Ladies and gentlemen, welcome to the STMicroelectronics Q3 2020 earnings release conference call and live webcast. I am Alessandro, the conference 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&A session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may submit their questions in writing via the related field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Céline Berthier, Group Vice President, Investor Relations. Please go ahead.
Thank you, Alessandro. Good morning, everyone, and thank you for joining our third quarter 2020 financial results conference call. Hosting the call today is Jean-Marc Chéry, ST's President and Chief Executive Officer. Joining Jean-Marc on the call today are Lorenzo Grandi, President of Finance, Infrastructure, and Services and Chief Financial Officer, Marco Cassis, President of Sales, Marketing, Communications, and Strategy Deployment. 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 harbor statement contained in the press release that was issued with the results this morning, also in ST's most recent regulatory filings for a full description of these risk factors.
Also, to ensure all participants have an opportunity to ask questions during the Q&A session, please limit yourself to one question and a brief follow-up. I would now like to turn the call over to Jean-Marc, ST's President and CEO.
Thank you, Céline. Good morning, and thank you for joining ST on our third quarter 2020 earnings conference call. Let me begin with some opening comments. Starting with Q3. As announced on October 1st, 2020, net revenues were $2.67 billion, up 27.8% on a sequential basis above the high end of our outlook range. This revenue performance was due to significantly better than expected market conditions through the quarter. Demand for automotive products, our engaged customer programs in personal electronics, as well as microcontrollers, were the main factors that contributed to this result. Gross margin at 36% included about 140 basis points of unsaturation charges. Our operating margin was 12.3%, and our net income was $242 million. For the first nine months, net revenues grew 2.7% year-over-year to $6.98 billion, with an operating margin of 9.5% and a net income of $525 million. Looking at Q4 2020.
At the midpoint of our guidance, we expect net revenues to be about $2.99 billion, representing sequential growth of about 12%, and gross margin to be about 38.5%, including about 70 basis points of unsaturation charges. For the full year 2020, we now expect net revenues of about $9.97 billion at the midpoint of our Q4 '20 guidance, translating into 4.3% year-over-year growth and with a double-digit operating margin performance. Our CapEx plan for 2020 is unchanged at $1.2 billion. Year to date, we have invested $897 million. Now, let's move to a detailed financial review of the third quarter. During Q3, market conditions improved progressively versus expectations. In early September, we communicated that net revenues would come in above the midpoint of our Q3 guidance. As we pre-announced on October 1st, net revenues came in 690 basis points above the high end of our outlook range.
Net revenues increased 4.4% year-over-year with higher sales in microcontrollers, RF communications, MEMS and analog, partially offset by lower sales of automotive, imaging, and power discrete. Year-over-year sales to OEMs increased 7.5%. Sales to distribution decreased 3.4%. On a sequential basis, net revenues increased 27.8%. Whole product groups grew revenues double digit. Our gross profit was $959 million, a decrease of 0.8% year-over-year. Our third quarter gross margin at 36% came in at the midpoint of our guidance, decreasing 190 basis points year-over-year, mainly due to price pressure and unsaturation charges. Unsaturation charges were about 140 basis points. Moving to operating expenses, we continue to manage them. In parallel, we continue to execute on our R&D sales and marketing programs and transformation initiatives. Net operating expenses at $628 million were below what we anticipated when entering the quarter.
Our third quarter operating margin was 12.3%, decreasing 80 basis points on a year-over-year basis. Both ADG and AMS operating margins decreased, while MDG operating margin improved. Our net income decreased to $242 million and EPS to $0.26 compared to $302 million and $0.34 per share, respectively, in the year-ago quarter. Turning now to the revenue performance of the product groups on a year-over-year basis. ADG revenues decreased 4.9% on weaker demand in legacy automotive and in power discrete, while AMS revenues increased 3% with MEMS and analog higher, while imaging sales were lower. MDG revenues increased 18.6%, reflecting double-digit growth in both microcontrollers and RF communications. In terms of operating margin by product group on a year-over-year basis, MDG operating margin increased to 17.4% compared to 15.7%, while ADG operating margin decreased to 5.8% from 8.5%, and AMS operating margin decreased to 17.5% compared to 20.5%.
