Q2 revenue came in at $2.8bn, down 14.4% y-o-y, although up from Q1. However, the real problem lies elsewhere: its net loss reached $97m, weighed on by $190m in impairment charges and restructuring costs relating to the industrial redeployment plan announced in October 2024.
STMicroelectronics' business can be broken down into two areas: product lines and end markets. In terms of products, the business remains dominated by analog, MEMS, and sensors (AM&S), which represent 41% of revenue. These components are notably used to process continuous electrical signals (temperature, pressure, sound), MEMS (mechanical micro-sensors) detect movement or vibrations (as in airbags or smartphones), and sensors measure the environment (acceleration, humidity, light). Embedded solutions (EMP), which account for 31% of revenue, mainly include microcontrollers and microprocessors integrated into a wide range of everyday objects: cars, industrial equipment, domestic appliances, and connected objects. These chips control logical or automatic functions.
Next come power and discrete products (P&D), accounting for 16%, which include transistors, diodes, and power modules for managing, converting, and distributing electricity in electronic systems. They are useful for industrial applications, inverters, power supplies, and electric motors.
Finally, RF and optical components (RF&OC), accounting for 12% of revenues, cover radio frequency circuits (wireless communications, Wi-Fi, Bluetooth) and optical circuits (data transmission via light), which are widely used in telecommunications and the Internet of Things (IoT).
Looking at end customers, automotive remains the main market, with 40% of revenues, ahead of industrial (22%) and consumer electronics (23%), while communications equipment and peripheral computing bring up the rear with 15%.
Let's get back to the results. Over the year, all segments are in the red, with automotive the biggest loser. The core business remains under pressure as the trade war disrupts supply chains and creates persistent uncertainty about volumes. The decline compared to last year is expected to continue in Q3. Margins are likely to be affected by costs relating to unused capacity.
Analysts are not mistaken: for example, Barclays highlights the lack of operational leverage, despite the recovery in volumes.
The group's dependence on the automotive segment (over 40% of revenue) is clearly working against it at the moment. Several manufacturers (Renault, Stellantis, Tesla) have recently reduced their targets. Tesla, which accounts for around 6% of STM's revenue, has also warned its investors of an upcoming slowdown. Added to this are pricing uncertainties and a potential loss of market share in silicon carbide to On Semiconductor. Clearly, visibility is low, especially as criticism is mounting over the group's management, which is more than 27% owned by France and Italy. The Italian government, in particular, has raised its voice in response to what it perceives as a lack of strategic clarity. Tensions have even arisen over governance, with the recent rejection of a director proposed by Rome. The stock has already lost 35% in a year.
