All right. Okay. Good afternoon, everyone. Jean-Marc, welcome to San Francisco. We've got Jean-Marc Chery, CEO of STMicro. Maybe just to kick off, look and talk about the momentum going into first half the year. You gave a pretty good guide to first quarter, talking about above seasonal aspect there, $3.04 billion. As we've seen a few weeks of this quarter already go by, Are we tracking to those levels? What other dynamics do we think we should be aware of for the first half? Thanks.
I confirm that for the first half, the dynamic of booking we receive will enable us to do better than the usual seasonality in first quarter. We confirm our guidance. We have seen some distributor in first quarter that for the first year, since many year, first quarter in Asia will be better than fourth quarter, which is a pretty great sign, because in first quarter you have the Chinese New Year. To have first quarter better than fourth quarter is really... [crosstalk]
Yeah.
A signal that showing that something is happening. In second quarter, we confirm as well that to be at, let's say the seasonality, so plus 3%... [crosstalk]
Mm-hmm.
Is at least what we can deliver. The overall coverage to achieve this first half, that will be a significant growth compared to last year. Our backlog coverage is between 85% to 98%.
Got you... [crosstalk]
You see the confidence level today. Overall, for ST, to grow significantly year-over-year and to do better than the usual seasonality... [crosstalk]
Mm-hmm.
I s there.
Perfect. Super. I mean, if we think about now the puts and takes as we go through the rest of the year and how the phasing works, second half on first half, maybe referencing things like mix and utilization, pricing, and even the under-absorption on FX, how does that all impact margins as we go through this year?
Well, to speak about second half, I think we have to go by segment. Well, on automotive first, for ST, the positive point is that we are now without any other inventory.
Mm-hmm.
Our major customer, OEM or, the Tier 1, they are clean of other inventory.
Yeah.
The only headwinds we still have in 2026 is capacity reservation fees that will disappear basically over the year. Means, looking at the seasonality we have usually on automotive, we can expect to have second half growing. Contributing, I repeat, to the usual growth of second half for ST, which is 15%.
Yeah.
Industrial market, well, clearly, industrial market, it is not a secret that what is related to power industrial. All the power management, or the thermal flow management, for AI data center and power energy is very strong.
Yeah.
Clearly, our microcontroller general purpose, analog and some power discrete are taking benefits of this dynamic.
Mm-hmm.
What we call smart industrial, so factory automation as an example, China is very solid. Asia Pacific is growing. Europe, we believe we touched the bottom in first quarter, and we see sign of improvement. Well, America so far stable.
Mm-hmm.
What customers told us that for consumer industrial, inventory are clean and they expect to have second half growing.
Okay.
Clearly for ST, industrial in 2026 will really contribute to the growth year-over-year and to the growth second half versus first half.
Got you.
Personal electronics. Well, personal electronics, we don't expect to have a growth overall... [crosstalk]
Mm-hmm.
B ecause of memory shortage impact. We will have a growth second half versus first half. Maybe a little bit more moderated compare usually because the phenomena for our main customer would change a little bit the introduction of new device profile.
Sure.
Last week they introduced a new one, and they will introduce a foldable that has a different build material for us.
Yeah.
Well, remain two interesting driver for ST over the cycle. First of all, it is Low Earth Orbit satellite communication. Well, here we receive significant upside... [crosstalk]
Mm-hmm.
T hat will enable growth for ST and that the manufacturing of ST can support.
Mm-hmm.
This will be clearly, a very solid contributor of the goal second half versus first half. Last but not the least is AI data center.
Mm-hmm.
Well, AI data center, well, if we make it simple, you have three flow. You have the network flow.
Mm-hmm.
From processor to data exchange.
Mm-hmm.
You have the powerControl management flow... [crosstalk]
Yeah.
W here you know that ST is not yet really present, but this will come. You have the thermal flow, so all the utilities, cooling and so on, where we are. Clearly, the network flow, we see really strong acceleration of the optical cable. That was supposed to start next year, second quarter, third quarter, but that will start in second quarter.
Mm-hmm.
It strongly accelerate in second half. This will contribute to a very solid growth of ST.
Mm-hmm.
Second half versus first half. The reason why, okay, when at the earnings, I told more first half seasonality better and second half 15%. This I confirm.
Mm-hmm.
Most likely with the current dynamic we are seeing, and with the booster on top of the cycle.
Yeah.
This is what we can deliver.