Net cash from operating activities decreased 10.3% to $385 million in Q3, compared to $429 million in the year-ago period. CapEx was $390 million in the quarter, compared to $244 million in the year-ago period. After the cash outflow of $76 million for acquisition to further strengthen the company's wireless connectivity capabilities, and $33 million of accreted interest paid to settle the 2022 Tranche A of the convertible bond issued in 2017, free cash flow was - $25 million in the third quarter compared to + $170 million in the year-ago quarter. In Q3, we paid cash dividends totaling $38 million. During the quarter, ST exercised the call option for the early redemption of its $750 million, 2022 Tranche A of the convertible bond issued in 2017.
Simultaneously with the exercise of the call option, ST issued a new, sorry, $1.5 billion dual tranche senior unsecured convertible bond due 2025 and 2027. Let's now discuss the market and business dynamics. In automotive first, global demand pick up faster than what we were expecting in July. This acceleration was driven by car production volumes, which continued to increase in China and South Korea, and restarting faster than expected in Europe and in the U.S. Importantly, during Q3, we saw a progressive acceleration of key trends driving the increase in semiconductor content per car, electrification, and digitalization, our strategic focus areas. In car electrification, the latest 2020 market estimates for hybrid and electric vehicle production are for about 7 million and 2 million vehicles, respectively. In car digitalization, the trend is positive, although with a different mix.
The pandemic may delay Level 4 and 5 ADAS deployment, but demand is clearly accelerating on Level 2 and Level 2+ . These dynamics are visible in our achievements during the quarter. In car electrification, we had, again, a number of new design wins for silicon carbide MOSFET. In application, such onboard charger for electrical vehicle. We also won a number of sockets with complementary technologies, such as our MDmesh MOSFET for a battery management system, low voltage transistor in an integrated belt starter generator, VIPower products for a body electrification platform, and with ultra-fast and silicon carbide diodes. Overall, our silicon carbide engagement with customers has increased again during the quarter. As of today, we are engaged with 60 customers in 68 ongoing programs. We are extending our reach with electrical vehicle car makers with important production starts in Asia during the quarter.
You will hear more during the ADG session of our Capital Markets Day on November 6th. In car digitalization, we are focused on technologies and solutions for driver assistance and autonomous driving, V2X communications, and embedded processing solutions supporting new car architectures. Here, we won a power supply platform designed for ADAS applications with multiple Asian manufacturers, and a design for a digital output tuner for a software-defined radio. As mentioned, we are seeing an acceleration trend on Level 2 and Level 2+ , where we have already delivered, together with our partner Intel Mobileye, over 50 million vision processing chips to the market in the past five years. With our 32-bit automotive MCU embedded processing solutions, we want designs in a keyless access control application and in an integrated communication solution.
We also had additional awards for our 28 nm phase-change memory microcontrollers, called Stellar, which support the evolution of car architectures. We recently announced further details on our Stellar MCUs to show all the devices ensure execution of multiple independent real-time applications. ST has developed this new technology with Bosch to meet future OEM integration demands. To conclude this automotive review, I would like to mention that we also expanded our sensor business with automotive-grade motion sensors and accelerometers for key fob applications. Moving to industrial now. The industrial market dynamics remain mixed but gradually improve during the quarter. This trend was visible across all geographies. Demand was strong for power tools and home appliance applications. We continue to see positive dynamics in power-related applications, motion control, and factory automation, all of which are focus areas for ST. Distribution is an important element of our go-to-market strategy in industrial.
