Ladies and gentlemen, welcome to the STMicroelectronics First Quarter 2021 Earnings Release Conference Call and Live Webcast. I am 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. The conference must now be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to Celine Berthia, Group Vice President, Investor Relations. Please go ahead, madam.
Thank you, Moira. Good morning, and thank you, everyone, for joining our Q1 2021 financial results conference call. Hosting the call today is Jean Marc Sherry, ST's President and Chief Executive Officer. Joining Jean Marc on the call today are Lorenzo Grande, President of Finance, Infrastructure and Services and Chief Financial Officer Marco Cassis, President of Sales, Marketing, Communications and Strategy Development. These live webcast and presentation materials Can be accessed on ST's Investor Relations website.
A replay will be available shortly after the conclusion of this call. This call will include forward looking statements that involve risk factors that could cause ST's results to differ materially from management's expectations and plans. We encourage you to review the safe harbor statement contained in the press release that was issued with the results this morning and also in Neste's most recent regulatory filings for a full description of these risk factors. And a brief follow-up. I'd now like to turn the call over to Jean Marc, ST's President and CEO.
So thank you, Celine. Good morning, and thank you for joining ST for our Q1 2021 earnings conference call. Let me begin with some opening comments starting with Q1. So year over year net revenues grew 35.2 percent to $3,020,000,000 All product groups contributed to this growth on continued acceleration of demand globally. Our operating margin increased to 14.6% And our net income rose 89.6 percent to $364,000,000 On a sequential basis, net revenues decreased 6.8 percent, 270 basis points above the midpoint of our outlook.
Our gross margin was 39%, 50 basis points above the midpoint of our outlook. Our free cash flow during the Q1 was $261,000,000 after net capital expenditure payments of $405,000,000 We exited the Q1 with a net cash position at $1,190,000,000 On Q2 2021, at the midpoint of our outlook, we expect net revenues in the 2nd quarter To be about $2,900,000,000 a year over year increase of about 39%, Gross margin is expected to be about 39.5%. For the full year 2021, we plan for solid revenue growth, outperforming the market retail. We will drive the company based on the plan for full year 2021 revenues of about $12,100,000,000 plus or minus $150,000,000 a year over year increase of 18.4% at the midpoint. This growth is expected to be driven by strong dynamics in all end markets we address and of our Engage customer programs.
We now plan to invest about $2,000,000,000 in CapEx to support the strong market demand and our strategic initiatives. This level of investment is at the high end of the range we communicated in January. Now Let's move to a detailed review of the Q1. Net revenues increased 35.2% year over year with higher sales in all product groups, except, as expected, the radio frequency communications subgroup. Year over year, sales to OEMs increased 21.4% and to distribution rose 76.2%.
On a sequential basis, net revenues decreased 6.8%, so 2 70 basis points better than the midpoint of our outlook. Automotive and Power Discrete Products and Microcontrollers increased sequentially, partially offset by a decrease in personnel electronics products. Gross profit was $1,180,000,000 growing 38.9 percent on a year over year basis. The gross margin Increased 110 basis points year over year to 39%, mainly due to the lower unloading charges, Manufacturing efficiencies and improved product mix, partially offset by negative current effects sorry, partially offset by negative currency effects, net of hedging. Our Q1 gross margin was 50 basis points above the midpoint of our guidance, mainly thanks to better product mix.
1st quarter operating margin was 14.6%, a year over year increase of 4 20 basis points, with improvements in ADG and MDG and the decrease for KMS. Net operating expenses This is well, dollars 735,000,000 Net income increased 89.6 percent to $364,000,000 on a year over year basis and our diluted earnings per share were $0.39 Looking at the product group year over year performance. All 3 product groups at double digit growth. ADG revenue increased 38.4% on growth in both automotive and in power discrete. AMS revenue increased 27.1% on higher analog, MEMS and Imaging product sales.
MDG revenues increased 42.2% on growth in microcontrollers, partially offset by the expected decline in radiofrequency communications. By for the group on a year over year basis, AndiG operating margin increased to 8.2% from 3%. AMS operating margin decreased from 17.2% from 20.8 percent and MDG operating margin increased to 19.4% from 11.5%. Net cash from operating activities increased 70.9 percent to $682,000,000 in Q1 compared to $399,000,000 in the next Year ago quarter. Free cash flow increased to $261,000,000 compared to $130,000,000 in the year ago quarter, with CapEx of $405,000,000 versus $260,000,000 in the year ago quarter.
During the Q1, we paid $38,000,000 of cash dividends to shareholders And we executed a $156,000,000 share buyback as part of our Our net financial position was 1 point $19,000,000,000 at Aprize 3,201, compared to $1,100,000,000 at December 31, 2020. It reflected total liquidity of $4,160,000,000 and total financial debt of $2,970,000,000 Let's now discuss the market and business dynamics. During the Q1, Global demand continued to accelerate following the already faster and stronger than expected restart of demand which began in Q3 2020. In Automotive, the rebound from Q4 2020 was much faster than And it has caused supply chain constraints across all the entire semiconductor industry. This rebound was and remains broad based across all customers including distribution and geographies And it's driven by 3 main factors.
