In a media briefing Jean-Marc Chery talks about ST Ambitions, market growth, key strategies, and manufacturing investments and how to achieve sustainability goals.
Capital Market Day highlights and ST plans
ST held capital market day event on May 12th. Within the framework of an unchanged value proposition focused on sustainable and profitable growth, providing differentiating enablers to customers and with a strong commitment to sustainability, ST will leverage its early focus on three long-term enablers: smart mobility, power and energy management, and IoT & connectivity.
ST’s ambition is to become a $20B+revenues company between 2025 and 2027 with an operating margin stably above 30%. This will be duly executed with strong determination and discipline, while achieving our goal to be carbon neutral in 2027.
ST’s $20B+ revenue ambition will build on the strength of the Company’s Integrated Device Manufacturer model and customer relationships and will be based on its established end-market and application strategy, focused on Industrial and Automotive as a broad range leader and selective leadership positions in Personal Electronics and Communications Equipment, Computers & Peripherals.
This revenue ambition is anticipated to be driven by: 1) the Company’s core business, leveraging ST’s technology and market leadership, expected to grow in line with its established market; and 2) high growth areas, within or adjacent to ST’s core business, where the Company has or targets market leadership and is investing in technology, talent, product development and manufacturing.
Market Growth and Key Strategies
Our value proposition for our stakeholders is focused on sustainable and profitable growth, providing differentiating enablers to customers and a strong commitment to sustainability. We pursue an organic growth model, with a strategy of selected bolt-on acquisitions.
Our operational model is as an Integrated Device Manufacturer, with a wide range of capabilitiesin internal products & IP design, Technology R&D and advanced manufacturing. Our technology and manufacturing portfolio are selectively complemented by several great Foundries and OSATs.
Our strategy stems from three long-term enablers: smart mobility; power and energy; Internet of Things and connectivity. These guide our market positioning and customer engagements, continuous and open innovation processes, Product & IP design and technology R&D efforts and manufacturing investments.
Key Markets and Opportunities
We have a strong focus on the Automotive and Industrial markets as a broad range provider of Application-specific and general-purpose products, targeting leadership positions wherever we play.
We selectively address the Personal Electronics market, targeting some leadership positions with a few differentiated products or custom solutions as well as with our general-purpose products portfolio.
We also participate selectively in the Communications Equipment, Computers and Peripherals market
All this builds on our large customer base and balanced go-to-market approach, addressing top accounts, a broad range of OEMs and our distribution partners.
This strategy has already yielded appreciable results with ST reaching $12.8B revenues in 2021. And we are on track with our plan to reach about $15B revenues for 2022.
Automotive Growth
First, we are uniquely positioned to expand and grow in Automotive. ST provides key enabling technologies and products to support its unprecedented transformation driven by electrification and digitalization.
What can better illustrate our success than the programs we have running with 20 car makers in power train electrification with our Silicon Carbide MOSFET!
We expect now to achieve our $1B SiC revenue milestone in 2023 thanks to a total of over 100 running
Over the past years we have developed our business across the automotive value chain – with car makers, Tier 1 and 2 players.
Our carmaker customers for SiC include BYD, Geely, Great Wall, Hyundai and XPeng among many others. And our Tier1 customers include Delta, Huawei, Inovance, Quanta, Shinry, Sungrow, and Vmax, to name
In car digitalization, we are supporting our customers’ move to ADAS and software-defined vehicles. We cover the full system critical specifications of high-computing power, real-time control needs, power management and sensing solutions.
Industrial Growth
There is a significant growth opportunity for ST also in Industrial, because this market is also undergoing a deep transformation, very similar to the Automotive one, driven by:
The Digitalization of devices and systems including the integration with the cloud (“cloudification”); this includes manufacturing, logistics, automation and robotics and various autonomous systems.
Energy Management and Power efficiency improvements, including power efficiency of manufacturing machine, energy infrastructure and transportation, Home Appliances, as well as battery-based electrification of devices and systems.
We target three main domains in the Industrial market:
- Factory automation and Industrial Infrastructure, the largest part, which includes automation, power and energy, transportation, test & measurement, and lighting.
