the full year 2020. Net revenues increased 6.9% to $10,200,000,000 for 2020, progressively strengthening versus the expectations we provided during the year.
This was due to the stronger and faster than expected restart of demand during the second half. Full year 2020 gross margin was 37.1 percent, operating margin was 12.9 percent and net income $1,100,000,000 Free cash flow for the year was $627,000,000 and CapEx was $1,280,000,000 Our net financial position increased to $1,100,000,000 at December 31, 2020, from $672,000,000,000 1 year earlier. On Q1 2021, at the midpoint, our first quarter business outlook It's for net revenues of $2,930,000,000 representing a year over year increase of about 31.2%. The gross margin is expected to be about 38.5%. For the full year 2021, we plan for solid revenue growth, outperforming the markets we serve.
Smart Mobility, Power Energy Management, the IoT and 5 gs are driving demand for semiconductor content, and these trends have accelerated during 2020. ST strategy stems from this long term enabler and we are very well positioned to support our customers across them. We plan to invest about $1,800,000,000 to $2,000,000,000 in CapEx in order to support the strong market demand as well as our strategic initiatives. Now let's move to a detailed review of the Q4. During Q4, Market demand accelerated sharply versus expectations.
As we pre announced on January 8, Net revenue came in 580 basis points above the high end of our outlook range. On a sequential basis, net revenues increased 21.3% with all 3 product groups performing above expectations. P and S was up 42.4%, ADG up 12.1 percent and MDG up 5.3%. On a year over year basis, Q4 net revenues increased 17.5% driven by whole product subgroups with only RF communications decreasing as expected affected by the U. S.-China trade war.
Imed grew 30.8%, MDG grew 15.7%, and ADZ saw a return to a year over year growth increasing 3.2%. Our gross profit was $1,250,000,000 an increase of 16% year over year. Gross margin was 38.8%, 30 basis points above the midpoint of our guidance. Fixed Currency FX, net of hedging, partially offset by improved mix and lower unloading charges. Net operating expenses were $598,000,000 Included in this amount, Other income and expenses improved to a net income of $131,000,000 compared to a net income of $54,000,000 in the year ago, mainly due to a nonrecurrence favorable impact of some R and D grants catch up.
Q4 operating margin was 20.3%, up 80 basis points sequentially. On a year over year basis, Q4 operating margin was up 360 basis points with an improvement in AMS and MDG, partially offset by a decline in ADG. Net income was $582,000,000 and diluted earnings per share were 0.63 dollars Let's look now in more detail at our full year results, starting with a recap of the market and business trends we saw during 2020, Which was clearly an unprecedented year with material swing. During the first half of the year, our business continuity plans enable us to support our customers and to continue to execute our R and D programs, while maintaining the most stringent health and safety measures. Then from Q3, We saw a much faster and stronger than expected restart of demand for our products, which further accelerated in Q4.
In automotive, the negative impact on demand was particularly strong in Q2, especially for legacy automotive in Europe and in the U. S. With many carmakers and Tier 1s shutting down for a period. Importantly, Even at that time, we didn't see any substantial slowdown of customer activity on long term strategic smart mobility projects. After the summer, global demand start to pick up sequentially much faster and stronger than the industry has anticipated.
We then saw a further acceleration during Q4, driven by car production volumes, replenishment of inventories across the automotive supply chain and more broadly, semiconductor content increase related to electrification and Digitalization. Then in Industrial, during the first half, we saw a demand slowdown in some applications, so appliance lighting, while others such as healthcare remained positive. From the end of Q2, we started to see improved dynamics in key application areas for ST such as the power related applications, Renewable Energy, Motion Control and Factory Automation. This continued in Q3. And during Q4, The situation improved strongly across all geographies.
Distribution is a key element of our go to market strategy in industrial. Here, we saw different regional dynamics. China was hit first by the pandemic effect in Q1, but started to recover as soon as Q2. While the slowdown in Europe and in the U. S.
Came a bit later in Q1, but continued during Q2. From Q3, we saw improvement in Asia overall with healthy levels of inventory in our distribution channel across All Product Families and Recovery in the Americas and Europe. In Q4, this positive trend accelerated. Inventories of our products at distributor Currently, very lean across all product families and geographies with very high inventory turns. Now in personal electronics.