Okay. A lot to unpack there. Maybe we'll come back to some of that. Maybe let's start with data centers. You know, you have the strategy to be a sort of foundry supplier on Silicon Photonics and BCD technologies. Obviously off to a great start with AWS partnership. Can you maybe just help us understand the timing and the potential size of the revenues coming out of that partnership?
Well, yeah, okay. If we look overall the AI data center, so the three flow, and we add also the data storage. Basically, ST today, we have 380, 390 product, part of the bill of materials. We have 200, 250 from analog and power, and we have 135 from a microcontroller and RF optical device.
Yeah.
Compare what we said, end of January, so that this year we can deliver $500 million.
Mm-hmm.
Thanks to the first effect of the AWS contract.
Mm-hmm.
Amplified by the acceleration of the demand on optical cable. This year, I can say we'll be nicely above $500 million.
Mm-hmm.
Nicely.
Mm-hmm.
Next year, well above $1 billion.
Interesting.
We have really a boosting effect from the start of the optical cable.
Mm-hmm.
From the benefits of our overall AWS contract, that I repeat, is a multi-billion dollar contract for the next five years, that will start this year and moving forward will grow.
Perfect.
This is the positive news I have to say since January, February. I was last week in Taiwan, of course, discussing with a company, and in China... [crosstalk]
Mm-hmm.
Working on a optical cable. You know that ST provide as a foundry, Silicon Photonics in 12-inch.
Mm-hmm.
Which enable our capability to grow fast. We provide the electronic IC, so is the driver of the laser, in fact, and we provide the microcontroller. We can start to see tension... [crosstalk]
Mm-hmm.
On this kind of microcontroller, where the lead time are increasing.
Mm-hmm.
That the reason why, because of this situation on microcontroller and the industrial market coming back to a positive, trend, we ask customer to put the order... [crosstalk]
Mm-hmm.
To give us the visibility, because if not, sooner or later, okay, microcontroller could come back to some tension.
Okay.
By the way, the lead time for micro now are between 10, 14 weeks, up to 28 weeks.
Okay.
This is the situation.
You can step in and relieve some of that tension on the lead time... [crosstalk]
Yeah.
G iven your position. Maybe just an addendum to that. The split between maybe playing into transceivers market, pluggables market, and the CPO that is emerging, is that an interesting split for you? Does that obviously change over the years, and how does that change?
No, we receive already some demand for programs moving to CPO, but more next year.
Okay.
More middle of next year. Short term, I think it's important that the supply chain adapt all the device. As an example, today, a limitation factor on optical cable is laser.
Gotcha. Okay.
Silicon photonics, sooner or later, microcontroller, DSP, possibly, but laser and silicon photonics, sooner or later, will be a limitation factor.
Okay. Makes sense. Maybe we jump to automotive. It sounded like in there we are getting to the end of the inventory correction.
Yes.
That seems to be consistent with other speakers at the conference. Maybe it's your platform. How would you talk to that? Are we at the bottom in second quarter, then we ship to end demand? Maybe could we talk about a recovery or is that too soon at this point?
No, on automotive, okay, for us now is more to understand the regional approach. Okay, America, well, you know the, in America, the story. Now the carmakers, they come back on the thermal combustion engine technology. For sure, the demand on electrical powertrain is slowing down. Well, our main customer for electrical carSo far this year will not be a decrease for us, will be an opportunity of growth. This following recent discussion we had with them. For Europe now, the visibility in Europe looks better than one year ago, two years ago.
The strategy of the main car maker is more clear now compared to one year ago. Whatever are BMW, Daimler, okay, and Volkswagen. For us it will be an opportunity of growth. The Tier 1, by the way, they have no more inventory correction. Sometimes, okay, there is escalation of shortage... [crosstalk]
Mm-hmm.
On some picky technology. APAC, so Korea, Japan, so far so good because they are on hybrid car model mainly, so very stable. What we have to monitor is China. By China the forecast is, $30 million, $31 million. $20 million vehicle, New Energy Vehicles.
Yeah.
Mix hybrid and electrical. We know that in China the profitability is low.
Yeah.
Here we have to monitor exactly what will be the dynamic in China for exportation of car and the internal market.
Mm-hmm.
Again, I repeat for ST, mechanically boosted by the fact that we have no more inventory correction to show a growth on automotive in 2026 between mid-to-high single-digit... [crosstalk]
Mm-hmm.
W ill not be a surprise.
