Tesla Supplier STMicroelectronics Cuts Guidance Again Amid Slow Automotive Market — 2nd Update

By Mauro Orru

STMicroelectronics slashed its sales and margin forecasts for the year once again as it continues to face lackluster demand for chips from the automotive industry.

The European chip maker said it now expects revenue of $13.2 billion to $13.7 billion this year compared with a previous range of $14 billion to $15 billion. Meanwhile, its gross margin is now expected at about 40% compared with a previous forecast in the low 40s.

The downgrades come three months after the group initially cut its forecasts due to slow demand, particularly from the automotive industry. STMicroelectronics, which counts Apple, Samsung Electronics and Tesla among its customers, said sales of chips for personal electronics had shows signs of improvement, though demand from the automotive industry and producers of industrial equipment remained low.

While demand for AI chips has been booming, the wider semiconductor industry is still facing an inventory glut: Major chip makers delayed spending on production equipment as they grappled with lackluster demand for semiconductors since manufacturers of consumer devices, cars and industrial equipment held off ordering more chips that they had stockpiled in recent years.

Electric vehicles, which have long provided a lifeline to chip makers, are no exception. Profit at Elon Musk's electric-vehicle maker Tesla tumbled for a second straight quarter, a sign that the EV market is still away from a full recovery.

"During the quarter, contrary to our prior expectations, customer orders for industrial did not improve and automotive demand declined," said Chief Executive Jean-Marc Chery.

Shares in Paris slumped more than 10% on Thursday.

Revenue slumped more than 25% on year to $3.23 billion in the second quarter. Analysts had forecast revenue of $3.20 billion, according to consensus estimates compiled by Visible Alpha.

STMicroelectronics posted a net profit of $353 million compared with $1 billion a year earlier. Gross profit--a closely watched metric for companies operating in the semiconductor industry--plunged to $1.30 billion from $2.12 billion, generating a 40.1% gross margin.

Analysts had forecast a net profit of $323.1 million and a gross profit of $1.28 billion, according to the Visible Alpha consensus.

For the current quarter, STMicroelectronics expects revenue of $3.25 billion and a gross margin of 38%.

Write to Mauro Orru at mauro.orru@wsj.com

(END) Dow Jones Newswires

July 25, 2024 05:03 ET (09:03 GMT)

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