STMicroelectronics N.V.

Before starting this call, I am very pleased to announce the appointment of Jérôme Ramelle as Executive Vice President Corporate Development and Integrated External Communication. Jérôme has been associated with our company for many years as a recognized European semiconductor analyst and has had 24 years of experience in several roles in various finance institutions. He brings in-depth knowledge of the semiconductor industry and capital markets, which would be extremely beneficial to support the company in the way we interface with investors, analysts and external stakeholders. I would now like to briefly turn the call over to Jérôme.

Thank you, Jean-Marc, and good morning. I'm very pleased to join ST and excited by this new challenge. So thank you, everyone, for joining our third quarter 2024 Financial Results Conference call. Hosting the call today is Jean-Marc Chéri, ST President and Chief Executive Officer. Joining Jean-Marc on the call today are Lorenzo Grandi, President and CFO, and Marco Cassis, President Analog Power and Discrete Mems and Sensor Group, and Head of ST MicroStrategy System Research and Application and Innovation Office. This live webcast and presentation material can be accessed on the ST Investor Relations website. A replay will be available shortly after the conclusion of this call. This call will include forward-looking statements that involve risk factors that could code ST results to differ materially from management expectations and plans. We encourage you to review the Safe Harbor statement contained in the press release that was issued with the results this morning and also in ST Moire's recent regulatory filing for a full description of this risk factor. Also, to ensure all participants have an opportunity to ask questions during the Q&A session, please limit yourself to one question and a brief follow-up. Now I'd like to turn the call over to Jean-Marc Chéri, ST President and CEO.