- Consumer industrial, which includes home appliances, smart buildings and homes, and power tools.
- A more specialized part addressing, for example, healthcare and aerospace.
We address this very fragmented market broadly through large and global OEMs, more specialized and regional OEMs, mass-market and distribution partners: from products to solutions with deep applications focus, knowledge and support.
ST’s unique competitive advantage in Industrial is based on our ability to offer a complete product portfolio for embedded processing, power and analog solutions, and sensors, as well as the competence to bring this all along together in optimized products and solutions for our customers.
Personal Electronics Market
In Personal Electronics, smartphones and connected devices will continue to be the centerpiece of our connected world.
With our broad and highly innovative customer base, Personal Electronics remains an exciting industry for us to participate in.
We focus on selected high-volume smartphone applications and accessories. These include our leading positions in Optical Sensing Solutions and MEMS sensors, secure solutions, wireless charging and selected power management ICs. We also leverage our broad portfolio to address high-volume applications like smart watches, through our STM32 microcontrollers. Our strong customer engagements position us well in Personal Electronics also for the future to contribute to our $20B+ revenues ambition.
More specifically in Asia, we continue to see strong dynamism in the China smartphone market with 5G smartphone opportunities developing in the coming years—and we will benefit in areas where ST has been leading the market for many years with state-of-the-art IP and technologies in differentiated products or custom solutions. There are also a growing number of opportunities in areas such as the gaming industry as well as wearables, accessories, and personal-care devices.
Communications equipment, computers & peripherals Market
In the Communication Equipment and Computer Peripherals space, the digital transformation has accelerated, with increasing needs for data transmission and storage and the need to secure that data in a wide variety of devices and networks. Here we will continue to target selected high-volume applications with differentiated products or custom solutions.
Manufacturing and Supply chain as critical success factor
We are continuously investing to support our growth plans and improve our competitiveness. In 2022 alone we expect to spend $3.2-3.5B CAPEX.
We are transforming our manufacturing footprint with strategic investments in 300mm wafer manufacturing and vertically integrated Wide bandgap production capabilities.
We already have a unique position in our 300mm wafer fab in Crolles, France, as a high-volume manufacturer with CMOS based technologies including embedded non-volatile memory, RF mixed Signal or other specialty technologies ranging from 90nm down to 28nm. This makes ST’s manufacturing footprint unique and competitive among our peers. And we continue to invest with our new 300mm wafer fab in Agrate, Italy while also expanding to analog and specialty technologies.
We are also rapidly growing our Wide Bandgap manufacturing capabilities and leading the technology race moving soon to 200mm for SiC. We are making progress on reaching our target of 40% internal substrate sourcing with a pilot line delivering 150mm and 200mm substrate. In the near future we will have a new integrated plant.
In GaN we have now completed our internal 200mm manufacturing line and epitaxy center in Tours, France. We anticipate to start volume production next year (in 2023). We are of course already in production on powerGaN with TSMC.
Meanwhile we continue to expand capacity in 200mm to support customer demand. Our Singapore fab is ST’s largest by volume, and it will continue to grow, especially for analog. Elsewhere in Asia, we continue to invest in both capacity and technology in our back-end fabs located in Malaysia, China and the Philippines to support future growth.
We will also continuously invest in our business support and enabling functions to optimize our supply chain capabilities to face incremental challenges and constraints of our industry with increasing complexity.
We have been heavily investing in machine learning and artificial intelligence solutions, big data analytics, digital twin models to merge the physical and the virtual, and collaborative tools across all our operations. All this is supported by a step change in the way we use cloud computing.
Embedded into our ambition
We are committed to sustainability for all our stakeholders: here we are investing to further accelerate our efforts by creating technology for a sustainable world, in a sustainable way. Our commitments here go back more than a quarter of a century and we have the goal to achieve carbon neutrality by 2027.
A great example is the project we just announced a couple of weeks ago in Singapore. With our local partner SP Group we will build a district cooling system for our fab; it will be the largest industrial DCS project in Singapore. This is a significant project worth $370M over 20 years, to provide chilled water as a service for both manufacturing operations and offices. It will be operational in 2025. The benefits are clear: 20% savings in cooling-related electricity consumption annually, and a reduction of carbon emissions of up to 120,000 tons per year.
