STMicroelectronics Reports $133 Million Loss in Second Quarter

Recently, STMicroelectronics NV stated in a release that the company posted an unexpected loss in the second quarter due to a $190 million asset impairment and restructuring costs related to its business streamlining plan.

The French-Italian joint venture reported an adjusted operating loss of $133 million in the second quarter, while Bloomberg data showed that analysts had previously expected an average operating profit of $54 million for the company.

In the same period, STMicroelectronics' revenue declined by 14% to $2.77 billion, while Bloomberg data shows that analysts' previous average expectation was $2.74 billion.

Image source: STMicroelectronics

STMicroelectronics stated that the second-quarter automotive chip sales were slightly below expectations, but the growth in revenue from personal consumer electronics and the industrial sector offset this impact.

STMicroelectronics announced a cost-cutting plan last October, and later, due to the continued downturn in the industry, announced layoffs of about 6%. Over the past year, the company's stock price has fallen by 27%. This has sparked criticism of the company's management from the Italian government. It is reported that the Italian government, together with the French government, jointly holds more than a quarter of the shares of STMicroelectronics.

A large portion of STMicroelectronics' revenue comes from the automotive industry, but rising tariffs triggered by global trade disputes are disrupting the automotive market, putting increasing pressure on the sector. Last week, Renault Group lowered its operating profit margin forecast for this year; Stellantis Group also reported a net loss in the first half of the year. Tariffs have also disrupted the global automotive supply chain and caused volatility in customer orders. Some automakers are stockpiling chips in advance to avoid tariffs, which may deplete future market demand.

Shares of STMicroelectronics' American competitor Texas Instruments Inc. also took a hit this week, as the market is concerned that tariffs and trade disputes will damage the nascent recovery momentum in automotive chip sales.

Kurt Sievers, CEO of another chip manufacturer NXP Semiconductors NV, stated that the two-year-long automotive chip inventory surplus is about to end—an issue that had been restricting the company's business development.

However, Ken Hui, an analyst at Bloomberg Intelligence, stated in a report that European chip manufacturers may not be able to maintain their revenue recovery momentum. Ken Hui expects that orders from China will decrease, "because as regulatory authorities may strengthen industry consolidation efforts, Chinese car manufacturers may lower their vehicle delivery targets," which in turn would dampen chip procurement demand.