During the first half, consumer demand for devices like smartphones was clearly impacted by retail lockdown, but demand for our key products remained strong, Thanks to our engaged customer programs. From Q3, there was a strong start of consumer demand from smartphones, driven by the introduction of 5 gs devices. This trend accelerated in Q4. Demand related to accessories was strong throughout the year, with ST dynamics related to wearable, tablets, In Communication Equipment and Computer Peri Shareholders, we saw solid demand throughout the year for products related to home working and enterprise servers, while the overall market for RD Drive was softer. This was also valid in Q4.
The 5 gs equipment rollout went through a significant slowdown in China during Q4. Looking now at our full year financial results. Net revenue were $10,200,000,000 for 2020, increasing 6.9% year over year, progressively strengthening compared to the full year expectation shared in Apri and the regular updates we gave during the year. Sales to OEMs represent 73% of total revenues, while distribution represented 27%. By region of origin, 42% of our 2020 revenues were from Americas, 34% from Asia Pacific and 24% from EMEA.
In terms of revenues by product group, Two groups grew while one declined. ADG revenue decreased 8.9%. Revenue from Automotive Products subgroup decreased, mainly due to a decline in legacy automotive, partially offset by growth in Headas. Revenues for the power discrete subgroup saw a lower decrease with soft market conditions for industrial in Europe and in America, Partially Offset by Growth in Car Electrification. IMS Revenues increased 18%, mainly driven by Imaging and Analog Products for Personal Electronics.
MDG revenues increased 14.9%, driven by strong growth in microcontrollers at both OEMs and distribution and partially offset by the strong decline in RF Communication Products in Q4. Gross margin was 37.1 percent, 160 basis points lower than 2019, Consequently reflecting higher and saturation charges of about 150 basis points compared to about 70 basis points in full year 2019. Our operating margin for 2020 was 12.9%, in line with the double digit target we had Fair. IMS posted an operating margin of 20.8%, MDG was 16.6% and ADG was 5.5%. Net income increased 7.2% to $1,100,000,000 translating into diluted earnings per share of 1.20 dollars Moving now to the other financial indicators.
Net cash from operating activities increased 12% to $2,090,000,000 CapEx was $1,280,000,000 substantially in line with updated investment plan we announced last April and further refine in Q2 from the initial expectation of $1,500,000,000 Free cash flow in Q4 was $512,000,000 bringing the full year free cash flow to $627,000,000 up 26%. Cash dividends paid to stockholders totaled $168,000,000 As part of our existing share buyback plan program, sorry. We repurchased shares totaling $125,000,000 during the year. During Q3, ST exercised the co option for the early redemption of its $750,000,000 2022 tranche A of the convertible bond issued in 2017. With the exercise of the collection, ST issued a new $1,500,000,000 dual tranche, senior unsecured convertible bond due 20252027.
Our net financial position Exiting the year was $1,100,000,000 up from $672,000,000 at the end of 2019. Now let's move to our Q1 2021 outlook and our perspective on the full year 2021. For Q1, we expect at the midpoint Net revenues of $2,930,000,000 increasing year over year by about 31.2% and decreasing sequentially by about 9.5%. On a year over year basis, all product groups will contribute to the growth. On a sequential basis, the decline will be lower than the usual seasonality.
We expect a decline in Hermes Due to the seasonality in Personal Electronics, stable revenues in MDG and a mid single digit increase in ADG, driven by strong demand in automotive. Our gross margin at the midpoint is expected to be about 38.5%, representing a sequential decrease of about 30 basis points. Year over year, the increase of about 60 basis points is mainly due to the much lower unloading charges. For the full year, We plan for solid revenue growth, outperforming the market we sell. The broad long term trends in electronic systems that we are focused on have accelerated during 2020 and are driving demand for our products.
Business are smart mobility, power and energy application and IoT and 5 gs. We are also facing an unprecedented market situation. Semiconductor demand is increasing across the entire industry, Driven by car production volumes and replenishment of inventories across the automotive supply chain, very lean inventory levels at distributors and stair return effects boosting demand of personal electronics and Communications Products. In terms of CapEx, so we plan to invest about $1,800,000,000 to $2,000,000,000 in 2021 in order to meet the strong market demand and also to advance our strategic initiative. This amount includes mainly the addition of capacity for our existing Kroll 300 millimeter fab, mix evolution for our most advanced 200 millimeter fabs and Silicon Carbide Strong Capacity Expansion.