Here, the improvement of the situation in the channel is accelerating. In Asia, point of sale trends remain strong, up sequentially in a year-over-year, with healthy levels of inventory in our distribution channel across all product families. In the Americas and Europe, recovery is ongoing, with point of sale up sequentially. Here also, inventory is back to healthy levels across all product families. We address industrial end market with our general purpose and secure MCUs, analog and sensor, power energy management solution. One of our strategic objective in industrial is leadership in embedded processing solution. Last month, we held the first module of our 2020 Capital Markets Day covering MDG.
In the presentation, we detail how we are strengthening our embedded processing offer around the STM32 family in terms of wireless connectivity, security, and artificial intelligence. During the quarter, we had several announcements supporting this strategy, including acquisitions of Riot Micro and BeSpoon, to further strengthen wireless connectivity. Machine learning tools from a partner to support AI deployment, and higher performance top-end microcontrollers. In addition, last week we announced the acquisition of SOMOS Semiconductor, a power amplifier and RF front-end module specialist. With this latest move, we are reinforcing our ability to play a major role in RF front-end modules for the IoT connectivity market, and we strengthen our RF front-end roadmap for 5G. Another strategic objective is to accelerate our growth in analog and sensor for industrial. In Q3, we won several new designs with our analog products for this kind of application.
For example, we receive awards for a new smart metering platform, as well as in motion control and automation with our STSPIN product, which integrates an STM32 microcontroller. We also continue to expand our business in industrial sensor with wins for our inclinometer with a number of large players. The third objective for us is expansion in industrial power energy management. Here, we capture many wins for our power discrete products, silicon carbide MOSFETs, and high-voltage silicon MOSFETs, IGBT, triac diodes, and intelligent power modules. These wins were for customers in applications such as power supply, air conditioning, metering, home appliance, power tools, solar pump, and motor control. Moving now to the personal electronic market. In Q3, there was a strong restart of consumer demand for smartphones, accompanied by steady growth in wearables, tablet, hearables, and game consoles.
This was driven in part by the stay-at-home effect and by consumer demand for health and fitness devices. In personal electronics, we have two strategic objectives. First, to lead in selected high-volume smartphone applications with differentiated products or custom solutions. Here, we continue to have success with multiple wins in flagship devices with Time-of-Flight ranging sensor, motion sensor for image stabilization, wireless charging products, touch display controllers, and secure solutions such as eSIM and secure elements with near-field communication. I would like to give you more detail on one win I mentioned last quarter. I can now confirm it is a Samsung Galaxy Note20 Ultra smartphone, which use ST multi-zone direct Time-of-Flight sensor. Also, both the Note20 and the Note20 Ultra include our MEMS pressure sensor, inertial measurements unit, and eCompass.
Our second objective is to leverage our broad portfolio to address high-volume applications such as true wireless stereo headset, smartwatches, bracelets, and gaming devices. Here, we had wins for sensor, analog, and power products, as well as microcontrollers. It's worth mentioning that we shipped a record number of MEMS sensors during the quarter. We also launched the Laser Scanning for Augmented Reality, so LaSAR, alliance as an ecosystem to accelerate the development of augmented reality eyewear applications. We see this as another potential high-volume application. In communication equipment and computer peripherals, during the quarter, we continue to see growing demand for home working-related products, while the demand for hard disk drive was softer. Our approach to this end market has three objectives. One is to address selected applications in cellular and satellite communication infrastructure.
Here, I would like to mention a win we had with a new gallium nitride GaN-based product in the communication infrastructure application. This was based on our new MasterGaN smart power product, which combines a driver and a GaN FET. In this area, we also capture multi RF- CMOS ASICs awards, and award for our new STM32 microprocessor, and awards for our STM32 microcontrollers for 5G infrastructure. Our other objective are to address selected high-volume application with differentiated product or custom solutions while leveraging our broad portfolio. Here, I would like to mention wins with our FlightSense product, motion sensor, and electronic fuses in personal computer and hard disk. Now, let's move to a discussion on the fourth quarter and brief comments on the full year 2020.
