ST's growth depends on its 10 "macro" programs and a boost by 5G
At its 2019 Capital Markets Day in London this week, STMicroelectronics emphasized 5G will be a key driver for growth in all its end markets as it aims to reach $12 billion in revenue by the second half of 2021.
Jean-Marc Chery, president & CEO, said that ST has ten "macro" programs that will contribute to its growth, boosted by 5G deployment. He added, “We are strongly convinced we will deliver $12 billion revenue second half of 2021.” ST believes that this can be supported by its current manufacturing infrastructure as well as an external foundry strategy. Chery said one of the key aspects of enabling growth was to strike the right balance in the supply chain between internal capacity and external resources — as its stake in Norstel demonstrates.
With most chip companies reporting flat or falling revenues in recent quarters, Chery said he was confident of a strong second half to the year compared to the first half. He commented that end demand was not collapsing, with point of sales in Asia, China, and the USA showing positive signs. The company is targeting a 2019 revenue of $9.45 billion to $9.85 billion.
Chery later outlined, in a media briefing, how his management team was looking at driving growth. The strategy was to break down the business into macro programs that would each generate $1 billion in revenue that was also sustainable. He said an example was its imaging business, which generates that figure. “Two to three years ago, we identified wide bandgap materials as a unique opportunity for us to develop silicon carbide and gallium nitride for motion control. I have reviewed with the team other billion-dollar opportunities.”
ST’s immediate three-year plan is to allocate resources for the 5G opportunity
He said it’s important for the company to invest R&D and resources into programs and business sectors that bring in billion-dollar revenues, and that ST’s immediate three-year plan is to allocate resources for the 5G opportunity. Industrial OEMs are also being looked at, which he said is a fragmented market, bringing just 5% of revenue. “In five years, a long-term focus on this area could also bring in a billion dollars in revenue.” Additionally, he said, 5G infrastructure will boost industrial revenue. Chery added, “We will also acquire from time-to-time to strengthen the ST value proposition.”
In addition to 5G, ST’s management team highlighted three areas of current strength: car electrification, car digitalization, and industrial automation. In fact, automotive and industrial end markets represent 60% of ST’s revenues, with around a 50/50 split between the two. These two markets will continue to generate a similar proportion of its revenue in the next two years. But Chery commented on the significance of 5G for these markets too, “For automotive and industrial, a key technology will clearly be 5G cellular data connectivity, rather than voice.” Chery also said that ST will become stronger in the embedded processing market.
ST would not be drawn on forecasts for its 5G revenue opportunity. For the base station and networking segment of this market, it hopes to gain 50 percent market share (though no timeline was given). “For mobile handsets, we’d prefer not to give you a size, it’s a market that’s new for us. We’ll give a target when we start production end of this year,” commented Marco Monti, president of ST’s automotive and discrete group. The silicon content for 5G smartphone handsets will also be significantly more than in 4G, and ST hopes to be a key silicon supplier for RF front end modules too. The company’s current revenue from front-end modules in 4G is around $100 million.
The mmW phased array technology used for 5G technology will also be deployed in low earth orbit (LEO) satellites, enabling beamforming for LEO satellite tracking. ST is ramping up production for satellite communications solutions based on its 130-nm SiGe and 28-nm FD-SOI processes.