1st, obviously, the number of car produced 2nd, the replenishment of inventories across the automotive supply chain. And 3rd, semiconductor content increased related to digitalization and electrification as well as higher content in traditional cars driven by accessories. During Q1, automotive demand remained strong with our bookings well above our current and planned manufacturing capacity. Booking visibility is now extending to about 18 months. Our customer activity related to electrification and digitalization, The long term trends driving automotive semiconductor content increased and continued to accelerate in Q1.
In current clarification, we added to our list of design wins for silicon carbide devices in applications such as traction inverters and onboard chargers. We also won a number of designs with complementary technologies such as our high voltage MOSFETs for our onboard charger and our electrical vehicles auxiliary power supply Vertical intelligent power products for battery management system and with our 32 bit automotive microcontrollers for our traction inverter and for our battery management system. We are also winning sockets in these electrical vehicle designs with our legacy Automotive products for domains such as body and convenience and insurance. In car digitalization, we are focused on technologies and solutions for driver assistance and autonomous driving, V2X communication and onboarding processing solutions supporting new domain controller of zone server car architectures. For example, we had additional awards for our 28 nanometer MTSOI Phase Change Memory Microcontrollers called STELLAR.
We won a number of designs in addition to what I mentioned before for electrical vehicles with our 32 bit automotive MCU All these products are designed on our own proprietary technologies and manufactured in our own internal 300 millimeter wafer fab. Overall, in ADAS, We continue to see an acceleration trend on Level 2 and Level 2 plus To conclude this automotive overview, we also expanded our faster business with automotive grade motion sensors for global positioning modules and navigation units. And we ramped a global shutter image sensor For a well known electrical vehicle carmaker, the latest example of our diversification strategy with Optical Sensing Solutions. Moving to Industrial. During the quarter, we saw very strong demand both in high end and consumer industry.
Factory Automation was one of the main demand drivers, but also but we also saw a similar trend for power tools, Home Appliances, Motion Control and Power Related Applications, including Renewable Energy. Demand was stronger both with distribution as well as OEMs, in line with our approach to be broad in the highly fragmented industrial market. Inventories of our products at distributors Are currently lean across all product families with high inventory turns. Point of sales remained strong in the Q1 across all products and geographies. We address the industrial end market with our general purpose and secure MCUs, analog and sensors, Our first strategic objective in Industrial is leadership in Embedded Processing Solutions.
I am glad to say that preliminary rankings for 2020 indicate that ST was number 1 for combined general purpose and secure MCU revenues. To continue to lead, we are strengthening our model processing offer around the SM-thirty two family in terms of wireless connectivity, security and artificial intelligence. During the quarter, we announced a number of products and solutions supporting this strategy. We launched a new extreme low power STM32 series with advanced performance and cybersecurity features. The new devices have already worn designs at major industrial OEMs and in metering applications.
We also announced new STM32 Bluetooth low energy devices and the 1st STM32 wireless microcontroller And we introduced a new artificial intelligence firmware and Camellar module bundled to help developers Building Computer Vision Applications. Our second objective in Industrial is expansion in Power Energy Management. Here we capture many wins with our power discrete products. For example, With silicon carbine and high voltage silicon MOSFETs as well as IGBT in applications such as industrial power supply, Electrical vehicle chargers, battery test systems, air conditioners, auto clients and lighting. Overall, our silicon carbide engagements increased again during the quarter, Now with 68 customers, equality split between industrial and automotive in 77 The 3rd strategic objective is to accelerate our growth In Analog and Sensors for Industrial, in the Q1, we had many duties with our analog products for Industrial applications.
We received awards in metering, motion control, factory automation and home appliances. And we also continue to expand our business Sensors in industrial applications with design wins for motion sensor and type of flight solutions in applications like cleaning robots. Moving now to the personal electronics market. Today, more than ever, smartphones are an essential source of social connection and streaming services for Entertainment, fitness, gaming and music, 5 gs adoption remains the main driver for smartphones growth moving forward. There is also strong demand as we continue to see during Q1 for other connected devices including wearable, tablets, earables, through wireless stereo itself and guest consoles.
In Personal Electronics, we are progressing on our Two strategic objectives: 1st, to lead in selected high volume smartphone applications with differentiated products or custom solutions. Here, we continue With sockets in flagship devices with motion sensors, multi zone time of flight ranging sensors, wireless charging products, Touch display controllers and secure solutions such as an embedded theme and secure elements with Near Field Communication. Our second objective is to leverage our broad portfolio to address High volume applications such as True Wireless stereo headset, smartwatches, bracelets and smart shoes. Here we had wins for standard and specialized motion and pressure sensors, analog and power products as well as for microcontrollers. We also progressed with our solutions for augmented reality based on laser scanning.
The Lazar Alliance we announced last year is now open to accept new members. We signed an agreement with a technology specialist To jointly develop ultra compact, low power laser beam scanner and we demonstrated augmented reality glasses based on ST Components at Mobile World Congress, Shanghai. In Communication Equipment and During Q1, we saw continued adoption of 5 gs related products as well as sustained demand for PCs and especially the book and from book as they continue to move from being shared household devices to individual ownership. Our approach to this end market has 3 objectives. 1 is to Select selected applications in cellular and satellite communication infrastructure.
