ST Announced Its Manufacturing By Huahong Of 40nm MCU

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Jean-Marc Chery, CEO of European chipmaker STMicroelectronics, announced on Wednesday a new partnership with Chinese foundry Hua Hong. He said manufacturing locally in China is critical for the company to remain competitive. Chery's remarks come against the backdrop of demands from European, U.S. and Chinese governments for more localization of chip manufacturing. At the same time, many chip companies are expanding their operations in Singapore and Malaysia to serve the Asian market.

However, Chery stressed that the Chinese market, as the world's largest EV market and the most innovative market, is indispensable for ST. If ST relinquishes market share in China's industrial or automotive sectors, it will be replaced by other companies, which in turn may dominate the local market and use it as a platform to compete in other countries.

"If we give up market share [in China] to other companies, whether it's in the industrial sector or in the automotive sector, these Chinese companies will dominate their market," he said. And their domestic market size is so huge, it will be a great platform for them to compete in other countries. "

He added that STFA is applying the best practices and technologies it has learned in the Chinese market to Western markets. "The days of missionaries are over," he Chery made the remarks to reporters in Paris. On this day, the company just updated its long-term financial forecast at the Investor Day event. STMicroelectronics has previously been severely affected by the decline in the industrial chip market.

In 2023, ST and Chinese company San'an Optoelectronics established a silicon carbide (SiC) joint venture in Chongqing, with San'an providing silicon carbide wafers. On Wednesday, ST announced that it is working with Huahong, China's second-largest custom chip maker, to produce microcontroller chips for the 40nm node in Shenzhen by the end of 2025.

Fabio Gualandris, head of ST's manufacturing division, said other reasons for producing chips in China include the cost advantages of local supply chains, compatibility issues, and the risk of government restrictions. In addition, if you choose to produce elsewhere, you will not be able to keep up with China's fast-growing EV development cycle.

"They're faster," he said. If you're not there, you can't react in time. "

Postpone financial goals

STMicroelectronics, which announced on Wednesday that it was postponing its long-term financial targets, said the downturn in key automotive and industrial markets will continue into 2025, although the outlook remains bright

ST, one of Europe's largest semiconductor companies, now expects to achieve annual revenue of $20 billion and an operating margin of more than 30% by 2030, up from its previous target of 2027.

CEO Jean-Marc Chery told investors in Paris that the company will continue to maintain its position as the largest supplier of energy-efficient silicon carbide chips. At the same time, the company will benefit in part from the AI boom, including power chips for data centers and "edge" AI applications in electronic devices.

Chery said 2025 would be a "year of transition," although he expects the industrial and personal electronics market to be strong in the second half of the year.

Analysts noted that the adjustment was expected and in line with previous warnings. "Today's reaffirmation of the financial targets by STF proves that we believe the company's current weak performance is cyclical rather than structural," Stifel noted in a note.

Shares in STMicroelectronics have fallen 49% so far this year, closing down 1.2% at 22.95 euros on Wednesday. The company detailed plans to save hundreds of millions of dollars by 2027 through measures such as attrition and early retirement, with no plant closures in the short term.

According to Chery, unpredictable government policies have put pressure on companies, leading to "distortions" such as double orders, excess capacity and overinvestment. China, the United States, and Europe are all subsidizing the semiconductor industry, and Italy and France have also benefited from Europe's aid packages. However, Chery expects capital spending to decline over the next three years.