People at ST – The Energy that drives us Forward
Our 48,000 people who are the enabling force behind our ambition and value proposition to become a $20B+ revenues company between 2025 and 2027 with an operating profit stably above 30%.
In Asia we have about over 18,800 colleagues, working in R&D and design centers [1160], in our competence centers, in our front-end and back-end fabs, in logistics, and in our 34 offices throughout the region. Their work and commitment has been a key factor in our resilience and success over these past years.
What is the impact on global semiconductor industry for the next 2-3 years from Russia/Ukraine conflict and changes in global political and economy landscape? Will it lead to faster steps and strategy deployment in supply chain localization in different countries and regions? For this, what are ST’s considerations and strategy alignment?
The specific impact about the Russia/Ukraine war for the semiconductor industry, and specifically, potentially for ST, is about some production process materials, process gases or chemicals, but especially the gases shortage (xenon neon, and helium). For the time being, this is the case where we will see the overall industry itself will have to find a solution. Such gases shortage is because of this event of the war between Russia/Ukraine as well as some other events in the world. So specifically, the impact is about potential and additional shortage or supply chain constraint situation from supply of materials to gases.
Well, then it’s clear that the extensive impact, that, the specific impact of Russian Ukraine war is about increasing unpredictability of the economy and geopolitics and clearly an increasing tension everywhere in the world. Everyone is not great at the moment including us in the industry. The economy is facing a very very important challenge about the environment, the planet, to find the way to generate clean technology, to consume less energy, less power to be much more efficient.
How will you achieve carbon neutrality while continuing to increase production capacity and activities?
I think it is not an option to not reduce carbon emissions. And we have a plan, we have a clear plan. First is to reduce our own direct emission from greenhouse gases. I have done an operation review with the local wafer fab, and they shared with me, up to 2027, to make the abatement of the greenhouse gases we already generated. And it’s very simple. It is investment. It’s clear in Singapore we will invest above $70 million of equipment to make the greenhouse gases abatement. That is the first thing.
The second thing is indirect emission. So in energy consumption, we have many plans, first of all, we have planned and they share with me plan to reduce both in relative value, so units, mega watt per square foot of produce, but also in absolute value. And what I have mentioned about the cooling center of Singapore is a great example. And we have done a similar one in the south of France. Recently, I have celebrated a similar installation in South of France. So, we have an action as well to reduce our energy consumption. We have planned, and we have actioned to source our energy from green energy and we want to be a company using a 100% renewable energy by 2027. So, we have a clear plan of direct emission abatement. And here is the capex expenses and some time, we use partnership and I have to say we are partnering with Schneider to work on this action plan on abatement of direct emission or energy saving or usage of renewable energy.
And afterwards, we have also a set of actions to optimize the indirect emissions of our logistic transportation of people and goods. And also, definitively as any company, we will mitigate them with the action and strategies. So we have a full set of action plans, very similar to capacity increase, very similar to productivity improvement, quality improvement, security improvement, cost decrease, again, technology, so it’s, it’s a matter of execution of plan and management commitment. And the management incentive is a long-term, and KPI. One third of the long-term incentive management scheme is about sustainability. And the short-term incentives as well. Management is incentivized on it. So it’s a matter of plan.
Then about the cost, manufacturing cost. It is our challenges to mitigate the headwinds we have. So, I would like to repeat that some headwinds in terms of inflation and inflation of energy, inflation of material and process material, chemicals, gases and so on. But we still have an opportunity of cost improvement. And one important leverage we will have in our future manufacturing costs is the transition to 300mm. So, we will do more in the next few years, achieving the $20 billion plus, and we will double the weight of the 300mm wafer production for ST. So, this is a huge opportunity of cost decrease. Very similar for WBG. Today our SiC is at 150mm, we will move to 200mm.Automation in our assembly and test plants, so we have a great opportunity for automation, Industry 4.0. So, we have in our handssome opportunity of cost reduction, to balance, and more than mitigate at the end to improve our costs. So that’s the reason why the heavy reduction, the decarbonization of ST is not an option. It is embedded in our plan.