In this area, we capture multi radio frequency CEROS ASICs Our other objectives are to address selected high volume application with differentiated products or custom solutions and to leverage our broad portfolio. Our wins here include time of flight and motion sensors for laptops and Chromebooks. Now let's move to a discussion on the Q2 2021 outlook and some comments on the full year 2021. The unexpected magnitude and speed of the upturn in semiconductor demand has put the whole supply chain under strain. Manufacturing capacity worldwide including at foundries is currently saturated And went below the global level of customer demand, at least for the next 6 months and most likely for the full year 2021.
I still have stood fast fully saturating our existing manufacturing capacity with the right product mix and by working to increase capacity faster and evolve our initial operating plan in our Wafer fabs, particularly for digital mixing all CMOS based and advanced smart power and silicon carbide technologies to serve automotive, power and microcontrollers. Our current and planned 2021 manufacturing capacity is fully loaded with a confirmed backlog. We are now planning for 2022. We are working closely with our customers and partners across all end markets and channels to adapt to this unprecedented situation. For the Q2, we Net revenues to be about $2,900,000,000 increasing year over year by about 39% at the midpoint, with again growth across all product groups.
On the sequential basis, this translates into a sales decrease of 3.8 We expect the gross margin to be about 39.5 percent, representing a year over year increase of 450 basis points, mainly due to higher loading and improved efficiencies in our plants. Secondly, this represents an increase of about 50 basis points at the midpoint. For the full year, So we will drive the company based on the plan for full year 2021 revenues of about $12,100,000,000 Plus or minus $150,000,000 With this plan, which translates into a year over year growth of 18.4% at the midpoint, we expect to outperform the markets we serve. This growth is expected to be driven by strong dynamics in all end markets we address and Our engaged customer performance. We now plan to invest about $2,000,000,000 in CapEx to support the strong market demand this year 2021, but prepare 2022 as well and our strategic initiatives.
To conclude, on Q1, ST showed its ability to adjust to the strong and sudden upswings in semiconductor demand, which started in Q3 last year and accelerated in Q4 and in Q1. We did that working alongside our customers and partners and pursuing our objectives with a diversified and balanced approach across end markets That is at the heart of our profession. We continued to focus on customers, Adapting our investments to increase our manufacturing capacity to support the higher level of global semiconductor demand and our engaged customer programs. We maintain our financial strength as demonstrated by our operating profitability and cash flow generation. For 2021, so we will drive the company base on the plan for full year 2021 revenues $12,100,000,000 plus or minus $150,000,000 We also plan to invest about $2,000,000,000 in CapEx, not only to increase manufacturing capacity, to support the strong global demand, including engaged As an example for this year, we are preparing another expansion of coal to prepare next year 2020 But also we continue to run our manufacturing strategic initiatives in order to enable our future growth.
I have expectation we will deliver production wafer from Agrax 8300 by end of next year. On this accelerated revenue growth path, we will continue to make ST stronger, This is our mine to achieve our strategic objectives by leveraging our balanced market position, our focus on high growth application and our solid product IP technology portfolio. All these are well supported by LTE's unique internal manufacturing infrastructure. With our teams executing With strong discipline and flexibility, no more important than ever under this market dynamics.
Thank you, Jean Marc. And before we open the floor to questions, let me add a few words on our upcoming Annual General Meeting. So our 2021 AGM will be on May 27. As usual, all related materials are available on the Investor Relations part Of the ST corporate website. As part of the resolution submitted for the approval of shareholders, ST Supervisory Board is proposing a dividend of US0.24 dollars per share, So back to the pre COVID level.
If you recall last year, taking into account the global, societal and Economic turmoil caused by the COVID-nineteen outbreak, the dividend was decreased to USD0.168 per share. Another submitted resolution I am happy to highlight is the reappointment of Jean Marc Sherry as sole member of the Managing Board and CEO for another With this, we are happy to take your questions.
The first question is from Alexander Peterk from Societe Generale. Please go ahead.
Yes. Hi, good morning and thanks for taking my question. Can I just explore a little bit the upside and downside on your current year Revenue forecast of €12,100,000,000 So we see shortages propagating from auto into smartphones and other industries, as you've pointed out? Do you see any risk that if the production is held back at your key clients that, that could have a negative impact on your Overall outlook for the year. And then on the upside, you've now been fully booked for the year.
Are there any possibilities for you to exceed this forecast? Can you increase or accelerate any CapEx plans at all? Or are we basically Really pretty much at capacity. And then just as a point of maintenance, could you give us an outlook for your CMD? What kind of format will we have on the calendar for this year?
And second maintenance point just on OpEx, where do you see it in the Q2? Thanks a lot.
Okay. It's 3 questions. We'll start with the $12,100,000
Can you explain the first one?