In the fourth quarter, we expect net revenues to be about $2.99 billion. This sequential revenue growth of about 12% at the midpoint is expected to be driven by all product groups, except the RF communication subgroup for obvious reasons. Gross margin is expected to be about 38.5%, including about 70 basis points of unsaturation charges. For the full year, we now expect net revenues at the midpoint to be about $9.97 billion, translating into 4.3% growth year-over-year. Based upon this plan, we expect to report a double-digit operating margin performance. We are maintaining our CapEx plan for 2020 at about $1.2 billion. Before concluding, let me remind you of the upcoming virtual Capital Markets Day, which are conducting through four modules. We held our first module on MDG on September 15. Thank you for attending that session.
The three upcoming modules are ADG, November 6, AMS, November 20, and overall strategic update, December 9. To conclude, I would like to reinforce two key points. First, in response to the global COVID-19 pandemic, we will continue to ensure both the ongoing health and safety of our employees and continuity of our business operations for our customers. These priorities remain of utmost importance for us. Second, ST fundamentals are solid. The strategic decision we made years ago stem from secular growing market trends addressing key societal needs. The underlying principle of our strategy have not changed, and we remain determined to continue to make ST stronger, executing our sales and operating plan, and outperforming the markets we serve. Thank you, and we are now ready to answer your question.
We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Webcast viewers may submit their questions in writing via the relevant field. In the interest of time, please limit yourself to one question. Anyone who has a question or a comment, may press star and one at this time. The first question comes from Sandeep Deshpande from JP Morgan. Please go ahead.
Yeah. Hi. Thanks for letting me on. If you could help us understand granularly the revenue increase from the third quarter to fourth quarter. It's about $310 million of additional revenue. Where are these $ 310 approximately coming, in terms of buckets, in terms of automotive, in terms of personal electronics, et cetera. Thank you.
Thank you, Sandeep, for the question. Okay. I will address the question to Lorenzo.
Good morning, Sandeep, and good morning, everybody. Yes, indeed, we do expect a significant increase in our revenues in the coming quarter, in Q4. Where we do expect that? As we were saying before, we do expect that all groups contributed to the sequential growth in terms of revenues. Where we see, let's say, the driver? We see driver in terms of revenues mainly coming from imaging, coming from Analog. We will continue to grow in a significant way also in MNS, meaning our microcontroller, both general purpose and secure microcontroller. We will also grow our revenues in all, as I said, product groups. Even if we're a little bit less expense, we will see growth also in power and discrete in the quarter. Automotive will contribute and MEMS as well will contribute.
As we said, we have only one significant headwind in the quarter that is mainly related to our subgroup, the RF-
Communication.
-communication groups, which we will decline revenues. Looking sequentially over all the groups that will grow, o n a year-over-year basis, I can tell you that our expectation is that definitely MDG group and AMS group will grow. Why we do not expect this growth in ADG, that sequentially will grow, but on a year-over-year basis will be substantially flat. This is the dynamic that we see for this current quarter, Q4, in terms of revenues.
The next question comes from Anthony Stoss, from Craig-Hallum. Please go ahead.
Morning, guys. With the 38.5% gross margin guide for December, not too long ago, you held out a goal of getting to 40% gross margins. Any thoughts on if you could attain that in 2021? Also, if you wouldn't mind just sharing where you think you'll end for silicon carbide revenues for 2020, and any thoughts on that for 2021?
Thank you for the question. I will address the first question to Lorenzo, and I will answer the second one.
In term of gross margin for 2021, what can I say is the following. Next quarter, sorry, I am talking always on next quarter, but actually, I'm referring to Q4. For the current quarter, Q4, you see that our guidance is at 38.5%. This is impacted still by, I would define, significant amount of unloading. We will have a 70 basis point impact on unloading in the quarter. This comes from a very different situation in that we have today, if I look at the various fabs, some of our fabs that are fully loaded, running at full capacity, some are other, mainly related to our legacy product, that are still suffering unloading. This situation will be continuing.