Okay. I think when you discussed earlier, you touched on some of the shortages affecting end demand, but you referenced handsets. You also referenced some design wins with your leading customer, and how that might change the phasing through the year. Can you just repeat the phasing and the impact from the design wins, but help us understand really the impact of these shortages, particularly DRAM, as indirect on you guys?
Well, you I guess everybody has understood when you have the DDR4 price multiplied by five and DDR5 by three, for the consumer low-end or middle-end device, the bill of materials is no more affordable.
Yeah.
Because if they adjust the price, they completely consume the profit. Clearly, and in a shortage period, people will allocate the capacity to more high-end device and so on.
Yeah.
Sometimes you have no choice. Yes, I know there is number about smartphone that will decrease by multiple 10%. We found it excessive. As far as ST is concerned, as our main exposure is with our main customer.
Yeah.
W e do believe they are covered in term of memory supply. Again, I repeat, for us what is important is to follow their plan for the year. We know that they introduce at a different time compared to last year, we have changed our revenue forecast accordingly. Again, the foldable phone has a different bill of materials.
Yeah.
So far as a matter of result, we believe for ST personal electronic in 2026 will be a transition year, means, very low single digit growth.
Gotcha. Okay.
No more impact... [crosstalk]
Mm-hmm.
T han the one we could expect on low-end smartphone.
Okay. When we lap that the subsequent year, growth should be stronger for you?
Yeah, indeed.
Gotcha. Maybe if we jump to industrials, I think it's one area that we left out there. You know, it looks like inventory normalization is progressing quite well.
Mm-hmm.
I think you do have exposure to consumer industrial, also I believe factory automation as well, where orders do seem to be improving. Maybe just help us understand what is the hard evidence for this to be a strong growth year? What would be the level of growth for this year for industrial generally?
Yeah, you know the KPI are classic, is inventory turn and distribution. For us in our model and distributor is between to have two, three months of inventory. Well, in China we are below.
Yeah.
Well below. In APAC we are target or below the target. This is a sign number one. The sign number two is a POS increase.
Mm-hmm.
POS is increasing. We still control the POP clearly, to finish, okay, to adjust the pocket of inventory we are here and there. Mainly general purpose analog and some discrete. The positive sign is a POS. Again, I repeat what I said a few minutes ago, main distributor in Asia will see first quarter 2026 better than fourth quarter.
Okay.
Including Chinese New Year.
Mm-hmm.
It's not because they have an effect before Chinese New Year of inventory buildup. It's because overall they see something positive. By application, I repeat, power industrial is going very fast, driven by AI, but also energy supply and conversion and transportation. Smart industrial in China accelerating, APAC as well. Europe is starting.
Mm-hmm.
Qualitatively between distributor in Asia and some customer in America, they saw that second half consumer industrial could increase again.
Okay.
In first half, inventory are clean. So far for the timing is soft, but they expect really something growing in second half.
Okay.
That's the reason why we told to customer, "Please put orders." They commit that they will do it by April, May... [crosstalk]
Mm-hmm.
In order, we avoid this panic that could happen, because today we have shortage in memory, we have shortage in passive. We start to have shortage in laser. If we have this contamination of shortage, well, after we have to pay attention to not go back to double booking and so on and so forth.
Mm-hmm.
We have asked customer to say, "Please anticipate," because we need to drive our manufacturing properly.
Slightly undersized channel reinflation from an order book that has demand in the second half, but we're being mindful of double ordering at this point.
Of course, we will monitor it, carefully, taking the lesson of 2022... [crosstalk]
Yeah.
2021.
Makes sense. Makes sense. Maybe just staying with power then. Silicon Carbide, I think you've called this out as being a decent year coming back to 2024 levels. Specifically, it looks as though this is both EVs and in industrials. Maybe help us understand how are the drivers working as we started this year?
You see all the. Well, now with Tesla stock decreasing and the other program starting in Europe and in China, the priority for us is first, okay, to close our 6-inch fab. Of course, in respect with the customer qualification, timing, and constraints. It is a priority number one, okay, to go to a cost-effective 8-inch fab in China and in Catania. Then to continue to introduce our upside in term of technology. Now we start to give sample on the generation 5.
Yeah.
Well, we prepare, a generation 6 that will be a disruption.
Mm-hmm.
clearly, compared to the generation 5, even if we receive good feedback on generation 5. This is a mandatory condition for us, to go back to profitability, break even in 2027 on power and discrete, and then to contribute to the operating margin, starting 2028.