The first one is the $12,100,000 Up and down, this is a range. What there could be some down driven by some change in the profile of the model. I reiterate, Alex, And tell me if I'm wrong. And also, if there is any flexibility during the year to Is there any up and down of $1,000,000 in what are they?
I think, okay, the plus or minus $150,000,000 It's basically the usual and standard uncertainty when you provide such plan related to random events in the operation. I guess everybody who are aware About what happened in Texas with the snowstorm and what happened in the Japanese competitor, fire in fab. Okay. This kind of random event, okay, you have to size it, okay. So the range of plusminus €150,000,000 are only related to Random event on the operation, absolutely not related to demand, which again is well, well above Our manufacturing plant capacity.
The second question
The second question was what if we have any plans for our Capital Market Day Next year or if we do anything?
For this year? No, for this year, we have not yet planned. We will That is okay during the course of the year.
Okay. On the OpEx?
And on OpEx.
Maybe I'll take the question about OpEx. Good morning to everybody. If I well Then the question was on OpEx in Q2, how to model the OpEx in Q2. But In Q2, we see our expenses slightly decline compared to the one of Q1. Actually, the expenses Q1 came a little bit higher than expected.
While in Q2, we substantially, let's say, I think the FX will stay similar to the one of Q1, slightly maybe down, but not significantly, Where we have a more favorable calendar and maybe a little bit more favorable effects, But this will be substantially offset by increase in activities and don't forget that in the Q2, we have, let's say, the Salary policy, so increase in terms of cost of labor.
Thank you very much.
Thank you, Alex. Next question please, Maria.
The next question is from Dominic Polsensky from Morgan Stanley. Please go ahead.
Hi, good morning. Thanks for taking the question. First one is really just to follow-up on the previous question. So does that imply that your sort of view on upside potential in the second half of the year because you're fully booked is more limited? Or what are the puts and takes On sort of that view on the second half?
And then the second question is or the follow-up or it's just around the mix of revenues that you're expecting for 2021. Thank you.
No, for the full year again?
Yes, by division?
Yes. By division?
For the full
year, the mix of revenue.
The first one was on H2 limited by capacity. And the second question is what is the mix of revenue for the year?
Okay. So I'll let Lorenzo to answer on the mix.
Let's say, when we look at the growth in respect to 2020 by group, definitely, we see that in our expectation of the 12 point We see that in our expectation of the $12,100,000,000 midpoint that all groups are contributing. For sure, the groups that are contributing more is ADG with a significant growth also Based on the fact that last year, let's say, especially in the first part of the year, ADG was impacted by Not a particularly stronger market in automotive. This year is the opposite. So definitely, ADG will be the driver of the growth, Followed by MDG, MDG for sure is impacted by the fact that In Industrial, there is a strong rebound in the market and our distribution as you have already seen in Q1 It's much stronger, let's say, than it was last year. So the second driver will be definitely MDG.
And when we look at AMS, AMS last year And a stronger year definitely will increase, will continue to on the path of growth, let's say, at less pace, lower pace In compared to the other two groups, I would say. All of these three groups will contribute. First one, ADG, Strong growth. MTG will be significant growth and also AMS will continue to grow significantly, let's say, Contributing to the overall growth of the company.
Yes. And for the second half and the full year, We can be at the upper range of what we mentioned, assuming, okay, we execute 100 Perfectly of all the operation we have set up, okay. I already that I would like to recall again that Our operations are working 24 hours a day, 7 days a week, all the leave vacation. So we have absolutely no hold in our supply chain. And if we deliver it up to the last minute of 2021, We could be at the range of the 12.1 plus or minus 150 means 12.25.
Thank you very much. Next question please, Moira.
The next question is from Stephane Houri from ODDO. Please go ahead.
Yes. Hello. Good morning, everyone. So The first question and I have a follow-up is can you now that you gave some visibility for the rest of the year, your vision of your relationship with Your largest customers or customer, not customers, in the second half. And can you Clarify in terms of content and if you see sales growing with this customer?
And as I said, I have a follow-up after. Thank you.
Okay. So this is an interesting question, okay? But what I would like, I would like To speak about, let's say, Personal Electronics, okay. Clearly, now about ST, We are, okay, in all the platform of the main players in Personal Electronics Because, okay, we are executing our strategic objective, okay, what I would like to recall, okay, with custom solution, we addressed selectively Some, let's say, high volume application out of the core digital of the smart devices. And on another end, okay, we leverage our general purpose portfolio to capture, let's say, accessories, okay, Inside the smart device, high volume application as well.
And I take this opportunity to note, Okay. With our Broadridge portfolio, clearly, we play In multitude device, everywhere with a major player. And this has enabled us, okay, To engage in many important customer programs around the world and which for us again is essential to remain a key supplier in this Safe Space Personnel Electronics segment. Now more specifically, our custom products that address selectively complex applications in the Personal Electronics segment play to our strengths. If we look at the typical design cycle time for this complex application, I can confirm that we have a clear visibility on where ST products will remain a part of such application for the current 3 years and they will contribute to our revenue growth.
Okay. Sorry, just to clarify, you can confirm for the current year or years?
The year.