So thank you, Jérôme. Let me begin with some opening comments, starting with Q3. So third quarter net revenues of $3.25 billion were in line with the midpoint of our business outlook range, compared to our expectations. Revenues were higher in personal electronics, declined less in industrial and were lower in automotive. Q3 gross margin of .8% was broadly in line with guidance. Q3 net revenues decreased .6% -over-year, mainly driven by a decline in industrial and, to a lesser extent, in automotive. Looking at our -over-year performance, gross margin decreased to .8% from 47.6%. Operating margin decreased to .7% from 28%. Net income came in at $351 million. On a sequential basis, net revenues increased 0.6%. For the nine-month period, net revenues were down .5% -over-year to $9.95 billion, decreasing across all reportable segments, and particularly in microcontrollers, which is impacted by the continuing weakness in the industrial market. We reported gross margin of 39.9%, operating margin of 13.1%, and net income of $1.22 billion. During the quarter, customer order bookings were slightly up versus Q2, but were below our expectations. This reflected a continuing delayed recovery in industrial and a further deterioration in automotive. As a result, we now anticipate Q4 2024 revenues at the low end of the range previously indicated, and well below normal seasonality in Q1 2025. For Q4 2024, our first quarter business outlook is for net revenues of about $3.32 billion at the midpoint, declining -over-year by .4% and increasing sequentially by 2.2%. Gross margin is expected to be about 38%. For the full year 2024, the midpoint of our Q4 guidance translates into full year 2024 revenues of about $13.27 billion, representing a .2% decrease -over-year at the low end of the range indicated in the previous quarter, with a gross margin slightly below that provided in that indication. For Q1 2025, based on our current customer order backlog and demand visibility, we anticipate a revenue decline between Q4 2024 and Q1 2025, well above normal seasonality. I would like to highlight that today we have also announced the launch of a new Company-wide program to reshape our manufacturing footprint, accelerating our wafer fab capacity transition to 300 mm silicone and 200 mm silicone carbide. And resizing our global cost base. Now I will move to a detailed review of the third quarter. My segment on a -over-year basis. Analog products, NEMS and sensors was done .3% mainly due to the decrease in imaging and in analog. Power and discrete products decreased .4% with a decline in both power and discrete products. Microcontrollers revenues declined .4% mainly due to general purpose microcontrollers. Both power and discrete and general purpose microcontrollers revenue declines were largely driven by industry. Digital ICs and radio frequency products declined .7% mainly due to headass and infotainment. By end market, industrial declined by more than 50%, automotive by about 18%, personal electronics by about 9% and communication equipment and computer peripherals by about 5%. -over-year sales to OEM decreased .5% and by .4% to distribution. Overall Q3 net revenues increased .6% sequentially with an increase of .7% in analog products, NEMS and sensors, .9% in power and discrete products and .6% in microcontrollers, while digital ICs and radio frequency products decreased 17.4%. By end market, industrial was down about 12% sequentially, automotive flat, personal electronics up about 20% and communication equipment and computer peripherals down about 8%. Growth profit was $1.23 billion decreasing .8% -over-year. Post margin decreased to .8% compared to .6% in the same quarter last year. The decrease was mainly due to product mix and to a lesser extent to sales price and higher unused capacity charges. Operating margin was .7% compared to 28% in the Euro-Go period. On a -over-year basis, Q3 net income decreased around 68% to $351 million compared to $1.09 billion in the Euro-Go quarter. On a -over-year basis, earnings per diluted share decreased to $0.37 compared to $1.16. Net cash from operating activities decreased to $723 million to $3 versus $1.88 billion in the Euro-Go quarter. Net capex in the third quarter was $565 million compared to $1.15 billion in the Euro-Go quarter. Decaf flow was $136 million compared to $707 million in the Euro-Go quarter. Inventory at the end of the third quarter was $2.88 billion compared to the $2.87 billion in the Euro-Go quarter. Days sales of inventories at quarter end were 130 days, similar to the previous quarter, and up compared to the 114 days in the Euro-Go quarter. During the third quarter, ST paid $80 million of cash dividends to stockholders and executed a $92 million share buyback under our current shared repurchase program. ST's net financial position of $3.18 billion as of September 28, 2024, reflected total liquidity of $6.3 billion and a total financial depth of $3.12 billion. I will now go through a short update on some of our strategic focus areas. In automotive, we saw some further deterioration in customer backlog and order entry during the third quarter. In our view, this reflects a change in the plans of our customers, with some shift from full battery electric to hybrid and from premium to economy vehicles, as well as not sized production at carmakers to control inventories. However, we do not anticipate significant change in the long-term electrical vehicle adoption by consumers, and we assume their concerns – residual value, charging stations, price – will gradually alleviate. During the quarter, we continued to execute our strategy on car electrification. We introduced our fourth generation of silicon carbide MOSFET technology. This brings new benchmarks in power efficiency, power density on our business, and is particularly optimized for traction inverters in electrical vehicles. We had multiple wins with both silicon carbide and silicon devices and modules for new traction inverters and on-board charger design. We also won additional business with our automotive smart power technologies for electrical vehicle battery and power management systems, as well as our smart fuse solutions. In car digitalization, we gained further traction with our portfolio of automotive microcontrollers. Our Stellar microcontroller was selected by a major European carmaker in a new platform for traction inverter and on-board charger management. Another significant stellar win was with a