It also includes about $400,000,000 of investments strategic initiatives as well as the support of R and D activities and the maintenance required by our manufacturing operations. These strategic initiatives are continued investments in our new Agrad 300 millimeter fan, R and D for Gallium Nitride Power Technologies and the fabrication of silicon carbide substrates. To conclude, on 2020, we returned to solid revenue growth, outperforming the market we sell. We maintained our profitability with an operating margin at 12.9 percent and net income at $1,100,000,000 We strengthened our net financial position with strong growth in operating and free cash flow. ST demonstrated both resilience during the first half of this unprecedented year and the ability to support the strong and sudden upswing in demand during the second half.
Working alongside our customers and partner, Here, I am thinking about distributors, OSAT, foundries and of course various vendors. During all the different phases we have to go through together in 2020. For 2021, we are determined to continue to make ST stronger. We are convinced That we have the right strategy and resources to do this, our balanced market position, our focus on high growth application and our solid product IP technology portfolio. These are supported by our operating discipline and agility, now more important than ever in such a dynamic market and by the improvement programs and transformation programs we are engaged in.
This will translate into solid revenue growth and improved financial performance. Thank you. We are now ready to answer your questions.
We will now begin the question and answer session. You will hear a tone to confirm that you have entered the queue. Participants are requested to use only handsets while asking a question. The first question is from Andrew Gardiner from Barclays. Please go ahead.
Good morning. Thanks very much for taking my question. Jean Marc, I was hoping you could perhaps sort of compare and contrast some of the statements you had made in December at the final CMD session compared to what you're saying this morning. I mean, if we look at how you outperformed in the Q4 and the very strong guidance you've given for the Q1 of this year, plus Back in December, you gave what I think if I remember rightly, you referred to as a prudent or conservative guidance of calling for €12,000,000,000 by 2023, hopefully a bit sooner, but certainly by 2023. Like I said, it feels like you guys are already annualizing there and the solid growth expected for this year, it could be very, very well near that in 2021.
Have things changed since you gave us that outlook in December materially enough to drive that kind of upside? How do you see the balance of your business and why still be so cautious on that long term? Thanks very much.
Well, thank you for your question. Clearly, what we are seeing is, Let's say, an accelerated path, okay, to our trajectory to deliver $12,000,000,000 of revenue. It is clear that with the backlog we have the current dynamic of the market We have well, I would like also to recall that in December, what I told you that Basically, by fact, we have lost one important customer and due to the implication of the trade war between USA and China. And our visibility at this time was that the other vertical we address, so industrial and automotive, With a data point, okay, we own at this point of time, would not certainly offset, okay, this customer or loss. It is clear that after, let's say, a very strong order booking in Q4, Which has accelerated, okay, in November and in December on automotive and industrial market.
Yes, I confirm today that we are clearly on an accelerated path versus this trajectory. And we are working, we update every month our sales and operating plan for, let's say, a rolling 12 months. So we see clearly this accelerated path. That's the reason why we have, let's say, decided to increase Our CapEx plan versus the model we have in order to fulfill the stronger market demand and to continue our, let's say, strategic initiative. And then another point It is important to mention this Personal Electronics.
It is clear that something happened in the overall Personal Electronics, which is, let's say, in the same time, okay, the 5 gs deployment of device. And we know that our major customer is very successful in this area. We see all the accessories, the wearable, are very successful. And this is certainly one of the effect of The work at home, stay at home, which will remain definitively whatever is pandemic evolution during the year. So yes, I confirm to you that the megatrend we are accelerated more than expected.
Certainly, this megatrend in automotive, in industrial, in cars and electronics will offset, okay, the fact We lost okay this important customer due to the trade war. And today, our current view is clearly, yes, we are in an accelerated path.
Thank you very much, Jean Marc. Just one quick follow-up, if I may. As we look forward throughout this year, Based on what you've just said, can we expect somewhat normal seasonality? I know it's a things are, as you said, unprecedented in some end markets, but Would you still say that second half should be up on first half?
Well, you know, okay, we try to be Quite disciplined, okay, in the way we drive and we give indication to you the best indication, okay? So In January, okay, we give our Q4 earnings, the guidance of Q1. We give important information about the CapEx, Okay, which is, of course, linked to the expectation we have on the full year revenue for 2021. And then in April, we will provide to you, let's say, the full visibility of 2021. Yes, most likely, we will have a different, let's say, breakdown between H1 and H2 in 2021, more simply because today we have a very strong demand in automotive.
I think Everybody well aware about the automotive, let's say, supply chain situation. So the demand is very strong, which will boost definitively the first half of the year. And this is valid as well for personal electronics and industrial market.
