STMicroelectronics reported third-quarter net revenues of $3.76 billion on 29 October, up 17.9% year on year and 7.7% on the previous quarter, with a gross margin of 37.3% and net income of $291 million.
Chief executive Jean-Marc Chery described an environment in which “demand remains well above supply”, supported by strong bookings and improving visibility, and noted that inventory held in distribution continued to track below the company’s standard target. The microcontroller, digital and radio-frequency group grew 29.9% to $1.72 billion, with general-purpose embedded processing up 24.1% and optical communications up 46.2%. Fourth-quarter guidance points to about $4.15 billion, and roughly $14.5 billion for the year.
This is the part of the market that most products actually sit in. ST does not make accelerators; it makes the microcontrollers, analogue parts, power devices and sensors that end up in appliances, cars, tools and instruments. When that supplier reports demand above supply and thin channel inventory, it means the shortage has reached ordinary components rather than staying in the exotic ones.
Low distribution inventory is the signal to act on. It means the buffer between a factory queue and your build has been used up, so a change in your schedule now travels all the way back to the fab, with the fab’s lead time attached.
The gross margin recovery is the quieter number. At 37.3%, up more than four percentage points on the year, it mostly reflects factories running full rather than sitting idle: unused capacity charges fall away when every line is loaded. That works in reverse just as quickly, which is why a supplier enjoying this part of the cycle is cautious about adding capacity for it.
Source: STMicroelectronics