We see this situation continue at least for Q1, and most likely even for less extent into next year. For the level of gross margin of next year, allow me, let's say, to give me some more time in order to understand also how there will be the evolution of the market and our revenue for next year.
This year about silicon carbide, we will not achieve the $300 million. We will be well above last year. The reason why we will not achieve is because, okay, as you know, we face unprecedented situation in H1, along the value chain of all these products. What is, let's say, great is our current run rate and current demand is, let's say, well aligned with this $300 million, let's say, revenue target.
Next question, please.
The next question comes from Jerome Ramel from Exane BNP Paribas. Please go ahead.
Yeah, good morning. Maybe could you help us to model the OpEx? You've been better than expected in Q3 once again. How should we model OpEx going forward? Maybe if you could give us a hint for a little bit for next year. Thank you.
I will take the question. For OpEx, if you remember, I was guiding for the year OpEx, in the range quarterly OpEx between $ 635-$ 645 as a total of the year divided by four, with some different dynamic in the different quarters, mainly due to seasonality, these kind of things. As you rightly say, we are coming a little bit better. Now, if I see the OpEx for the full year, I would expect that we will be a little bit lower than our midpoint. If we exclude any extraordinary item. Why I'm saying so, because, our expectation for Q4 actually is that we will have an extraordinary item that is related to the grant catch up, in one jurisdiction for, let's say, the year 2019 and 2020.
This will be material for Q4, but is one-time event, so is not repeatable. That means that we will have our OpEx, let's say, in Q4, well below the normal average. We do expect OpEx in Q4 between $605 million-$610 million. Mainly driven, let's say, by this one-time impact. I repeat, without this one-time impact, we will be, in term of OpEx, as an average in the quarters, in the range of $640 million for the year, quarterly average. We will be at the level that we were expecting to be. Next year, there will be definitely some increase in term of OpEx. To be honest, it's a little bit early to model. There are anyway two ingredients that we need to take into consideration. One ingredient is the fact that there will be the normal increase related to salary.
There will be the increase related to the cost of labor. There will be some increase also in terms of activity. This will bring us to move a little bit higher in terms of expenses, as well as you see that today our exchange rate going in the range of 117- 118. This is for sure something that we have to factor in. Just to give an idea in terms of impact of effects for one percentage point of change in euro, dollars, this has an impact in our operating margin per quarter of around $8 million-$10 million. This is split half and half between gross margin and OpEx. In modeling this, you may want to keep into consideration this impact.
The impact is per quarter, right?
Yes. The impact is per quarter.
Thank you.
Next question, please, operator.
The next question comes from Stéphane Houri from ODDO. Please go ahead.
Yes. Hello, good morning. Can you please help us understand, what is your visibility at the moment for 2021? Given the pretty high starting point or ending point, at the end of Q4, given the comparison basis, especially in H1, is a double-digit growth assumption for you next year a credible scenario? If you can give us some comment about the visibility you have with the large customer engagement program for next year, like Silicon Carbide and others. Thank you.
I take the question. It's, let's say, of course, a very good question. Okay. What I can say, I would like to repeat what I say, let's say early September. Yes, our assumption is next year will be a year where the market will grow again. Well, this year we have a view about ourself that basically could be flattish. Okay, minus two plus two, but it's still difficult to say. Next year, okay, we expect to have a year 2020 with, let's say, market growing again. Now, saying that, you know that we have a fixed milestone to communicate with you. December 9, during our update about strategy, we will communicate about our model for the $12 billion.
You know that end of January, we will communicate about our CapEx for 2021, which will be, let's say, first indication about the confidence level we have for the full year. As we have done this year and last year, we will communicate the plan with which we drive the company in April during our Q1 earnings. I would like, okay, to strictly follow this process. Honestly, today is too early to give more detailed color. Again, the takeaway, the assumption we have preparing our budget, preparing our next year, is next year will be a year where the market we address will grow again.