Thank you very much.
Thank you. Thank you very much. And the next question please.
The next question is from Laurent Bromel from Exane BNP Paribas. Please go ahead.
Yes. Good morning.
Two quick questions. The first one, how should we model the OpEx for Q1 and maybe for the full year? And a follow-up question on automotive. Jean Marc, you mentioned the disruption in the industry. Could you Shed some light on what's going on, where is the bottleneck and what is STMicro doing to address this issue?
Thank you.
So the OpEx, Lorenzo, you start with OpEx.
Good morning to everybody. I will start to talk about our OpEx. What we do expect for Q1 in terms of OpEx? You have seen usually When we guided, we guided including other income and expenses. As you remember and as you have Seeing clearly in this quarter, the number of other income and expenses has been quite significant.
Here we have a catch up that was expected on our R and D grants in one jurisdiction due to the change of one law And we were in the position to recognize that this is for around $100,000,000 So Q4 for sure we benefit of this in our overall expenses. What we do expect for the next quarter? But for the next quarter. For sure, there will be some headwind for our expenses. One is definitely the exchange rate.
The guidance we are going to give we gave for Q1 is euro dollar exchange rate of 120.1 in Q4, 20 16 and the level of other income and expense It's much more normalized in respect what we see in Q4. So the expectation is to have expenses that will range in the quarter There are actually 1 between €705,000,000 €750,000,000 something in this range. This is our expectation. There should be significant change moving forward, let's say, some up and down in the year, let's say, but the expectation will be Actually, to be in this range moving forward.
So then it's about it's Jerome, it's a question about Industrial Automotive, okay, what we are doing to support the current demand. It is clear that Mercedes Benz for Automotive has been quite sudden. I don't want to repeat myself each time, but It is clear that coming after summer with this strong acceleration Definitively has put under stretched the supply chain. Well, as far as ST is concerned, Well, clearly, we are supporting our customer very closely in daily contact with them, okay, in order to be sure that each single PC we produce, okay, go directly, okay, to a production line. So we are under emergency task force mode with close relationship between the Tier 1, ourself and carmaker.
And then, okay, the second action is The capability of the company to synchronize, okay, for Q1, Q2 and H2, All of our manufacturing asset supply chain and the foundry to make the best triangulation between all the manufacturing source we have in order to really maximize the amount of wafer we can deliver to our assembly plant in Ozark to support all this demand. Well, it is clear that this is what we are doing. There is no too much flexibility because all the foundry are basically fully saturated, whatever they are 8 inches or 12 inches There is no more, let's say, equipment available on 8 inches So it's impossible basically to increase an 8 inches capacity The situation is quite similar on OPPOSAT, so assembly and test. Here and there, there is also some startup shortage of material like substrate. This is a situation which is very strange.
As usual, the recipe is the following. All the actors have to increase, Let's say, timely and STD, their capacity to support their customer with the best visibility, okay, we can Discuss with them and cooperate in order to fairly balance The capacity across all the verticals we address, means automotive, industrial, Personal Electronics and Communication Equipment. So it's a pure, let's say, operating job and process that we are, let's say, pretty well, let's say, equipped to do.
Thank you.
Thank you very much, Jerome. Next question please, Myra.
The next Question is from Matt Ramsay from Cowen. Please go ahead.
Yes. Thank you very much. Good morning. Happy New Year, guys. Jean Marc, I wanted to, I guess, dig a little deeper on the first question that Andrew asked to kick off the call.
I think a lot of us In December, and a lot of investors were sort of struggling to square the circle of the strength that you're seeing in the business With pushing out the long term revenue target and you addressed some of the things about conservatism and around the challenges at Huawei, but Maybe you could just confirm for us or address if there have been any changes to your key customer program visibility with a few folks, namely The large smartphone customer, the silicon carbide programs and also what's going on with Mobileye. If you could kind of confirm that there's no changes there In your view, I think that would help a lot of us in our forward modeling. And then I have a follow-up on gross margin. Thanks.
Coming back, okay, to the 2021 Accelerator Pass, okay, I would like to mention, okay, a few points. Okay. Clearly, the production of car in 2021 now is expected to be between 85 to 90,000,000 vehicles, but with also an amplification related to inventory replenishment, Because it look like, okay, the industry in Q2 and early Q3 puts the inventory close to 0. So clearly, the run rate of what we are seeing today in terms of semiconductor demand for the automotive market It's more aligned with 98,000,000 vehicles rather than 85,000,000 to 290. So there is clearly an inventory replenishment, Which was not okay the data points we have in November.
