European chipmaker STMicroelectronics reported a slump in sales reflecting broader challenges in the semiconductor industry. The company reported net revenues of $3.47 billion, marking an 18.4% decline compared to the same period last year.
This slow demand was particularly noticeable in the automotive and industrial sectors, although gains in personal electronics provided some balance.
“Q1 net revenues and gross margin both came in below the midpoint of our business outlook range, driven by lower revenues in Automotive and Industrial, partially offset by higher revenues in Personal Electronics,” said President and CEO Jean-Marc Chery, in a statement.
The net income plummeted by 50.9% to $513 million, while the operating margin shrank dramatically from 28.3% in the previous year to 15.9%.
The financial strain was further highlighted by the gross margin for the quarter standing at 41.7%, slightly below the company's expectations, primarily due to a less favourable sales price and product mix, alongside reduced manufacturing efficiencies and increased unused capacity charges.
Operating income also fell significantly, down 54.1% to $551 million compared to $1.20 billion in the prior year.
Segment-wise, the performance varied across the board. The analogue, MEMS (Micro-Electro-Mechanical Systems), and Sensors segment saw a revenue decline of 13.1%, mainly due to decreases in MEMS and imaging applications. The power and discrete Products segment recorded a 9.8% drop in revenue, largely attributed to a decrease in discrete components.
The microcontrollers, Digital ICs, and RF products segment witnessed the most significant decline, with revenues plummeting 34.4%, primarily due to decreased demand in general-purpose microcontrollers.
In response to these challenges, the French-Italian company said it is adjusting its strategy. The company, whose clients include Tesla and Apple, projects second-quarter revenues to be around $3.2 billion with a gross margin of approximately 40%.
For the full year, the forecast is set between $14 billion and $15 billion in revenues, down from its previous forecast range of $15.9 billion to $16.9 billion. These projections are part of a broader plan to recalibrate the company's approach amidst ongoing market volatility, said the chipmaker.
STMicroelectronics is also focusing on strategic capital expenditures, maintaining its net CapEx plan for FY24 at around $2.5 billion.