Yes. Okay. And then the follow-up So is now that you have reached the €12,000,000,000 in 2021, while you postponed that target From 2022 to 2023. So I understand the end demand has been much stronger than expected. But Can you clarify if the €15,000,000,000 aspiration, I would say, that you talked about in the recent past can become your next target?
Thank you.
No. Well, I would like to come to the €12,000,000 I think, okay, fact based, okay, we share altogether 2 important changes versus, This is, let's say, last December, November. First point, okay, now the sum We are facing our specific addressable market in absolute value is the one which were supposed to be in 2023 a few months ago. So first of all, okay, the absolute value of the SAF, We are facing now, okay, either one we are supposed to be in 2022, okay, and the company has demonstrated its capability to fast react in order to address Then what is important to take note is that the mix inside the SEM It's totally different than the one which was a few months ago, because few months ago, our TAM was very strong in, That's a digital consumer part and clearly we were impacted by Huawei and it was weaker Okay. In Automotive and Industrial.
And the main change between, okay, now and few months ago is acceleration, the strong acceleration Of the automotive and in the industrial part, okay, that where ST is typically, okay, broad range supplier and a leader. So that's the reason why with this brutal change in terms of overall size of the market, we have been, let's say, Capable to deliver and we will deliver the $12,000,000 So for me, it is totally consistent. Then for the next future, we are convinced that with our product portfolio, our technology, Our manufacturing supply chain, okay, because again, as I said, I expect next year, Agate to start to deliver Production wafer for revenue, we really expect that we have all the ingredients, including the visibility of our engaged customer program, To continue to our platform, the market we sell and definitively, okay, when we will have The adequate confidence level about all the markets will evolve, plus the visibility we have on our branch program, Okay, to communicate on the next step. But let me this quarter, okay, as we are doing As usual, first of all, but to give you the guidance of Q2, to provide this year indication at $12,000,000 Believe me, to deliver $12,100,000 growing our internal manufacturing by 20%, Not totally supported at the level we expected from Foundry because they will increase only by 10%.
It's already very challenging, okay, but the company, okay, is able to do it and will be able to deliver it. Okay. Thank you very much, Exia.
Thank you, Stephane. Next question please, Moira.
The next question is from Matt Ramsay from Cowen. Please go ahead.
Thank you very much. Good morning, everybody. I guess for my First question, Lorenzo, looks like obviously you're producing as much as you can in your factory network and the gross margin is up, Looks like 450 basis points in the guidance for the June quarter. Maybe you could talk a little bit about What the margin profile is going forward from there? Are we looking at in the 40s as You remain fully booked or are there other variables that we should think about in terms of mix of divisions or mix of products In the coming quarters on gross margin?
And then I have a follow-up. Thanks.
The line was a little bit disturbed. What I capture is a question about The evolution of the gross margin along the year. This is my understanding. You see that in the first half, the gross margin will be Slightly above 39%. And now we are guiding 39.5% on Q2.
It's 39% Q1, so slightly above. What is the expectation moving forward from here? Of course, moving forward in the 2nd part of the year, the contribution that we'll have from manufacturing efficiency, Improvement of manufacturing efficiency will be there, but will not be, let's say, very strong. Now we are running our fabs at the Full capacity are the best that we can do. For sure, I would say in Q1, we were at 91 The more than that is impossible, you know, but the lead is there.
Q2 will be similar and Q3 and Q4 will be the same, So without any kind of unloading charges. In respect to that, we will have Small improvement in term of manufacturing efficiency. There will be some contribution from the mix. You have also to consider that the environment in pricing is, yes, favorable for our pricing, but on the other side that we have also the supply chain. And the price overall, let's say, are increasing, partially offsetting what we can really share with our customer.
So my expectation is to have some mild improvement in our gross margin, assuming there is no worsening In the currency environment, because also this you know, we are sensitive on that. Assuming that more or less we will stay where we are today In term of currency, we do expect a somewhat increase in the 2nd part of the year in term of gross margin. Where we will end? But you know the math is simple. Let me say that we will be between 39% 40% gross margin for the year.
Got it. Thank you. And sorry about the breaking in the line. No problem. The phone feels good in the middle
of the
night as well. The I guess the my follow-up question, Jean Marc, I know that Huawei has been a challenge for lots of companies in the ecosystem as a headwind, but For your company in particular given some custom products that you were doing for them, It seems like now there may be a path forward for their smartphone business under the Honor brand that may do some Fairly decent volumes going forward. I wonder if you might talk about some of the products that you might have targeted for the Huawei smartphone brand That many of us are modeling sort of that 0 going forward, if those might be applicable to the Honor brand if they get any volume in their smartphone business.
Thank you.
Yes or no. Okay. We are addressing this customer, let's say, but in the frame of The other book, okay, in China. But also, okay, Is that okay with our capability to confirm to them orders they ask us? So yes, we will deliver okay, Let's say, about maybe $100,000,000 to an hour in 2021.