In November, we were more around 80,000,000 vehicles to be produced. And without this amplification factor about inventory replenishment. So this is the point, the number one. Then about our, let's say, major ENGAGE program on, let's say, on the high growing discussion we addressed. 1st, smart mobility.
Smart mobility, I would clearly confirm to you that our programs with Mobileye, our program on silicon carbide are running very well. And on silicon carbide, our plan for 2021 is to generate revenue between 4 and $500,000,000 Mobileye will not comment because we never comment Specifically on the customer, but we will increase our plan. Then about Imaging and Face ID. But Again, okay, you know that I never comment on customers and customer programs. But however, I can confirm to you that we do not plan any material or significant change in our revenue in 2021 with our imaging business.
So I hope I am quite clear.
Thank you, Jean Marc. I really appreciate the candor there and don't shoot the messenger ahead to ask the question. I guess And my follow-up question, Lourenco, I wanted to talk a little bit about gross margin. Obviously, there was an inventory correction in 2019 and then all of the turmoil that happened in the supply chain around COVID and demand in the automotive sector. And you've been kind of chasing under loading charges In your margins for a while and maybe you could talk a little bit about what your expectations are for gross margin trends.
Tightness in the industry seems to indicate that the underloading charges would go away. Additionally, we've heard some rumblings of potential pricing increases For ST and other vendors. Anyway, the puts and takes on gross margin would be really helpful. Thank you.
Yes, maybe I can comment on that. Yes, it's true that during 2020, the combination of lack of demand in the first Let's say, lower workforce has impacted significantly our gross margin. We said that there is around 150 basis points impact on the gross margin with the combination of these two elements. What is happened now? In Q4, we already started to see some reduction in respect to the original expectation of our Unloading charges.
This is one of the main factor of having exited the Q4 slightly better And then what's the expectation of the 30 basis points are mainly driven by the fact that the unloading charges are are a little bit lower. Then when we look at Q1, now Q1, I would say that unloading charges are substantially, let's say, gone. We have a really no material residual and loading charge that is mainly driven by the fact that we are not yet ready to fully utilize Some of our to change, let's say, fully the mix in some of our plants, we are talking about 10 basis points of unloading charges in Q1. So The expectation is that definitely for this year unloading charges will not be any material number already in Q1 Contrary to what was expected. On the other side, there are 2, let's say, at Windsor, let's say, for us.
For sure, one is the exchange rate. This doesn't play in our favor. It's negative. You see that now we are guiding in the range of 120. You see how is the spot rate.
So it means that We are in this at this level of exchange rate. Last year, the average of the year was 1.13. Q1 in 2020 was 11, 1.11. So, it means that definitely there is a significant change in this respect for what concerned the impact of the FX. I was modeling this, if you remember, during the Capital Market Day, as impacting our cost in our COGS.
And then definitely there is also some impact related, let's say, to the cost of our materials, The cost of precious material that is another important component of our COGS. True that on the other side, this is in term of revenue pricing fairly share Somehow with, let's say, our customers. So there is for sure And this is visible in the guidance of this quarter, let's say, less seasonality in term of price Irrespective was our usual situation. Indeed, when I look at the gross margin, there's a combination price mix We do not have the usual negative impact significant negative impact that we normally have at the beginning of So there are all these ingredients that are combining together. Moving forward, we will see, let's say, We will see, let's say, the evolution.
I do expect some improvement, but then it's a little bit early now to really
Thank you very much, Mattel. Next question please, Myra.
The next question is from Sandeep Deshpande from JPMorgan. Please go ahead. Mr. Deshpande, your line is open.
Can you hear me? Can you hear me? Yes, yes, we can hear you.
Yes, hi. My first Question is regarding what we've been hearing in the automotive market that there have been shortages in the market. Maybe STM can give a view on this market. And is STM able to supply this market? Or there are other suppliers who are not able to supply to the market.
And then secondly, again reverting to that question on CapEx and revenue guidance in your CMD, I mean, if you look at your CapEx figure at the moment, or then it would you had guided to 6.5% CAGR growth on the plan at that time. I mean, your plan now looks to be much bigger for this year, although you're not guiding to this year. I mean, maybe you can help us understand What new customer programs or what kind of customer programs have been engaged? Why suddenly the CapEx has gone up to this even higher than what was guided in December at this point. And that will this be sustained because otherwise This huge spending at this point could later on be hurt ST.