Japanese TR-1 as part of an electrification platform design that integrates multiple functions in a single MCU. This approach is generally called -in-1 and is an important trend for next generation of car architectures. A further win saw Stellar chosen for an active safety application in a new electrical vehicle platform from an emerging player. We also continue to have important design wins in traditional applications like braking, where we are the leader in smart power. Each sensor we had a number of wins with our automotive grade motion MEMS for smart keys, telematics units, and for our innovative rotating car display. Our design win activity here continues to position ST well to leverage the structural growth in this key market. In industry only, we are seeing continuing inventory correction at OEMs and along the value chain, preventing any significant recovery in semiconductor demand. In this context, we continue to work with customers to design in today's products while investing in R&D to create the next generation of solutions. We had design wins across a broad range of applications for our power and analog portfolio. This included a design win with silicon and silicon carbide products for a leading provider of power supply units for AI and server infrastructure. A fast win application requiring very high power efficiency. In embedded processing, our STM32 microcontrollers continue to be the most familiar MCUs for developers. We have a recognized software ecosystem with over 1.2 million unique users, growing more than 30% -over-year. And one of the fastest growing and most active microcontroller technical communities with over 500,000 unique visitors each month and 40% -over-year growth. This growth in STM32 adoption will position ST to capitalize effectively on the next industrial market upcycle. Additionally, we have over 50,000 active development projects on ST's artificial intelligence tools. This activity has been also boosted by our ST Edge AI Suite that we were launched at the end of the last quarter. During Q3, we also announced a new strategic collaboration with Qualcomm Technologies for the next generation of industrial and consumer IoT solutions. Together, we will integrate Qualcomm's leading wireless connectivity technologies with our STM32 microcontroller ecosystem. We will start with a Wi-Fi Bluetooth thread combo system on the chip. Thanks to this, developers will enjoy seamless connectivity software integration into STM32 microcontrollers. Moving now to the other two end markets. Personal electronics was slightly better than expected, and communication equipment and computer peripherals was in line with expectations for all our engaged customer programs. To conclude on this Q3 update, I would like to mention a new step in our company organization. Since the beginning of 2024, ST has made a significant change in the way it is structured and operates, including the reorganization of its product group. Since October 1, 2024, Lorenzo Grandi, President and CFO, has taken additional responsibilities, with the perimeter now also covering supply chain, corporate development, and integrated external communication, in addition to finance, global procurement, digital transformation, and information technology. The company's executive committee remains unchanged and continues to report to me as President and CEO. Now let's move to our fourth quarter, 2024 financial outlook, and our plans for the full year 2024. For Q4, we expect net revenues of about $3.32 billion at the midpoint, representing a -over-year decline of .4% and a sequential growth of 2.2%. Q4 growth margin is expected to be about 38% at the midpoint, impacted by about 400 basis points of unused capacity charges. For 2024, our Q4 guidance at the midpoint translates into 2024 net revenues of about $13.27 billion. This represents a decrease of about .2% -over-year in the low end of the range indicated in the previous quarter. Within this guidance, we expect a growth margin of about 39.4%, impacted by about 290 basis points of unused capacity charges at the midpoint of our 2024 full year indications. This $13.27 billion is in the low end of the revenue range indicated in the previous quarter. The difference compared with the midpoint of the range relates mainly to lower revenues in automotive and to a lesser extent lower revenues in industrial. Partially offset by slightly better revenues in personal electronics. We confirm our 2024 net capex plan of about $2.5 billion. For Q1 2025, at this time of the year, we usually do not comment two quarters ahead. But based on our current customer backlog and order entry dynamics, we anticipate a revenue decline between Q4 2024 and Q1 2025 well above normal seasonality. Fair to say, this also includes a significant lower number of calendar days in Q1 2025 versus Q4 2024, a 6% sequential decrease, which is the highest sequential decrease in the number of days in the last three years. Finally, today we have announced the launch of a new company-wide program to reshape our manufacturing footprint. We are accelerating our wafer fab 300 mm transition in Agratet and Kohl. In particular, in Agratet reaching a scale of about 4,000 wafers per week exiting 2026. In Kataja, in Silicon Carbide, we will accelerate our transition to 200 mm. Moreover, we will resize our global cost base. This program should result in strengthening our capability to grow our revenue, but with an improved operating efficiency, resulting in annual cost savings in the high triple digit million dollar range exiting 2027. To conclude, as I said last quarter, the current market cycle dynamics, coupled with the ongoing transformation of the automotive and industrial end markets, are bringing both opportunities and challenges in the short, medium and long term. And this is true for ST and for our customers equally. In the short to medium term, we are adapting our operating plans to this situation, and we are launching our company-wide reshaping and resizing program, while continuing to invest in innovation and our strategic manufacturing initiatives. Major to long term, we continue to be convinced that this will provide the basis for our sustainable growth ambitions and for delivering value to our stakeholders. We look forward to updating you on our strategy at our capital markets day on November 20th, either in person in Paris or via our live webcast. Thank you for your attention, and we are now ready to answer your questions.