But it's totally different as a magnitude, okay, compared to what we were supposed to have with Huawei. Well, therefore, the remaining Huawei, we have, let's say, again, we have been protected, okay, on all the license Related to 5 gs and radio frequency, let's say, devices. And we have only a Few standard, let's say, product license. And for us, it will be
Thank you very much. Next question, please.
The next question is from Alexander Duvall from Goldman Sachs. Please go ahead.
Yes. Good morning, everyone. A couple
of quick questions. Firstly, obviously, the issues around tightness in supply of components in the auto industry are very well publicized. Wondered if you could give a bit of an update on which quarter you think those kind of constraints could ease and whether that might mean that there's a bit more sustainability Auto revenues into next year if they're capped a little bit this year? Secondly, you referenced digitalization as a driver of automotive. In the last few days, it's been reported that the UK government is looking at facilitating level 3 automotive automated driving on highways, And we're seeing increasing moves by premium OEMs into that level 2 plus autopilot arena.
I wondered if you could share your view on how ST is positioned in some of these areas of Semi is required to facilitate those kind of developments and how you feel about the prospects of the ADAS market for semis as we move to those higher levels of information? Many thanks.
So thank you for your questions. So I will address to Marco.
Good morning. So first of all, yes, correctly, as you say, the rebound that we had in the automotive Starting extremely strong from the late part of Q4 2020 was much better than was anticipated. And as you correctly say, this has driven at the end Some supply chain constraints across all the semiconductor industries. And we are working at this stage Very close with our customers to support them. This is driven by all customers, including the distribution and by all the geographies.
Why this is happening? Because first of all, the number of cars Has been produced is increasing. There is clearly the need to replenish the inventories across all the automotive supply. And let's not forget that the semiconductor content inside the cars driven by Electrification and digitalization is going up, but also is driven by an increase of requirement of accessories Inside the car. So all these together has brought the situation a very, very tight situation.
And we saw that during Q1, this demand stay extremely strong. We all the bookings that we have are In this stage, above our current and planned manufacturing capacity And the booking B2B that we have now is extended to 18 months. So what we are doing now is We are already starting with our customer about what is going to be the demand for fiscal year 2022. If you move now to the others, yes. So the positioning what we see in the market is that basically level 2 and level 2 That is where the market is moving and is accelerating.
And as you know, we are working here with the leader in the market in this kind of application, And we keep working with them to support the very strong demand that we do see as in this portion of the market. I hope that this answered the question.
Great. Many thanks.
Yes. And we'll prepare for level 3. Absolutely.
Thank you very much, Alex. So next question, please.
The next question is from Jerome Rommel from Exane BNP Paribas. Please go ahead.
Yes, good morning. One question,
Jean Marc. You say you are fully utilized right now, but In Q4, you were capable of making $3,200,000,000 of revenues. So is the mix different that you are only, if I may say, I should be on the last volume now on the current run rate. Or is it the access to the foundry that make the difference? And the follow-up question will be with all the capacity increase CapEx you are putting in Crohl and Agrate and so on, And could you quantify a little bit what kind of capacity expansion you are implementing in terms of wafer per month?
Or should it give us a hint of What kind of capacity by the exiting the year you will be versus end of last year? Thank you.
So thank you, Balm. For the first question, also I have to mention very transparently that in Q4, we have also a All inventory decreased. So we fulfilled the demand, which was, let's say, not at this level with the inventory we have on the shelf, okay, to support. So it is also The reason why it's difficult to compare apple to apple, okay, Q1 versus Q2. But clearly, Let's say in Q1, yes, there is also a mix effect Definitely, because if I comment as an example, the revenue by the articles, Jeanette speaking.
We commend the revenue by product group, but here I can give some color on verticals. In Q1, year over year, we grew Automotive by 31% Industrial, 65% Person Electronics, 26% And Communication Equipment and Infrastructure 20%. And on secondarily, okay, Q1 versus Q4, We grew Automotive by 5%, Industrial by 12%. We decreased Personal Electronics, okay, for let's say, as usual, okay, by 27% And we grew the communication equipment infrastructure by 10%. So yes, also there is an effect in terms of About capacity, where we are increasing capacity?
Well, clearly, Let's say, the main three domain, let's say, 4 domain we are increasing capacity are, 1st of all, Kroll 300 because call 300 is a fab supporting strongly Our personal electronic Engage customer program, our microcontroller, both for a secure general purpose And automotive. And then, okay, we have, let's say, a mixed signal technology addressing everything. So here we are going up to the limit of the current full build up, let's say, capability of Defa, but we have We decided, okay, in December to make another extension because, okay, we have a specific design in whole, okay, to extend by modules. And this extension will be ready, let's say, by another year, okay, to support additional growth both on customer engaged programs, microcontroller, automotive, general purpose secure and diversified, okay, specialized mixed signal technology to address everything. So this is the first domain.
And by the way, our mid term expectation with call is to be capable to run close to 10 ks wafer per week. Then okay, the second area we are increasing a lot is in aircraft, a 200 millimeter, okay, for Advanced Smart Power Technology because here, okay, the demand is quite strong on the, let's say, the most advanced, What we call the BCD-nine. And as a kind of Copypaste, Singapore, you know that we acquired 3 years ago The x fab of Micron, which is, let's say, up to date 200 millimeter fab. And we are saturating this fab to support BCD9 again to support microcontroller as well and also vertical integrated power. Well, the 3rd domain is SC Com Carbine.
