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STMicroelectronics
stock plunged more than 10% on Wednesday as the European chipmaker pushed its $12 billion annual sales target back by a year to 2023, partly blaming the U.S.-China trade war.
The company, which has
Apple,
Tesla
and Huawei as major customers, cited trade tensions between the U.S., China and Europe, as well as U.S dollar weakness against the euro, as it lowered several mid-term targets in a capital markets day update.
The French-Italian chipmaker confirmed in October that revenue from Huawei would be zero in the fourth quarter, after 30 consecutive quarters of growth with the Chinese telecom giant. It comes after the Trump administration issued new rules in August banning non-U.S. companies from selling chips made using U.S. technology to Huawei without a special license.
Read:Chip Stocks Have Done Well in 2020. Here’s What a Biden Presidency Means for the Sector
ST Micro stopped shipping to Huawei in September and CEO Jean-Marc Chery told analysts last month that the company was waiting for feedback on its license application.
The company had been targeting $12 billion revenues and more than $1 billion free cash flow by 2022, set out at last year’s capital markets day, but it now aims to reach those goals by 2023, it said Wednesday.
Its operating margin target was lowered to between 15% and 17%, from a 2019 mid-term forecast of 17% to 19%. The new targets are based on an exchange rate of $1.16 to the euro, compared to the $1.12 basis for 2019’s targets.
Read:Why Investors Shouldn’t Ignore U.S. Restrictions on Huawei
“We need to take into account the U.S.-China trade war implications. With a de facto embargo so far, preventing us from selling our custom-designed solutions to an important customer,” Chery said on Wednesday, referring to Huawei. “For a period of time, this will have an impact on the average content value we were able to extract from both personal electronics and communications infrastructure end markets,” he added.
Looking ahead. U.S. dollar weakness has not helped but the U.S.-China trade war appears to be having a much greater impact.
Despite the Huawei ban, ST Micro expects sales growth in the fourth quarter, driven by strong demand from the automotive and mobile phone industries. It is well positioned for this as a semiconductor supplier to electric carmaker Tesla and iPhone maker Apple. German engineering and technology company Bosch, technology conglomerate
Samsung
and
HP
were also among the company’s top 10 customers in 2019.
Chery said he expected automotive and industrial demand to grow over the next three years but warned it would not offset the impact of the “likely trade war related revenue losses.”
Huawei is hoping that the incoming Biden administration will improve relations — ST Micro will also be hoping that’s the case but it’s far from certain.