We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question or a comment may press star and one at this time. The first question is from Francois Bovigny from UBS. Please go ahead.

Thank you very much. Jean-Marc, I wanted to come back to Q1 comments. Obviously, you mentioned less calendar days, but you know the sharp decline in Q1. Could you highlight maybe some drivers? And importantly, you know it is the first quarter of the calendar year, which is the pricing reset. And you know that we have a lot of fear on the market right now, especially given the oversupply and the demand environment that pricing could fall significantly into next year. How should we think about that as negotiations started and you guided a weaker Q1? What is the pricing impact here and how should we think about next year's pricing environment?

On the pricing, I will let Lorenzo comment, but here he is not a warning about pricing. Absolutely not. He is more a warning about the customer backlog and the order dynamic. And the fact that you know that in Q1, we have the usual seasonality of personal electronics. And including on personal electronics, potentially this year could be worse. Well, unfortunately, it will be significantly this year amplified by the fact that the quarter will be shorter. 88 days compared 94 days in Q4. So this impact also significantly is a run rate of the revenue. Well, so so usually we have a let's say a low hand double digit sequential growth. This year will be amplified by the 6 percent is more related to the customer order dynamics and backlog. Maybe worse specifically on personal electronics rather than something trigger by the price. So, Lorenzo, you want to comment?

Yes. Good morning, everybody. You know that when we look at the price dynamic today in this quarter, substantially the pricing is similar to what was expected. I would say low single digit decline. Next year, as was Jean-Marc remarking, we don't see a dramatic price environment. Yes, it is a little bit. Let's say there is a little bit more pressure than this year. But we still are talking about the single digit decline overall. So we of course, we are in the negotiation phase now. But as I said, overall for the company, in average, we see something that is more in the mid single digit. That is a little bit higher than this year, but not as dramatic changing. Thank you for the thank you very

much.

You have any follow

up for this one.

Yeah, yeah,

yeah. The follow up would be on the on the macro control aside. I mean, obviously, it has been, you know, a big decline through the year. I mean, Q4 might be so declining a lot. I was wondering where where are you inventories in the channel? I mean, you know, where are you in this inventory correction? You know, versus your normal level where you think you should be. And do you see any light, you know, in the in the tunnel here with regard to macro control as industrial particularly?

But for general purpose, OK, it is clear that it is a very significant decrease this year. Above minus 50 percent and 24 versus 23. We have to say that. About more than half of this decrease for microcontroller is really connected to an inventory correction. But the point is that this inventory correction is is lasting more than expected because the handyman of our customer. OK, moving along the year was also decreasing. So we also said that 30, 35 percent of the decrease of microcontroller is ultimately linked to the end demand weakening of the of the customer of our customer. It is true that we have lost some market share in China, linked to the fact that during the shortage of semiconductor, we squeeze some Chinese company to support, let's say, automotive and other big OEM and industry. So we squeeze distribution in China in 2021 and 2022. And now we have lost this market share about the inventory correction in the channel. It is not decreasing as expected speed. And why? Because decreasing our POP, we didn't see, unfortunately, globally, I'm spoken. There is a very dynamic by region. The POS is not, let's say, behaving sufficiently to decrease inventory faster. So we expect that into one inventory correction will continue, especially in Asia, amplified by the Chinese New Year vacation in fact. Should continue to decrease a bit in Q2 and discussing with our distributor. We should expect a normalization in 2025. So this is where we are today.

Thank you. Next question please. My next

question is from Sunday, the standard from JP Morgan. Please go ahead.

Yeah, hi. Thanks for letting me on. I have a question on the automotive market. In the first half of the year, you saw slowdown from your big EV customer as well as you saw slowdown due to Mobileye. And now you're saying in the fourth quarter, you're seeing further slowdown. Can you quantify where this slowdown is occurring? Is it in legacy parts? Is it in silicon carbide? So where is this slowdown occurring in the automotive market and associated with the slowdown? Are you seeing the tier one suppliers reducing their inventories now, given that they have been holding such high levels of inventory in the automotive supply chain? Are we now seeing that correction in the automotive supply chain in terms of inventory? And is that one of the reasons why? Of course, there's the consumer angle as well, but on the person electronics angle. But is that continuing into the first quarter of the year? I have one quick follow up.

Well, thank you. If you don't mind, I will share the answer with Marco Cassis.

