STMicroelectronics (STM.US) has sparked market attention with its Q4 revenue forecast, estimating revenues of $3.28 billion, below the average analyst expectation of $3.35 billion. This outcome intensifies concerns about a stalled recovery in the mature semiconductor industry. Since the beginning of the year, the chip sector has been consistently impacted by geopolitical tensions. Former U.S. President Trump initiated a trade war, threatening large-scale tariff hikes.
Looking back, STMicroelectronics reported a 2% decline in Q3 revenue year-on-year to $3.19 billion, with analysts generally anticipating $3.163 billion. Earnings per share were $0.29, reflecting a 21.62% drop year-on-year, exceeding analysts' average forecast of $0.23 by 28.89%. Operating profit plummeted by 53% to $180 million, falling short of expectations. The company attributed these results to $37 million in asset impairments and restructuring costs from previously announced cost-cutting measures.
CEO Jean-Marc Chery stated in a press release that there have been “signs of recovery” in the market throughout the year, forecasting a total revenue of approximately $11.75 billion for 2025, indicating a 22.4% growth in the second half compared to the first half. Furthermore, the company announced it would reduce its annual capital expenditure plan to below $2 billion to “optimize investments based on current market conditions.”
The escalation of geopolitical tensions is threatening the semiconductor industry, which is just recovering from inventory excesses. During the COVID-19 pandemic, chip shortages led customers to stockpile, but demand recovery has been slow. Previously, STMicroelectronics reported an unexpected loss in Q2, with CEO Chery attributing it to one customer, calling it merely a “temporary setback,” and expecting growth in Q4.
It's noteworthy that a significant portion of STMicroelectronics' sales relies on Apple (AAPL.US) and Tesla (TSLA.US). Similarly, its competitor Texas Instruments (TXN.US) released disappointing earnings forecasts on Tuesday, showing that customers are reducing orders due to escalating trade tensions and economic instability. Additionally, the Dutch government unprecedentedly invoked Cold War-era laws to seize control of Chinese chipmaker Nexperia located in Amsterdam, posing a serious disruption risk to the automotive chip supply chain. In response, the Chinese government has prohibited Nexperia from exporting chips from its factories in China to Europe, further raising concerns about potential severe shortages for automotive manufacturers and suppliers.