ST is the world’s leading semiconductor player that is creating innovative, sustainable technologies with a broad product portfolio to target specific markets and applications. In a recent virtual media briefing, Jean-Marc Chery, President & CEO of STMicroelectronics shared an overview of the company’s strategies, markets and the investment plans.
Jean-Marc Chery highlighted key focus areas for the company:
- Key long term enablers are smart mobility, power & energy, IoT & 5G
- Key value propositions are sustainable and profitable growth, independent, reliable and secure supply chain and committed to sustainability
- Plan to invest ~$2.0 Billion in CAPEX in 2021 to support the strong market demand and our strategic initiatives. Investments of ~$1.5 Billion in Research & Development per year
- Carbon neutral by 2027
- ST product portfolio enabling strategic trends
- Differentiated technologies are ST foundation
1. How is SiC enhancing electric vehicles and what are the improvements have been made?
Jean-Marc Chery: We have a roadmap for improving our SiC products and solutions acting on the various steps of the value chain. It is well known that for assembly our MOSFET on SiC are available either in custom-designed modules – basically, this is what we are doing with Tesla – or through more application-specific standard modules. We have developed some relationships with OSATs and we have developed our own solution which we call ACEPACK. And we can also offer bare die through cooperation with module makers.
The first area of improvement of our products is the performance improvement of modules themselves. The mission profile of electric cars, specifically the two main applications with SiC, is the improvement of the inverter, onboard charger, and DC/DC converter. So this is on module improvement.
Then when you move to the process itself, clearly we are introducing in mass production of our Generation 3 which is based on planar technology. We have accumulated unique grade experience, accumulating thousands of wafers produced to enable all our customers to benefit this Generation 3 technology which is reliable and high performance. We are already developing Generation 4.We have the roadmap to continuously improve the performance of our MOSFET in the area of high tension and pure electrical performance.
The other aspect of the innovation is related to raw material and epitaxy layer which are the key to enable the process of the device.
We are working in partnerships with our main suppliers, CREE and SiCrystal. And two years ago, we acquired Norstel, where we are developing our own technology which is on the 150mm 6-inch ready, demonstrating the best standard performances versus the competition. We have also recently delivered our first 8-inch wafer in SiC that we will start to process in order to qualify first diode on SiC and later on the MOSFET on SiC. It is also an important opportunity for innovations and improvements of the technology. ST will become one of the unique companies, totally verticalized, from the modules, application modules, wafer-fab process, epitaxy and raw materials. We are also optimizing customer mission profiles and customer experience. This capability for full vertical control is a key competitive advantage.
2. What is the impact of pandemic on Automotive ICs demand? How are you addressing the situation?
Jean-Marc Chery: I will not further elaborate the root cause but there is an important gap between the demand the semiconductor industry is facing since December last year, versus the manufacturing capacity the semiconductor industry has prepared and invested for 2021.
ST, based on the visibility we had a few months ago, late Q3-Q4 last year, prepared itself to bill revenue of around $11 billion. The demand now is above $15 billion. For the industry, it is basically the same. The industry has prepared itself to bill $9500 billion revenue, while the demand was basically 30~35% above this capacity. So it is not the question of shortage. It is a question that everybody across the value chain from electronics, OEM, EMS, customers both from standalone electronics and embedded electronics did not prepare properly for this boom. So this is the first point. Now we have to manage.
How we manage is specifically for the short term. For the short term for car makers, we reacted quite fast because we moved our CAPEX from $1.5 billion to $2 billion as announced in December. Thanks to the fast reaction of ST, and support from process equipment makers and assembly equipment makers in order to increase our capacity. This is the reason why in April, I announced that the indication for the year will be above $12 billion plus or minus 150.
We reacted to increase immediately the capacity to support the market. However, the gap is still 25%. So for the short term, there is no other way to manage in close relationships with all the customers, car makers, Tier 1, industrial OEM in order to prevent as much as possible line-down, shortage issue and manage damage control and impact on our customers. So our first priority is to manage the short term in order to avoid structural damage to our customers. So this is our main priority. It is a heavy task for all our management. So this is for the short term.
Then for the medium term for 2022 and 2023, first of all, we are starting to discuss with our customers on either our initiatives or their own initiatives on the lessons learnt and how we can better plan in the future and give better visibility to the semiconductor supply chain to prepare with some flexibility. Of course, we are not naive. We know that the business can fluctuate, but at least we need to find a way where customers provide the visibility that the semiconductor can acknowledge to prepare with risk mitigated with capacity.
The main challenge we have in the industry is the following. For instance, for the car industry, to make a car, the cycle time is one day. To make electronic boards, the cycle time is one week. And the CAPEX is very heavy.
The cycle time to have new equipment for process is basically 9 months, for assembly is basically 6 months. This is the business condition. We have to find a way to adapt the legacy business model of the car industry to be more aligned with material requirement planning, rolling visibility and some flexibility in order to enable the semiconductor industry to plan.
This is what we are doing with our customers now. So we are clearly asking them the visibility for 2022 in order to plan our CAPEX, of course increasing the number of order which is not cancellable, because the visibility is good. However, if the visibility is with zero reliability, there is no value. So we need the visibility with certain reliability and with certain amount of flexibility.