Yes, Sandeep. Good morning. So, yes, what you say is correct. Let give me some color. So, first of all, the reduction in automotive is related with an overall reduction in terms of light vehicles. So, in terms of light vehicles, 24 would be lower than 23 and going specifically on battery operated cars, we see a reduction in the battery operated cars, giving space, let's say, to an increase in the hybrids and the plug-in hybrids. We are able to quantify this decrease in terms of battery operated car in the range of 15%, not equally distributed, much less in China and more in Europe and in the US. So clearly, this has an impact considering that battery operated cars has a higher content in terms of silicone and has, of course, an impact also on the silicone carbide. We believe, and this is what analysts are saying, is that 25 will be still not growing the overall number of light vehicles. So it's a situation that will proceed during 25, at least for the first half. And clearly, this has created, of course, probably some excess of inventory at car makers and along the supply chain, which has an impact, as we have seen in our overall numbers. Now, say that if you extend a little bit the time horizon, we do believe that electrification is going to come because it's linked to factors that will be in place. And it's going to come at a lower pace than what we were expecting. 25 for a start would be not easy. But as you said, yes, it's a combination of the factors that we are highlighting. I hope that this answers your question.

Thank you. And then, I mean, you mentioned earlier on the pricing environment at the moment. Can you just comment on what you're seeing in terms of in the automotive space in particular, what you're hearing in the current negotiations that are happening for pricing into next year, given how difficult the environment is for your customers and given also that they are holding quite high levels of inventory?

The negotiations are ongoing. For sure. Let's say this year, the price pressure in automotive was there, but quite mild. I would say that at the end, let's say it was in the low single digit. It's true that starting negotiations, we see some more price pressure in automotive than in the one that we see in 2024. Of course, as you can imagine, it's different in respect to the various customers. But I would say that assuming that at the end, the negotiations that are ongoing will end like the one that we are close already. We may say that in automotive now the price pressure would be mid single digit. Let's say something in that range. Then we may have some more and less, but at the end, this is what we see today.

Maybe if I can complement. It is clear that also it has been assessed in the perspective of the regional view. It is clear that today that what is happening in China, especially on the fact that Chinese carmakers are really have excess of capacity. The price pressure in China, specifically around the ecosystem of passenger vehicles or live vehicles is definitely high. So this is a different behavior compared to the Western world or other region.

Maybe if I can add just the last comment here, what we see, let's say, yes, this pricing environment. And then you have also to consider in terms of capacity reservation fees, let's say in 2025, that will be a further reduction because clearly, let's say, acknowledged by the market that now capacity is available. So this will be an element that will be there definitely in 2025.

Thank you so much. Thank you, Sandeep. Moira, next question,

please. The next question is from Lee Simpson from MS. Please go ahead.

Great. Good morning, everyone. Thanks for squeezing me in. I'm just wanting to ask around the R&D number, I think, 492 million. Look, just throw that gap down, maybe about 10 percent relative to some of the expectations out there. So I just want to get a sense for is this a sustainable level? Do we think this is the right level going into next year? And whether or not related to this, there was any change perhaps in the spend structure around silicon carbide as a strategy. Thanks.

No, I would say that when we look at the expenses in the quarter in Q3, you have to keep in mind that there are a few elements. First of all, the expenses came lower than expected for a few reasons. Well, one reason is we know, let's say, is impact of the vacation in Europe. This was expected. We're a little bit higher than than what we were modeling entering the quarter. But this is not the main reason. There are one, let's say one, one, an item, one time item in the cost of labor that was decreasing our expenses. And this was not expected in respect to entering the quarter. But then there is also, let's say, some more control during the quarter on our discretionary expenses. So that's the combination of these elements combined together where our expenses lower is not something structural. We have not, let's say, especially when we look at our R&D, change our effort in terms of R&D. So we continue to invest. We continue to invest in the silicon carbide. And we continue to invest, let's say, in the development of our products. It's true that, let's say, the new organization is bringing some efficiency in our, let's say, ability to follow our programs and somehow be more efficient in the way that we drive our our expenses. This is also driven by the fact that we have reorganized our our groups in a way that, let's say, today we are avoiding overlaps between the activity in the groups. And this is a portion also that is impacting our ability to have a better control of our expenses.

Great. Thanks, Lorenzo. Very clear. Really, if I could just turn to, I think somewhere in the commentary you mentioned, wins in AI servers. And so just trying to understand, you know, which part of the server power semi's architecture are you addressing? You know, there's three major parts with power supply units, voltage handling across the rack, and of course, the delivery to accelerators or GPUs themselves. Is there a specific area where you're winning? And could you tell us anything about the architecture of the power semi's that you're using?