Okay. Thank you very much.
Okay, thank you. Next question, please.
The next question comes from Dominik Olszewski from Morgan Stanley. Please go ahead.
Hi, good morning, everyone. First one, just on the gross margin. Obviously, revenues came in significantly ahead for this quarter. Maybe could you just help us bridge this quarter's gross margin versus maybe quarter- on- quarter sequentially, just to understand the moving parts there. Separately, there was a mention of some pricing pressure dynamics on top of your unsaturation charges. Maybe could you just describe which products or divisions were affected there? Thanks.
Lorenzo?
Yes. I will take the question. I would like to take the chance of this question also to give some colors about not only the dynamic of our gross margin moving from Q3 to Q4, but also some color on the Q3 gross margin. As you notice that our gross margin came in Q3 exactly at the midpoint of our guidance, with a higher level of revenues. On top of that, we had in the quarter, lower level of unloading charges, because at the end, unloading charges in the quarter accounted for 140 basis points. This lower level of unloading charges and a slightly better manufacturing efficiency, even if much lower impact, this has been totally offset in our gross margin of the quarter by unfavorable product mix. In a much more lower extent, also by some negative impact of the exchange rate.
Why the product mix came, let's say, not creative in the quarter? Product mix in Q3 was characterized by definitely an higher level of sales in automotive legacy product in respect to what was our expectation entering the quarter. These products were the ones much suffering in the first part of the year and in Q2 particularly, from not an optimal manufacturing decision. This was due to the lack of loading that we suffer. As you know, this inefficiency is impacting our gross margin with one quarter of delay due to the impact on the inventory. This is the reason why, actually, we did not see significant benefit in the quarter by this higher level of revenues. Moving to the second part of the question, let's say, what are the drivers of the gross margin moving from Q3 to Q4?
We increased by 250 basis points sequentially, and this is mainly thanks to, in this case, improved product mix, net price decline. The price decline will remain, let's say, normal price decline. I want to underline that we don't see in the market any significant pressure of prices. Price decline as a norm. Definitely, we will have a better loading, and some better efficiency in our fab. The loading will reduce from 140 and 70 basis point. The only, let's say, headwind that we will see but really mitigated at this stage by our policy hedging is the negative impact of the exchange rate. I would say that at the end, moving from Q3 to Q4, the driver will be definitely lower level of saturation and much better impact on the product mix.
I was trying to explain to you what happens in Q3, and that will be a significant difference in respect to what will happen in Q4.
Okay. Thank you very much, Dominik. We can move to the next question, please.
The next question comes from Matt Ramsay from Cowen. Please go ahead.
Yes, thank you very much. Good morning. Congratulations on the execution in what's been a very challenging environment. Jean-Marc, one of the questions that I've been getting from investors is around profitability, particularly as your silicon carbide revenue grows in your Automotive division, going forward towards the long-term targets that you've set out. Maybe you could just talk a little bit about how you're thinking about growing revenue in the Automotive business, particularly in the hybrid and electric vehicle space versus profitability of that growth as you look forward. Thank you.
I will start to answer and Marco will complement. It is clear that what we want to do in our automotive activity and power-related activity is to transform the company from heavy legacy weight, which, you remember at present, today, approximately 70% of the total revenue we have from automotive, and 30% are related to the new application, electrification. In digitalization, it is ADAS, it is connectivity, it is a microcontroller addressing domain. This is clearly where we want to go. Now, we consider that we have all the enablers to push this strategy from device. Silicon carbide MOSFET, low voltage power MOSFET to address the mild hybrid car, silicon carbide to address the electrical car, both onboard charger, but as well, the powertrain of the electrical car.