I have to say that Part of the $12,100,000,000 we have increased our revenue perspective on silicon carbide. If you remember very, very well, okay, I mentioned In January, something in the range of €450,000,000 €500,000,000 Now it will be Well, about EUR 550,000,000. So we are increasing we are accelerating silicon carbide, both in Catania, but in Singapore as well. So now we are, let's say, underway to qualify Singapore's second car buying the first time. Well, and the rest is, let's say, in Catania to support, okay, IGBT and High voltage MOSFET to support the automotive market.
So this is basically the 3 domain the 4 domain, sorry, where we are Increasing our CapEx dedicated for capacity for this year, starting to preparing Okay 2022. And then important to share with you that we target to enter the first equipment In aggregate, 300 millimeter, let's say, late this year, okay, and in Q1 next year. And I have a strong confidence level that the first revenue extracted from Agra 300 We'll open, okay, by the end of 2022.
Thank you very much.
Thank you very much, Jerome. We have now Time to take 2 I think 2 more questions. So next question please, Moira.
The next question is from Didier Shemmama from Bank of America. Please go ahead.
Good morning. Thanks for squeezing me in. I just wanted to ask you a question, Jean Marc, on the longer term sort of consequences Of the current shortages, especially in automotive. I wondered if you could maybe talk a little bit about the nature Your conversations with Tier 1s whether even automotive OEMs are now talking to you to secure long term inventory levels And whether you think that the behaviors in terms of purchasing are going to change, in particular, as we move into the electrification of the power where power semiconductor companies become together with battery vendors the most critical suppliers to automotive customers. Any views on inventories and how things are going to be managed going forward would be very interesting.
And I've got a quick follow-up. Thank you.
I think today, our view and let's say, position is the following. Well, today, you have, let's say, basically 2 kinds of business model. So you have a business model. And here I would like to mention CarMaker Tesla, which is a mix where basically Tesla is developing Its own embedded electronic system. And naturally, okay, Spoken about its own embedded electronic system, e address the semiconductor vendor, okay, straight.
And here, okay, with them, we have, It's a business as usual supply chain relationship in terms of planning, update of planning, Okay, inventory policy and so on. But I have to mention that, okay, inside this business model, at any moment, We are putting Tesla in difficulties. Then you know there is other business model, which is the Yes. We are not. Yes, we are not, okay.
And here, there is other business product. There is other business model, which is a classic one. So automotive Tier 1, making the bundled electronics and the Tier 1 addressing phase. But in the future, if a carmaker wants To develop its own automotive electronic system on an hybrid mode. So some will remain with Tier 1.
So you want to do by yourself? Yes, okay. We will be ready to discuss with them and to interact our business with them. But if the rule is they want to skip the Tier 1 and discuss with us to secure inventory, But continuing the current business model with Tier 1, this is something we will not consider, okay, because At the certain moment, okay, we have to be consistent, okay? Again, today, what is happening is not a problem of shortage of semiconductor.
Today, what is happening It's a pure lack of anticipation of planning and supply chain. It's not a question of business model. So Our conviction that in the future we will have and also accelerated by the transformation of the powertrain as you said electrification That we will have on hybrid mode. So some carmakers will have their whole number that electronic and in such a case they will discuss with semiconductor And we will have the usual intimacy we have in R and D, in supply chain, in engineering and so on and so forth. And they will continue for another part of the electronics to use the Tier 1.
And in such a case, our customer are the Tier 1. And I hope it's clarifying.
That's very helpful. I'd like to have 2 quick follow ups, if I may. First of all, on the pricing environment, That's a question that a lot of investors are asking, how can ST capitalize on the current shortages? I mean, are they levered To maybe potential price increases. So I wondered if you could maybe talk a little bit about that and if you could also talk a bit about your lead times Maybe with the commodity products, whether that could help you maybe break above the 40% gross margin that has been quite elusive, in fact, for the companies for quite some time.
And my second question, Jean Marc, sorry to put you on the spot, but it's my job. So you told us at the CMD that you would do €12,000,000,000 in 2023 at the latest. Now you're going to do that in 2021. And you also saw flagged that a $15,000,000,000 target mid term. I just wondered whether You could give us your level of confidence maybe for 2022, whether you could outperform your total addressable market, if you think you've got
the sort of visibility and confidence to do that. Thank you. First of all, on price, okay, Marco will answer because he's Managing the sales and marketing.
Yes. Correctly, as you said, we are in an environment where the price increase is something that we are Discussing and we are implementing with our customers, this was already discussed during January and this It's ongoing, but as we say there, we are applying this not in an opportunistic way. It's a way also to react What is the increase in cost in the supply chain, so materials, substrate, everything. So This is an ongoing activity clearly due to the situation, but again, we will not apply this in a few opportunistic way.