Thanks. Thank you. Obviously, I will pass the question to Marco Cassis. He's now in charge of this fantastic product line.

Yes. So good morning. Now we are going to address all the three main blocks. So I'm speaking about the power supply units. I'm speaking about the down to the 48 volt or whatever and down to drive the GPUs, which means we will address through silicon can buy high voltage MOSFET, and SPS. So the SPS is the low voltage MOSFET, which is the part in which we are now really focusing. It will take a little bit of time clearly to come with a strong offer. But our offer is going to go through all the chain because we do believe we will have the portfolio and we have the portfolio and we have the capabilities to serve all the content inside the AI server. So, of course, surely considering the maturity of the products, the first big target is going to be in the power supply units and down the voltage and the scale through the AI service architecture.

That's very clear. Thank you very much.

Thank you, Lee. Next question,

please. The next question is from Didier Chamama from Bank of America. Please go ahead.

Good morning and congrats, Jerome, for your appointment. I've got a couple of questions first on the Q1 commentary. Should we assume that your gross margins are going to take another leg down? A, because obviously your volumes are going to be lower and you're going to lower your factor utilization to lower your inventory and the balance sheet lingering at a high level. That's my first question and I've got to follow up. Thank you.

But you see that in this quarter, our let's say the impact of the unloading charges is very material because it is impacting our gross margin by 400 basis points. We start already, let's say, to take some measure in front of a weaker Q1 as we said before, let's say this will be well below our normal seasonality. There is the impact of the calendar, but there is also the impact of the visibility of the backlog. But for sure, Q1, yes, we do expect early at this stage to give a precise guidance, but definitely it will be a difficult quarter in terms of gross margin. Also, because we will continue to have a significant impact for the unloading. We want to keep under control our inventory. And this is something that for sure, let's say, will have an impact in Q1.

Thank you. It is clear that manufacturing activity in Q1 will not follow the usual activity profile. But in Q4, we have to follow a strict process of discussion with representatives of personnel and people to plan this Q1. But again, we will come back later on.

Thanks, Hans. And on the restructuring program, thank you for highlighting the Fab resizing and perhaps OPEC's cutting. I think one of the questions we got this morning was, is the high triple digit millions of dollars a net number or is it a gross number?

This is the expected savings that we will have, let's say, as a combination of costs and expenses. Of course, this is not including the possible, let's say, cost related to severance or let's say something cost like that.

Yes, it's a gross number. I mean, OK, maybe just a quick one. Last time, Jean-Marc asked you if you were still looking at M&A. You said I think you were actively looking. So can you just give us an update on that? Thank you.

No, but we continue to operate within our organic growth strategy with Bolton acquisition. OK, we have we have activity in our radar screen, which are pretty active today. So we'll come back to you as soon as conclude on it.

Thank you. Thank you, DJ. Moira, next question,

please. The next question is from Jean-Marco Bonacina from Banca Acros. Please go ahead.

Yes, good morning. Couple of questions for me. The first one is if you can specify what is the one time charge related to your cost saving plan. The second one is more strategic midterm, given that we are seeing, especially in Europe, some change in the platform and factory closures. So what makes you confident that in the mid to long term, we will see still a significant ramp up in the penetration of EVs? Thank you.

Good morning. You refer the one time that I was referring for Q3 or something different? Sorry, I'm not sure. No,

assuming you will have, let's say, eight hundred million dollars of cost saving in twenty seven, assuming that this will be partially related to, let's say, lower headcount, how much will be the one time cost associated with the cost saving plan?

I would say that at this stage, it's a little bit early to enter in those kinds of details. Yes, let's say, of course, it's kind of things I think will be better clarified moving ahead on our capital market day and entering more detail on this plan. If you don't mind at this stage, I would prefer to say. OK.