Thank you.
So I will take the CapEx. There is a CapEx question.
The CapEx and automotive.
Well, automotive, so I will answer both and, of course, Marco And Lorenzo will complement our sales. About automotive, first point I would like to mention About STVU, is that on the, let's say, electrification of the car, So, silicon carbide. We see a total different situation than on the legacy automotive. Despite, okay, the tremendous growth of our key customer on the silicon We can combine, okay, we are supporting them steadily, okay. And as I mentioned, let's say, A few minutes ago, we plan, okay, to have this year revenue between US450 $1,000,000 US500 million dollars With a strong growth in H2 and silicon carbon rate of, let's say, US300 $1,000,000 on an annual basis.
So here I answer, okay, partially both questions, okay? So but here ST do not generate at any moment shortage on silicon carbide, and we will grow very strongly H2 versus H1 and full year 2021 versus full year 2020. Then coming back to the legacy. To the legacy, Clearly, yes, there is a gap, important gap today between the short term demand of the automotive industry, so carmakers and Tier 1, versus the capacity installed in the semiconductor industry. And you know also for our Wasser Fab and Assembly, okay, this capacity are shared with other verticals.
And clearly, the other verticals, personal electronics, servers, computers, but industrial as well and industrial especially In Asia since Q2 and now in Europe, in America, all this, let's say, this This market, okay, request capacity. Unfortunately, the car industry wake up very late, and And lead time of semiconductor are what they are. And you cannot, okay, overnight, okay, increase the capacity in like a direct bus. So yes, okay, it is an industry problem. There is an overall industry problem Showing an important gap between the demand and the capacity.
ST in the past, as always, pretty well managed This kind of situation, delivering and supporting our customer at best and Fairly balancing our capacity in all the verticals in order to protect customers from the automotive market from industrial, Personal Electronics and Computer Peripheral. Well, then I must not mention, okay, a specific bottleneck Okay. From the company on another one, okay. I think it's not my job to do it. But it is an industry problem for sure.
The contribution of our revenue for the sales and operating plan of 2021, As usual, we'll be pretty well balanced between on gas program. So I confirm to you that The silicon carbine will be one of the main one, ongoing one on Personal Electronics. But definitively, Let's say, Huawei will be a strong decrease 2021 versus 2020 because up to now, we have first Not received any other license, especially on custom design product and technology. And if tomorrow we receive, okay, we will be ready to support this customer. But with the lead time we have today, No more, no less, because today with the capacity saturation, our lean time are increasing.
So So WayWe will be a detractor definitively in 2021 of the revenue. And then, okay, we will have a well balanced increase of our microcontroller, of our analog product, forward in discrete on top of the silicon carbide and definitively The legacy automotive, so ASIC based on BCD technology, on vertical integration power technology and the others with Mobileye. Thank you. About the CapEx, to be clear. So about the CapEx, now you know our model, again, It's well known, okay.
For $1 growth, we invest, okay, at least $0.8 We need to keep 6%, 6%, 7% of our sales for the maintenance, for the R and D, for the corporate sustainability, okay, we need to invest, okay, to go to a 0 and our strategic initiative. Yes, between our model was 1.6 to 1 point 7. This is what we said at the Capital Market Day, which was spread, okay, with $400,000,000 Group. Let's say, the strategic initiative around $300,000,000 $350,000,000 for the maintenance And the rest, which was, let's say, US800 $1,000,000 for capacity increase. Well, we have increased The CapEx for capacity increase.
So now the CapEx for capacity increase will be between $1,100,000,000 to $1,200,000,000 In order to support the automotive industry, the industrial market and the personal electronics, products. We will, let's say, continue to maintain high level of ratio of outsourced production with our main foundry partners, so TSMC, Samsung and Another, let's say, specialty foundry. So this is the view of the CapEx. Last year, Entering the year, we announced $1,500,000,000 before the COVID effect. ST has always the capability to modulate The CapEx on capacity adapting us very fast from the business in house, okay?
What will remain It's a steady execution of our strategy program because we are convinced we need to set up a new 300 millimeter fab And we will increase the capacity of this fab timely with our business plan. We need to set up internal capacity for raw silicon carbide In order to have a partial production of our needs to support the $1,000,000,000 target we have by 2025, I guess you have well noted that in 2021, we will have achieved already half of this target. And then, okay, we have also initiative on Gallium transport power device, which will be the next generation of technology important to address the power energy sectors. For the rest, capacity, we adapt ourselves to the market dynamic. With market is strong, we invest And we increased the production externally.