Got you. Okay. Very clear. Maybe if you could touch on pricing dynamics. You know, it looks as though we could be getting to the end of that price to clear phase. Just maybe if you can get some evidence of that happening. What are the sort of types of price erosion you're seeing, maybe in general purpose designs, analog power, and maybe discretes generally?
Now, again, on pricing, we are going back to normal, what we call the low single-digit price decrease. Well, as usual, in first quarter, we discuss with the car industry the price, but we didn't see this year something specifically strong. As usual, in China, the price pressure is higher. I do not exclude that sooner or later, very selectively, we could be in position to increase price on some product specific, driven by some specific application.
Mm-hmm.
Avoiding to increase price across the board like memory.
Yeah.
Specifically on application, lead time increasing, we could increase price selectively.
Got you. Maybe just, turning to investments. I mean, you called out a CapEx over $2 billion this year, $2 to 2.2 billion, if I remember right. We're just trying to understand how does that spend split maybe across, you know, the 300mm capacity build, Silicon Carbide, advanced packaging, and now photonics as well. Help us understand, how do you prioritize that spend?
No, clearly our last year, okay, I repeat, we have done well below $2 billion and $1 billion not $8 billion. As a rule, we want to stick with the CapEx equal or below the depreciation we have at company level. This is enabling the company to go back to $18 billion revenue.
Yeah.
Clearly, since a few weeks, we are seeing an acceleration of this optical cable... [crosstalk]
Mm-hmm.
Where, we have some specific equipment that we have to add on top of our capacity in Crolles, mainly, we need to invest and pull in, because the demand is permanently increasing for 2027 and 2028.
Mm-hmm.
In significant magnitude, I have to say. The reason why we say we can go $2 to 2.2 billion, and I repeat, we have the capability on microcontroller to use more foundry.
Yeah.
Well, we have two partner on microcontroller. It is the TSMC and Samsung. Well, TSMC, they said that, no, they will stop to invest on 40-nanometer or this kind of stuff, but here we are, we are covered. With Samsung, okay, I do not exclude that we will increase our microcontroller activity in Samsung, keeping place, okay, in call for Silicon Photonics BiCMOS 55 nm to support this fastest increasing demand on optical cable.
Okay. Maybe just I'll touch on cost restructuring, then I'll open it up to the floor. Can you just maybe give us an update on where we are with restructuring? What sort of annualized savings should we expect? You've already engaged in a headcount reduction program. How's that going? What sort of one-time cost should we expect this year and next?
You know there is two, there is two party. There is what is related costs. Well, this will not be too much visible, sorry, in 2026 because we are dependent the qualification time of customer. It's really complex. is a 1,000 of product transferring, okay, between the values 8-inch to 12-inch or 6-inch to 8-inch. The contribution of this cost will be more visible exiting 2027, where basically it's for 500 basis point contribution to the gross margin. Expenses, we have already, let's say in 2025, and in 2026 expense, cost saving, well above $100 million.
We have explained that on the expenses in 2026 we have some specific headwinds. Well, one was linked to the foreign exchange, the dollar. Recently we have seen is going down. I don't want to make a forecast on the dollar.
Yeah.
I am not crazy. We will see. We have some inflation on the wage after two years where we content a lot it. Well, the non-recurring additional cost we have is a cost related to the transfer of product and technology, it is not recurring. It will cost an additional expenses for us. Means in 2026, we will have a very few single-digit percent of OpEx increase.
Mm-hmm.
We have the cost decrease linked to our program well above, it is $120 million, $130 million.
Yeah.
This will come again in 2027.
Yeah.
Okay.
That offsets the inflation effectively.
Yeah.
Got you. I did say I'd open up the floor, so I'll follow through on that. All right. Not just now. Maybe I'll go back to, you know, we've seen some M&A from yourselves. You've recently acquired the NXP MEMS business. Just trying to maybe understand, you know, how does that fit in as far as synergies, revenue, cost synergies, and whether or not there is any dilution coming this year and next?
No, first of all, important to know that, okay, we cooperated with NXP as a foundry.
Mm-hmm.
From manufacturing point of view, the acquisition of NXP MEMS is zero risk.
Yeah.
Okay? We on the mechanical part I have spoken. On the MEMS, we have an agreement of supply with them for the time we need, okay, to develop a companionships in our own factory. As far as revenue is concerned, we have integrated, and the backlog we have, okay, is consistent with this expectation. It's good deal for us. Is accretive in term of gross margin.
Yeah.