For the second question, if I want to simplify, it is clear that for any semiconductor company to continuously improve its competitiveness, especially facing an ultra competitive marketplace that we are facing now, you among many reasons, some capacity that has been triggered by government incentive here and there everywhere. And unfortunately, as well with some, let's say, trade constraints, the only way is to increase the size and to shrink the product. But then, OK, you know that when the industry is facing and our customers are facing this kind of down cycle. Each time the exit period is asking for new products and new technology. So that is the reason why for ST, there is no other option to accelerate our 300 millimeter. And the reason why I have mentioned, OK, I got a specifically and we have to accelerate to reach as fast as we can. So I scale in order to have benefits of the cost of goods sold about this this 300 millimeter. Well, I would like to recall that basically the benefits we can expect moving to 300 millimeter, it at least 20 percent productivity increase. But directionally, this is ST. What ST has engaged? Of course, we will update you timely. We have defined the critical milestone. And of course, we will give more color to market day next November.

Thank you. Thank you, John Marco. Next question,

please. The next question is from Stefan who reads from Adobe. Please go ahead.

Yes. Hello. Good morning, everyone. You have described the change in dynamic of the of the market. Can you please update us on your vision on your targets for for silicon carbide for for this year and the following year? Thank you.

OK, thank you for the question. Clearly, considering, let's say, the change that we have seen in terms of dynamics, specifically the fact that fully battery operated electric vehicles has decreased compared to what was the expectation in 2023. And these reduction is going through linearly in the next year. This has an impact for us in 2024. That, as you remember, we're expecting to be in the range of one point three billion dollars. Now expected to land the year at one point 15, one point two billion dollars. So reflecting this change in terms of mix in terms of electrification. Now, we do believe that the trends going forward. So if we expand the rise on up to 230, we believe that the trend for education of mobility remains. And as I was saying before, if we go outside, we see also community service or industry for what is related to silicon carbide. So we still believe that our ambition to reach to go over the five billion dollars by 2030 is there because and this is linked to a market share. We do expect to be in the range between 30 to 33 percent. So, yes, there is a slowdown, but the long term ambition towards 2030 is remaining at the level that you were expecting. I hope that is answered.

Yeah, well, in fact, you also talked about 2025. I think you were targeting two billion, but I think you decreased the target to one point eight. So that was also the question. What do you see for next year?

We no longer expect to grow the five hundred million dollars, but due to the short term uncertainty, we will provide better visibility at a later stage. Now it's too early to come to further comments.

OK, thank you very much. And if I may have a follow up, it's a specific question on the evolution of the of the tax environment, notably in France, where you've got significant operations. Have you thought already about the potential impact on your on the evolution of your tax rate of the of the new tax, let's say, increase in France coming?

Well, as you know, in these kind of things, it's always a little bit difficult because there are many ingredients, let's say, that are combining together. Of course, it depends also how the distribution of the profit of the companies is among the various, let's say, countries, a jurisdiction. Definitely, yes, you see that today our tax rate will be in the range of 17 percent. We mean that more or less the impact that we may have if the law is enacted has been announced. We need also to look in detail. So what is that will happen? We may have an impact that will be below one percentage point on our tax rate.

OK, thank you very much.

Thank you, Stefan. We have time for a very quick one.

The next question is from Joshua Buchalter from TD Cowan. Please go ahead.

Hey, guys, thank you for squeezing me in. I wanted to ask about the accelerated move to 300 millimeter and the cost cutting. Did we how should we think about the implications to capex from this this change? Are you guys shutting down more quickly 200 millimeter facilities and in the short to medium term? Does this bring your capex up or should it should it lower it? Thank you.

We will reduce the work capex, let's say, next year and on the next year. We are planning a reason. It is, of course, something that we will disclose during our capital market day based on the market evolution and our capability, let's say, to grow over the market perspective. But yes, of course, we will decrease

our capacity. If I may add, let's say, you have to think to consider that the big infrastructure to go to 300 millimeter are already there. The effort has been done. We have already, let's say, put in place the infrastructure. So means that, yes, of course, we will have some capex, but we'll be lower in respect what has been

in the past. And the second, as we are accurate on this story, I would like to highlight that the concept of our wafer fab of silicon carbide 200 millimeter in Katanya is copy past of the concept of coal. Means, OK, we can increase by getaway. So we don't need to build a big infrastructure to go. We are building by module. So this is really a smart way to adapt ourselves to the market condition and investing in due time at the right time, but never in excess.

Thank you, Josh. I think this is the ending of our call for this quarter. So thank you very much. All of you for being there. And we remain here to this proposal. Thank you very much.