So we are working with them in order to plan our CAPEX and/or pass the information to our partners because ST is an IDM company with 80% of production needs covered by internal wafer fabs and 20% covered externally, mainly with our Taiwanese partners and Korean ones. And for the assembly and test, we are basically 70% internally and 30% externally, mainly with Asian OSAT. So we have to take into account and provide visibility to our manufacturing and technology service partners to help us to better prepare for the industry. Recently I participated in the World Semiconductor Council as the President of the European Semiconductor Industry Association. This is definitely a subject we discussed together.
3. What differentiates ST from other competitors in terms of services, solutions and sales channels?
Jean-Marc Chery: Let’s take a few examples by the product family. For embedded processing solution, we know that one of the industry standards for microcontroller up to a certain moment was clearly CMOS-based technology and then an embedded NOR flash or embedded split-gate. The differentiation was more around the ecosystem. You put around the software ecosystem and you put around the microcontroller and your capability to make an easier design for the solution. What is also important was the roadmap for wide portfolios. Up to a certain era of microcontrollers, the differentiation was more around the widest portfolios on STM32 which delivers the highest performance with the lowest power consumption, and the ecosystem.
Now, the shrinking of the technology, to offer much more performance of the microcontroller in real time depending on the application and the power consumption. We have seen some opportunities to differentiate ourselves. For example, we have developed an alternative to split-gate we call EESTM. Also, we have developed the 28 nanometer which is PCM.
Today we have microcontrollers which are qualified and embedded in some automotive, 28 FD-SOI, with PCM and flash embedded in package. As I have discussed, we will develop the next generation.
Today, I think it is an unique automotive mission profile to qualify embedded flash technology with the flash in the backend of the line. And this technology will have the capability to address the other MCU applications.
Then we come back to power solution. Again, we differentiate ourselves with wideband gap materials, with our module capabilities, our BCD architecture, technology and also something I did not mention galvanic isolation, and the capability of system on chips to have very high voltage, as well as digital capability.
As for optical sensing solution, we strongly differentiate ourselves with both the capability to design time of flight technologies, modules and infra-red imaging sensors, the capability to integrate solutions, and also the opportunity to do it.
Last but not least, for analogs, the dual capability in Agrate and Crolles, where we have the world of BCD and the CMOS-based, when we mix the cooperation, we can develop very high performance analog technologies. That is the reason why we are in the diversified world because we have the opportunity to diversify and differentiate ourselves. That is the reason why we are no more in the computer world, and in the pure communication world where we know the scale, the market, and the capability to access the market, the entry barrier is very high. That is the reason why we disengaged more than 10 years ago to concentrate ourselves on diversification, differentiation and addressing mainly the automotive and industrial markets, but selectively the standalone, because we offer very strong differentiation.
4. In December 2020, you have announced that STMicroelectronics targets carbon neutrality by 2027, how will it impact your business models and change people’s lives?
Jean-Marc Chery: For sure, we will not modify our business model. It is a question of identifying our actions and the opportunities to achieve this objective. And we have three.
The first one is the PFC emission. It is simple. You have to equip your manufacturing plants with PFC equipment and it is a matter of CAPEX. And it is a matter of the design of the equipment tool sets for the new plants. So Crolles, Agrate 300, have PFC emission at zero. And we will equip our various plants with it.
It is an investment in the mature plants. Generally speaking when your mature plants have well depreciated, here you are increasing the depreciation because you are putting in CAPEX You are increasing its value proposition because you put new CAPEX.
But we consider it is our duty. And it is also a leading example for the overall semiconductor industry. Yesterday, I participated in the World Semiconductor Council as the President of the European Semiconductor Industry Association. We repeated that the engagement in the PFC emission by 2030 is very important, and ST will give a leading example to achieve this by 2027.
The second objective is power and energy consumption. We have engaged ourselves to optimize the power and energy consumption and we have a strategic cooperation agreement with worldwide players which are based in China and Hong Kong such as Schneider, and we have set up an important plan of power and energy consumption and reduction. In parallel, we are engaged ourselves in using 100% of renewable energy.
The third strategy is more challenging. It is the emission linked to transportation of goods and our people. For people, it is clear that we will leverage the lesson learned from the COVID-19 implication of staying and working at home. We will continue to develop our business and customer partnerships by using more and more connectivity tools. Of course, it will never replace completely face-to-face interactions. Again, I repeat I would be delighted to meet you in person today, but at least we have the opportunity to communicate using these tools. For sure, to minimize the transportation of people across the world will certainly be important.
Then for the goods, we have to ship them. Here our approach is more compensation.
We will use the usual tools to compensate our emission from the transportation to contribute for a greener planet.
And never forget, the last aspect is that semiconductors are an enabler for applications with lesser power consumption, and less gas emission including CO2 emission. I would like to repeat that the semiconductor is not a problem but the solution. If the world wants to reduce drastically energy consumption and emissions, and continue to grow in terms of devices, services driven by societal needs, the semiconductor industry is the solution, not the problem.
With our processor solution, power solution and analog solution, definitely ST is a key enabler to reduce emission and contribute to a better planet. So I confirm that we target carbon neutrality by 2027 and we will achieve it with sharp execution.