Will boost our revenue. From technology standpoint, there is really good technology block.
Mm-hmm.
Thanks to this acquisition, our MEMS will come back to the Billion-Dollar Club.
Yeah.
We have capacity limitation, I have to say now. You know that MEMS, for the future, what we call the intelligent sensing... [crosstalk]
Mm-hmm.
Will open many opportunities linked with the Physical Artificial Intelligence.
Mm-hmm.
Sensor, will be really instrumental.
Mm-hmm.
I am really optimistic mid long term with this acquisition. Now we have everything to address this new path on top of automotive... [crosstalk]
Yeah.
Of this Physical Artificial Intelligence. What we call humanoid robotics or robotics.
Mm-hmm.
Where sensor will be instrumental, including sensor with some AI on board.
Makes sense.
This is where we are.
Okay.
Overall, positive. A year of growth. Let's see the order coming.
Mm-hmm.
Confirming ST now is boosted by optical cable. Agreement of AWS will open many other opportunity, including the power management, multi-billion dollar contract. Wow.
Mm-hmm.
Let's execute them.
Yeah. Sounds great. I guess if I take a step back, you know, we've seen good wins with sort of tent-pole customers in different areas. We've got Starlink and LEO, and you said, I think earlier, that's going very well. Obviously, you do very well with the iOS guys, clearly with Tesla as well. It's, you're a sort of strategic or technology strategic partner for a lot of these players.
Where does this take you as a strategy over the next five years? I mean, where else can you go? I guess I'm referencing the decision to be a BCD foundry here, you know, doubling down on 300mm in Crolles. Should we always expect these tent-pole customers and then maybe a fill out of the fat tail afterwards as a strategy, or is there something else that we should be thinking?
I think about ST has demonstrated this capability to work in close cooperation ship with this big customer.
Mm-hmm.
Maybe, we can test different model, with, this big customer is to create ecosystem. Means the big customer will enable us as a reference design for our product. We will put our product in their simulator, and by the way, they will deploy business.
Mm-hmm.
Okay, making simulation, and on robotics as an example where we have no data.
Yeah.
This is something that could happen in the future. This is certainly a business model we have to develop to be sure that we develop the right product in advance and the right go-to market to capture the full essence of the application.
Mm-hmm.
Not waiting that the customer drive us.
Yeah.
Okay. It's point one. The second point, I think ST is good performing to develop general purpose product, like our microcontroller and so on and so forth. Where we have to make progress, I say we are not bad, but we have to make opportunity of improvement, is to better anticipate the application, the KPI, what matter for the application, and to be sure that our product will enable KPI of the application performance. It is what we call Application-Specific Standard Product.
Yeah.
Well, this is where, okay, I want to push the company in the near months.
Mm-hmm.
That the reason why we set up some system engineering approach, not spread across various group, but more concentrated... [crosstalk]
Mm-hmm.
In cooperation with our competence center worldwide and our marketing to better anticipate.
Yeah.
This is certainly a strategic axis. To work closely with customer and having a reputation on manufacturing... [crosstalk]
Mm-hmm.
To be very solid and don't put the customer lie down... [crosstalk]
Mm-hmm.
I s something, of course, we continue to leverage.
Quite interesting. You see the initial big customer play as a pipe clean moment for you to get to ASSPs for that relevant market.
Yeah.
You touched on robotics there as a play, and I think we have heard you say that there's a large customer in the US and one in China as well. Is that still the state of play in robotics for you?
Yeah. Again, the humanoid robotics, you will have a different way. Okay? You will have go to market with some small player distribution.
Mm-hmm.
You will have big player integrated that will drive us, and then you will have, in the middle, some people that will provide ecosystem... [crosstalk]
Yeah.
Simulation tool, test tool, in order for customer to develop their ecosystem. It doesn't mean the guy will make the robot everything.
Mm-hmm.
He will be capable to build a robot and then subcontract to different Tier 1.
Yeah.
It is a model of electrical car.
Mm-hmm.
Pretty integrated, but with some Tier 1 on some specific subject, software-defined.
Yeah.
Okay? Designed in advance using digital twins.
Yeah.
Here, the components provider must be introduced in advance in order he provide the simulation of all the components.
Yeah.
To be sure that you are a full match... [crosstalk]
Mm-hmm
W ith the needed.
Interesting. Clock's running against us, but maybe we got time for one question from the audience. All right. In that case, Jean-Marc, thanks very much.
Thank you.
Thank you.