Company Faces Setback with Automotive and Industrial Market Slowdown

STMicroelectronics, a major supplier of chips to companies like Tesla, has revised its financial outlook, delaying its long-term revenue goals. The company, one of Europe’s top semiconductor manufacturers, now expects to meet its target of $20 billion in annual revenue and an operating margin above 30% by 2030, instead of the previous forecast for 2027. This change comes as a downturn in the automotive and industrial sectors continues into 2025, impacting the company’s growth projections.

Market Slowdown and Transition Year

CEO Jean-Marc Chery explained that while the company’s future remains promising, the current market conditions, especially in the automotive and industrial sectors, are leading to weaker sales. The company expects 2025 to be a “transition year” but remains optimistic about a recovery in the second half of the year, especially in the industrial and personal electronics markets.

Focus on Energy-Efficient Chips and AI Market

Despite the current challenges, STMicroelectronics continues to focus on its leadership in energy-efficient silicon carbide chips, which are used in electric vehicles and renewable energy applications. The company is also positioning itself to benefit from the growing artificial intelligence market, particularly with chips designed for data centers and edge AI devices.

Analyst Views and Stock Performance

While analysts anticipated this delay in STMicroelectronics’ financial targets, some see the situation as a temporary slowdown rather than a permanent decline. A report from brokerage firm Stifel highlighted that the company’s current struggles are cyclical rather than structural. However, the company’s shares have taken a significant hit, down nearly 50% this year, and closed 1.2% lower at 22.95 euros.

Cost-Saving Plans and Workforce Adjustments

In its efforts to navigate these challenging times, STMicroelectronics is planning to save hundreds of millions of dollars by 2027, primarily through workforce reductions from attrition and early retirement programs. The company has also confirmed that it will not be closing any factories in the near term.

Impact of Government Policies

Chery also pointed to the unpredictable nature of government policies as a key stressor for the company. He mentioned that some governments have introduced measures, such as excessive subsidies and over-investment in the semiconductor sector, leading to market distortions. The U.S. and European governments have joined China in providing significant subsidies to their semiconductor industries, and while STMicroelectronics has benefited from European aid, Chery warned that capital spending will likely decline in the next few years.