When market decreased, okay, we correct immediately. This is what we have done in 2020.
Thank you. Thank you very much. Next question please, Moira.
The next question is from Stephane Houri from ODDO. Please go ahead.
Yes. Good morning. Actually, I have a clarification to ask and a question about So the clarification is when you talk about your main customer and the Engage program and you Basically, that the relationship is unchanged. Does it suppose that you expect growth on this aspect. And the following question is about diversification.
You've been talking during the CMD about the fact that Now the game with your main customer was also to diversify your revenues. So can you highlight some of the initiatives there? And same question basically about silicon carbide because there's going to be some growth this year. But so far, it was only on one customer basically and is the diversification this year? Thank you.
So about silicon carbide, it is clear that, as I said, okay, during the various opportunity we have to discuss all Yes, 2021 will be the year when we will start to see, let's say, On our our customer base and they will started to, let's say, to contribute to the revenue. I guess, with this order of magnitude of revenue at USD 500,000,000 I will not communicate the breakdown because, okay, you can make after a correlation with our main customer, and I think it's not fair for me. But for sure, it will be one of the still one of the main driver of our revenue growth. But clearly, in 2021, We will enlarge our customer base, and they will really start to contribute to the revenue. Well, about the diversification, Yes.
I confirm to you that when now we see what happened in 2020 And when we look at the revenue we have generated with our main customer in Personal Electronics, ST address in a balanced way all the major platforms of this customer, The personnel computer, the pad, the phone, The accessories, the watches and our product, consistency, okay, with our strategy. Remember, okay, we want to We're selective on some custom design in imaging sensor, secure solution, analog product, but we leverage our, let's say, general purpose portfolio like microcontroller and power. Yes, now KST is very well positioned and spread in whole platform of our Ziffmajor customer, which, by the way, was the same strategy we had with alternative with Huawei, which has been, let's say, destroyed by the reason you know. So this is really a good diversification division and a very good leverage of our product portfolio definitively. And I would like to correct what you say.
I have not said that there is significant change in the relation with our customers. So I repeat what I said a few minutes I say we do not plan any significant change in revenue in 2021 for our Imaging business.
Thank you.
Okay, okay, okay. And lastly,
thank you very much for the clarification.
Thank you very much, Stephane. We are running now close to the end of the timing. We will take 2 questions Two more questions, and I apologize for the ones that have any other. So next question please, Moira.
The next question is from David Mulholland from UBS. Please go ahead.
Hi, guys. I'll keep it short from Obviously, one of the discussions we had when we were talking in the past about the headwinds of Huawei was what opportunity you might have to gain other OEMs that might benefit volume wise from the challenges Huawei faces. So I just wonder if you could give An update on how you feel about your design win traction and penetration into, I guess, the range of other Chinese OEMs that are hoping to gain on the back of and wireless challenges.
Well, yes, okay. So our strategy For the Versa Persson Electronics with the various OEM was the following. So 2 OEMs, 2 important OEMs, which was, let's say, basically, Aperol and Huawei, well known. Our approach was to co parent, okay, on R and D, on product development, on system development and develop custom Design Solution, but being very selective, again, in the field of, let's say, optical sensing solution, in the field of Fuel Solutions and Analog 1. And on another side, having demonstrated, okay, the high high efficiency and reliability of our, let's say, supply chain to leverage our general purpose portfolio to proliferate and polymerize, okay, our product across all the platform of these customers.
On the other player, so Samsung, VOX, so Oppo, Vivo and Xiaomi, The approach was a bit different, okay, complementary means it's more application specific standard product. Here, For this customer, we do not develop custom design solutions, but we offer in the field of all the subsystem I have described. So, sensing solutions, secure solutions, analog, charging, All this kind of stuff, power management, application standard product, and this is okay the way we work We are with them. And here, okay, clearly, today, we are, let's say, leveraging the strong demand with this customer, As an example, with our MEMS, okay? So we are very, very successful with our MEMS with this customer.
So this is, okay, the way we address this personal electronics. Well, then on top of that, it is clear that across the board, Accessories through wireless handset, wearable and so on are very demanding. In here, we address this market either straight with OEM when we develop their own solutions and through the distribution channel when we address more the mass market.