So I comment again on the 12 in the future. Again, my first question, okay, we'd have do the same, okay, now knowing what is happening today, few months ago, To say that €12,000,000,000 will occur only by 2023. My answer is yes. Why? Okay.
Because the data point we have in our end. So market we address by verticals. Data point on, let's say, live vehicle to be produced in 2021 to 2023, Smartphone, the Huawei warehouse, okay, all this at that point, okay, we had at this period of time, Okay. It was pushing us, okay, to say, okay, with the visibility and on top of that, okay, the potential implication of the trade war between the U. S.
And China To put us in a situation to drive the company, okay, we do believe that we will be capable to achieve the 12 by 20 22. Well, simply between, let's say, November, December and Q1, if my memory is well, we simply book close to $8,000,000,000 In 5 months of bookings. And then, okay, all the customer come to us and say, Automation is accelerating, number of cars are increasing, okay, industrial market, okay, driven by corporate sustainability, want to have more automation, More system, okay, with lower power consumption and so on. So all the planet align in a very fast path. And yes, no, we reacted because our capacity, first, were not planned.
Well, in a certain extent not fully saturated, which was good. So we have reacted very fast. We moved many technology here and there and we increased our CapEx. And we will deliver the 12 now because again The market we are facing now is the one which was supposed to be in 2023. Well, now, okay, again, I repeat, we have a clear visibility On one part of the Engage customer program with some, let's say, custom designed product or differentiated product Adlisting a complex embedded processing system.
And we know that this basically architecture of system in terms of design lead time More or less, okay, minimum 2, 3 years. And so we know exactly that for the next 2, 3 years, okay, that we will have to deliver this system and this customer. Well, then after this is all what is related to the market condition. So even market condition, as said by WSTS, will continue for 2022, 2023 2024 To be the compound average growth rate of 4%, 5%, the company will over perform this market Based on our product portfolio, our supply chain and our capability to support and our engaged customer program. Then we will cite it, okay, when we feel that the time is adequate in order, okay, to give us a target in terms of revenue in our midterm, let's say, strategic plan that we will work In the next few moments.
Yes, that's brilliant. Thank you
so much, everyone, and thank you, Romain, in particular.
Thank you, Didier. And I think we will take the very last question now.
Today's last question is from Achal Sultania from Credit Suisse. Please go ahead.
Hi, morning. Thanks for taking the question. Just, John Mark, if I'm just trying to Stan, the seasonality for second half based on your full year guidance, it seems that the analog and sensor business Is likely to see very small growth in the second half of the year, year on year terms. So just trying to understand that, see clearly the demand from smartphones and accessories has been increasing. So what's causing you to be slightly more cautious it seems on the AMS business in the second half?
Is it predominantly related to the China customer that you had? Or is it something else as well built into that guidance? Thank you.
No, there is no seeing specific customers, okay. Again, this year is, let's say, unprecedented one. We are limited by capacity. Believe me, the pressure we receive from carmakers is incredible. I guess, okay, everybody is not ignorant that some government has put pressure on some foundries To decommit product for consumer to allocate to automotive.
So this is very complex. So this year, okay, there is Basically, infinite demand, I can classify it. And all the industry is working closely with customers, with, let's say, partners In order, okay, to allocate according short term priorities We're not building any inventories, okay, but to be sure that all the components are making all the plans of the customer running and you see it's very difficult, But not absolutely related to one specific application of one customer. So Sure. Okay.
We will have this year very strong growth of automotive and industrial market Within the $12,000,000,000 okay. And let's say, a more soft growth On personnel electronics and on, let's say, communication infrastructure versus last year. For ST, first of all, because Okay. It has been allocated, okay, to support the automotive industry. So this is the reason why, okay, we will have this Difference of growth between the various product group and the various verticals.
Thank you. And maybe one quick follow-up. If I look at the SAM, you've been significantly outgrowing your overall SAM for the last A couple of years, maybe 3 years. Do you think that outperformance continues into 2021 2022 given the visibility that you have?
2021, the public visibility we have from Yes, okay. It's our SAM to grow 14.6%? 14.3 percent. 14.3 percent, sorry, for For the mistake. And as we forecast, okay, to grow 18.4.
So let's say 1.3 times Basically, the market we analyze. Then for 2022, I would like to Repeat what I said a few minutes ago. Well, first of all, we are preparing ourselves to grow With our manufacturing infrastructure, okay, and in the various plans I shared a few minutes ago. So I repeat call The SAGAPUR 8 inches, Agrad 200, Agrad 300 and Catania Silicone Carbide. And then for sure, thanks to our Engage customer program, we have and the visibility we have, the we have plus market conditions, which are supposed to be at a confirmed average cost rate around 5% And our portfolio, so general purpose, SCN32, power, our general purpose analog Plus all our application specific standard product.
Yes, okay, I confirm that, okay, our mission and our capability Is to continue to overperform the market we address.
Great. Thanks a lot, Jean Marc.
Thank you very much. Thank you, Eshel, and thank you to all of you. This will now conclude our call for this quarter. As usual, thank you very much for your attention.
Bye bye. Thank you very much.
Thank you.
Thank you. Bye.