Author | American Stock study Society

Data support | Tougou big data

Before July 28, Italian and French semiconductors$Sensata Technologies (ST.US)$The release of higher-than-expected results, mainly due to strong industrial and automotive market demand, revenue EPS double higher than expected, net profit doubled compared with the same period last year. The share price has fallen 1.97% since the release of the results.

By the end of August 23, 2002, St had risen 29.16% for the whole year and-24.81% so far in 22 years, outperforming the S & P 500 ETF (SPY:-11.64%) and PowerShares QQQ Trust, Series 1 (QQQ:-20.04%) and outperforming the Philadelphia Semiconductor Index (SOXX:-26.17%) in the same period.

01 Financial report details: revenue and EPS are higher than expected

St Q2 revenue rose 28.2% year-on-year to $3.837 billion (guidance $3.75 billion (±3.5%), expected $3.76 billion); gross profit margin rose steadily to 44.4% (yoy+6.9%,qoq+0.7%, guideline 44% Lou 48%, mainly due to 22Q2 raising prices for all product lines, including existing backlog products, although the price increase was not disclosed) Net profit rose 109.9% year-on-year to $867 million, while diluted EPS increased 109.1% year-on-year to $0.92 (expected to be $0.80).

St is one of the top five suppliers of automotive chips, with more than 10W customers, with the biggest customers being Apple Inc, an iPhone manufacturer, and Tesla, Inc., a leader in electric vehicles. (Tesla, Inc. 's current silicon carbide power modules are mainly provided by STMicroelectronics, and it is reported that ON will reach a "long-term agreement" with Tesla, Inc. to provide silicon carbide (SiC)).

Last quarter, ST said that current market demand was 30% more than ST's maximum capacity, with bookings of more than $4 billion. Bookings from all customers and regions of Q2 St continued to be strong, with a backlog of order visibility between 6 and 8 quarters, much higher than Italy's current and planned 2022 production capacity, and 23 years of full production capacity has been sold out.

02 the three major businesses performed well: ADG and MDG all grew by more than 30% compared with the same period last year, while AMS grew by more than 10%

Revenue from the automotive products and discrete components division (ADG) rose 35 per cent year-on-year to $1.454 billion, mainly thanks to growth in automobiles and power discrete devices. Silicon carbide equipment is a key component of automobile electrification. ST says it has increased the number of silicon carbide projects in the automotive and industrial markets to 102, covering 77 customers. ST is expected to earn $700 million from silicon carbide in 22 years and $1 billion by 23 years. On August 20th, component supplier Marelli signed a partnership with ST to provide a highly integrated and efficient SiC power electronics solution for the automotive market.

Although the market for SiC power devices has been growing steadily over the past five years, and global equipment manufacturers are accelerating the production of silicon carbide (SiC), forecasts show that its growth will really take off in 24 years. According to TrendForce's estimate, the market size of automotive SiC power components will reach US $1.07 billion in 22 years and will climb to US $3.94 billion in 26 years. Currently, leading equipment suppliers have met the basic challenges of SiC manufacturing, but due to the long delivery time, the fab manager is ordering additional equipment. In other words, there is still a lot of room for improvement in the process details, and IDM and the contract factory continue to work with suppliers.

Earlier, STMicroelectronics and Volkswagen's software arm Cariad jointly developed system-on-chip (SoC) for automobiles. This is the first time that Volkswagen has established a direct relationship with secondary and tertiary semiconductor suppliers. In the future, Cariad plans to guide Volkswagen Group's first-tier suppliers to use only SoC, which was co-developed with ST, and ST's standard Steller microcontroller for Cariad's regional architecture. In addition, the two sides are agreeing to choose Taiwan Semiconductor Manufacturing Co Ltd to produce SoC wafers for ST to ensure the supply of chips in the next few years. Neither Volkswagen nor ST disclosed the financial size of the deal, but it made ST one of Volkswagen's top technology partners. In May, Volkswagen said it would purchase system chips from Qualcomm Inc to develop L4 self-driving, and a spokesman for Cariad said the latest agreement would not affect the partnership with Qualcomm Inc.

Revenue from the analog devices, MEMS and sensor division (AMS) rose 11.3% year-on-year to $1.127 billion. On June 10th, Metalenz, the first company to commercialize meta-optics, and ST, a semiconductor supplier, announced that the VL53L8 Direct time of Flight (dToF) sensor currently released by ST is a hyperoptical device jointly developed by both sides. The device was disclosed in June 2021 and has been highly anticipated.

Metalenz's meta-optics technology from Harvard University can replace existing complex and multi-element lenses and provide additional functionality through a single meta-optics embedded in the time-of-Flight (ToF) module of ST, a leading company providing 3D sensing modules. The introduction of Metalenz technology into these modules can bring performance, power, size and cost advantages to many consumer, automotive and industrial applications. This marks the first time that super-surface technology has been commercialized and used in consumer equipment.

Due to the growth of microcontrollers and radio frequency communications, revenue from single-chip microcomputer (MCU) and digital IC (MDG) increased by 39.5% year-on-year to $1.251 billion. In 2021, St ranks first in the world in the field of general microcontrollers. In embedded processing, the company is consolidating 32-bit MCU's market leadership and will continue to invest to further enhance the STM32 family of products, providing an ecosystem with a special focus on wireless connectivity, security and artificial intelligence.

On May 12, MCU chip giant ST predicted that, driven by continued strong demand from the industrial and automotive industries, annual sales would exceed $20 billion by 27 at the latest long-term goal of about 23.5% higher than the 22-year target limit of $16.2 billion, and the company plans to achieve a gross profit margin of more than 50% by 27 at the latest. The new sales guidance covers a period of 25-27 years, indicating that ST expects its industry to continue to grow rapidly, which may also mean that, depending on market conditions, ST expects to achieve new sales and gross margin targets earlier.

03 summary

The company's management expects Q3 net revenue of $4.24 billion (±3.5%) and gross profit margin of about 47% (±2%), and expects 22H2 capacity to increase by 12.5% and revenue of $8.7 billion. At the same time, FY22 is expected to have revenue of US $159-16.2 billion (yoy+24.6%/26.9%), gross profit margin of 47% and full-year capital expenditure of US $34-3.6 billion (yoy+86%/97%).

According to the plan, ST will significantly increase wafer production capacity in the next 4 years, and plans to double the overall production capacity of European factories in 20-25 years, mainly by increasing 300mm (12-inch) capacity; for 200mm (8-inch) capacity, STMicros will selectively increase, mainly for those technologies that do not need 12 inches, such as BCD, advanced BiMOS and ViPower.

On July 11th, GE Core and STMicroelectronics announced that they plan to build a new wafer factory in France with an investment of billions of euros, which will adopt FD-SOI (Silicon on Insulator on Insulator) technology. The most advanced process is 18nm, with a full capacity of 620000 12-inch (300mm) wafers per year. It is scheduled to reach full production in 2026, mainly for semiconductors in automotive, Internet of things and other areas. The move will help the EU meet its goal of producing 20 per cent of the world's chips by 2030 (the EU also introduced a subsidy bill worth 45 billion euros to compete with the US $52 billion chip subsidy bill). It will also help Italian and French semiconductors increase revenue to more than $20 billion.

With NTM PE 9.6x at a five-year low and continued strong demand in the automotive and industrial sectors, especially from Chinese mainland, the company's revenue will rise steadily and its valuation will most likely be repaired.