We will have the GaN in the near future for charger as well. Now, we have a serious offer in IGBT. Last but not the least, now, we are really competing in the field of power modules. Both with our internal source in Shenzhen and external ones, or various partnership we have with a critical OEM. We have all the set of enabler to push our strategy to grow, this 30% part of the automotive revenue we have. We do believe that this part will be a key driver of our profitability. Last but not the least, you have seen our announcement with Bosch.
Clearly we have demonstrated that in term of change of architecture of the, let's say the car, moving from fragmented ECUs to more domain ECU, large domain ECU, you need a very powerful microcontroller, capable to drive real-time activities in parallel. We have already demonstrated that we have this device, we have this technology, and which I repeat, is a 28 nanometer embedded phase-change memory, but 28 with FD-SOI, which present some specific, let's say, features, really great for automotive. This will also drive our profitability in the future to increase. This is the overview that I can share with you. Marco, you want to complement some points?
No, just I would like to add that as you said, we see a change in the market moving far more towards electrification, digitalization, and our product portfolio innovation that we are bringing is moving towards that direction where we do believe we will outperform that market. Obviously this will bring together an improving profitability.
Really.
Is it okay, Matt, for you? Thank you very much.
Yeah, it's fine. Thank you, Céline.
Thank you, Matt. The next question, please, Alessandro.
The next question comes from Alexander Peterc from Societe Generale. Please go ahead.
Yes. Good morning, and thanks for the question. I just have a few specific points. One, if you could quantify the Huawei headwind in the fourth quarter in terms of revenue percentage here. Second one, do you have a view on what will be this year's automotive semi market evolution, and how does your year-to-date revenue in automotive compare to this overall market growth? Then just lastly, should we anticipate still some lingering unsaturation capacity, unsaturation charges going into the beginning of next year? Is it like all the first half or just the first quarter? Thank you.
I will take the first question and, Marco and Lorenzo will take the other one. About the first question, if I have well understood, okay. For Q4, I guess I have been quite clear. After 30 quarters of consecutive revenue growth with Huawei, ST revenue in Q4 from Huawei will be zero. We have stopped to ship any PCs to Huawei September 15, being compliant with the foreign direct product rules, from the BIS in the U.S.A. Of course, we have applied for export license to continue to support our customer. As of this day, okay, we have not received any feedback. Our revenue will be zero in Q4. I guess, okay, I am quite clear on the subject. Overall, okay, again, Huawei, let's say, weight in ST, we do not communicate, okay, percentage of customer, only when they are above 10%.
We have only one. Okay, it's quite well-known that Huawei weight was, let's say, mid-single digit percent, okay, weight in our revenue overall this year, with Q4 at zero.
Okay. We take from automotive, what we do see, confirm again that Q2 was the bottom, and we have moved up our view of light vehicle production for the full year. Now we see a range between $73 million-$77 million, which means the midpoint around $75 million, which moved materially up to what we were seeing in Q2, where we were between 63 million and 72 million cars, of which seven million are hybrid cars and two million are electric cars. In terms of market overall, semiconductor market, clearly we see the acceleration of increase of content thanks to electrification and thanks to the digitalization of the car, a trend which is ongoing and probably further accelerated due to the proliferation more and more of electric cars. Lorenzo, if you want to complement in terms of-
Unloading charges. Yes. If I well understood, the question is that how the unloading charges will be moving forward in the first part of next year. Yeah, I confirm what I said before. Yes, we do expect to still have some unloading charges in Q1 and likely even in progressively going down also in Q2. Let me say that, as I was saying before, this is a very unbalanced situation in which we have some of our fabs that are fully loaded at this stage, let's say, and for which we cannot do more than what we do. We have some other fabs that are still suffering for unloading charges due to, let's say, the demand that is not balanced between what is the demand and what is our capacity.