That's Great. And just a quick follow-up. Obviously, you've been developing custom RF power amplifier content For Huawei and that can't be sold anymore. Have you found ways to repurpose that? Can that be seen with a bit more development From yourself in more of a standard product over time that you can still get some benefit from the investment?
It is clear that Here, our strategy was, let's say, in 2 steps. Okay, step number 1 was It is a cooperation, okay, we developed across the past years, okay, with Huawei on RF technology. And then to diversify ourselves, anticipating, okay, the expansion of IoT, Well, when the 5 gs infrastructure will be deployed and the capability of the network to enable millions of nodes, okay, per unit of surface To have the capability inside ST to offer the full product part of the system, means microcontroller or microprocessor, connectivity, analog, power management and the radio frequency because, okay, we do not want to depend on third party to address the IoT. So all the investments we have done with Huawei in technology and know how, yes, we will reuse we are reusing it on IoT. And also, I would like to recall that we have acquired a startup last year called Somos, Which has a strong capability to design radio frequency device like a power amplifier or other transceiver.
That's right. Thanks very much.
Thank you. And we will now take the last question.
Today's last question is from Alexander Peterk from Societe Generale. Please go ahead. Mr. Petak, you can speak. Your line is open.
We lost connection with the questioner.
Okay. So the next question then?
The next question is from Sebastian Sztabowicz from Kepler Cheuvreux. Please go ahead.
Yes. Hello, everyone, and thanks for taking the question. On the market demand, the market is currently overreacting right now. What kind of visibility do you have for Q2 do you see? Any potential risk of inventory correction moving into Q2 and maybe in the back half of the year?
And secondly, on the time of flight sensors, Could you make an update on your road map? And also, how do you see the demand building up in this specific market? Have you seen any slowdown in the adoption of 3 d sensors in the market. It seems that Samsung has stopped using time of flight sensors for world facing application in the last GS 21. Thank you.
So first of all, the demand is very clear on HVAC and NH 2 is really starting to be loaded very healthy, okay? So and again, we don't see, Let's say any other booking because the inventory in the supply chain is very healthy. Again, I confirm to you that we have a total visibility on the distribution channel And the turn of inventory are incredibly high, well above 4, 5 or 6. So, inventory are very low. So, we don't see the business, okay, is very dynamic.
Now, believe me, It is very, very obvious there is no inventory in the automotive industry, taking into account the number of call we received. And on the other, let's say, verticals, Carsten Electronics, similar, okay, we know very well the supply chain of our main customer And we monitor very well the inventory level and we did not detect any of our other inventory. No. Again, we confirm to you that the current situation clearly are clearly linked to the kind of demand where what is related to personal electronic, enterprise server, these kind of stuff are Driven really by the stay at home, the work at home, the lack of traveling. And this will last in a mixed way, I think, for a very long time.
Then the industrial market in China, in Asia is very active, very healthy. It's starting to recover in Europe and in America. And then on automotive, okay, again, this industry is engaged now in a major transformation related to electrification in order to comply with the various norm and regulation like the WLTP in Europe. And this is very demanding in terms of component for, let's say, inverter, onboard charger, the battery management system, okay, so you need to have a lot of control. More and more, All the vehicles will be equipped with Level 2 or Level 3 ADAS system.
So this is very demanding in terms of components. So the content is increasing. And then there is a specific, let's say, situation where clearly the overall production of car worldwide will come back to the level of 2019, Certainly, 1 year ahead than expected few months ago with an amplification in 2021 related 2 inventory replenishment. Why? Because this industry put inventory close to 0 in Q2 and in Q3.
So this is clearly a situation that the semiconductor industry has to manage, let's say, with all the capability of this industry to react fast and to control this situation. And then the other question was about the time of flight.
Good afternoon, Bernard.
Francois, I will not communicate our strategy on time of flight, okay, clearly is a bit to offer the best component for, let's say, the application we target, either on the front side or the outside of the smartphone. We know that sometimes the direct time of flight is more adequate than the indirect time of flight. Then there is, let's say, The cost of the sort of ownership is very important. Then the capability to put The components, as much as we can under the OLED screen display of the phone is also very important. So this is okay on all these aspects.
ST is working and want to continue to address with custom design solution our main customer. I guess I have already commented about that and to address with more application specific standard solution, the other smartphone player.
Thank you.
Okay. So this will end our call now for this quarter. Thank you very much.
Thank you. Thank you very much.
Thank you for your attention and we keep in touch. Thank you
very much. Thank you.
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