This, we do expect will continue for at least for sure Q4, Q2, Q1 as well, and will start to progressively be corrected during the course of Q2 and moving forward. Just to give you an idea, let's say, the level of saturation of the fab that we were, in average, let's say, suffering during the quarter, during Q3, was in the level of 73%-74%, the saturation level, with many very different situation. Someone in the range of 50%, someone above 90%. In the current quarter, in Q4, this level will be more in the range of 82%, so with some improvement. Still you see that we are not at the optimal level, and this will continue, I repeat, for sure also in Q1. Progressively reducing, but not immediately reducing.
Thank you very much.
Thank you very much. We have time for one or two last questions, Alessandro. Next question, please.
The next question comes from Adithya Metuku from Bank of America. Please go ahead.
Yes. Good morning, guys. Two questions. Firstly, just looking at the OpEx numbers, I just wondered if you could give us some color on what, in your view, has led to OpEx being so different to what you expected at the beginning of the year. What were the key puts and takes? Just so we get a sense for what's changed. Then also, if you could give us the exact grants figure that we should expect in 2020, and how would that figure look going into 2021? Any color there would be much appreciated. If possible, just a quick follow-up on the share count for next year, given the redemption of the convertible bond. Would that really change? Should we factor anything in versus the disclosures in 3Q? Any color here would also be appreciated. Thank you.
The question is on the level of OpEx on average per quarter for 2020. This is your question, Adithya?
Yes, as in what has changed. I know the numbers that were given earlier, but what was different to what you expected?
If you see, and for the full year, Lorenzo can answer that.
Okay. For the full year, as I said, the average quarterly expenses that we do expect at the end of 2020, if you take the full value of our expenses, including other income and expenses, and you divide it by four, it will be in the range of $ 640 before one time item that we do expect in Q4. In Q4, we will have a positive impact in the line other income expenses, material impact in the range of $100 million positive that will reduce significantly the expenses. It's one time. At the end, let's say, this will not be repeatable. It's due to the fact that we have a catch-up of grants, thanks to a new law, let's say, one legislation that allow us to recognize these grants. It's one time, will not be repeatable.
In respect to our original guidance, we are there, of course, without this impact. For sure, we'll be lower than that because you have to consider that this will decrease the average of our expenses in the year. What has changed? I would say apart this one time in Q4, what we have seen when we gave our original guidance, $ 645-$ 635, for sure, also due to the pandemic. In fact, we had some savings, for sure. Let's say, at the beginning of the year, we were thinking to travel in a normal way. This would not happen. Let's say, at the end, what it happens, we had some savings, especially in this kind of discretionary expenses, but not on our R&D programs.
What I can tell you is that in the R&D programs, in our, let's say, core activity, the activity was there, was done, let's say, even if we were under this particular situation of the pandemic. There was other savings because less traveling, less meetings, let's put the discretionary expenses that in the normal life, of course, of a company you have, and in this situation, we did not incur. We had some more expenses for some items that were not supposed to be, like mask protection for the pandemic, these kinds of things. At the end, if you want, we were, before this exceptional catch-up, substantially in line with our expectation. A little bit less on the discretionary, a little bit more on extraordinary expenses related to the pandemic, but more or less we were there.
I don't know if this actually answer completely to your question.
They do. Thank you. Just a quick follow-up just on that share count number, whether the 3Q number is fully reflective of the changes in the convertible bonds that you did in the quarter, or whether we should factor anything in when we look at the share count for the fourth quarter.
The share count, you mean the total share count of the company?
Yes.
Yes. Is reflected.
Reflected. We have provided, as well, the number of shares, which has been provided, plus I'll share.
Understood. Thank you.
Okay. With this, I think this concludes. We are at the time, at 10:30 A.M. With this, I think it concludes our earnings call. Thank you very much, everybody, for attending. As usual, we remain, investor relations team is available if you have some follow-up question. Do not hesitate.
Yeah. Next meeting is ADG, November 6th.
ADG to answer all your questions on automotive and power solutions is 6th November with Marco Monti.
Okay. Bye bye, everybody.
Thank you very much.
Thank you. Thank you. Bye.
Bye bye.
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