STMicroelectronics anticipates 10% revenue dip in Q2 amid COVID-19 challengesSTMicroelectronics anticipates 10% revenue dip in Q2 amid COVID-19 challenges

STMicroelectronics forecast a 10% sequential decline in revenue in the second quarter of 2020 as the spread of COVID-19 continues to affect its business.

Jean-Marc Chery, CEO of the chipmaker, said the Q2 outlook takes into account the declining demand environment, especially in the automotive sector, "as well as the ongoing operational and logistics challenges due to current governmental regulations."

In the first quarter of the year, although revenue increased by 7.5% year-on-year to $2.23 billion, it declined 19% on a sequential basis. Chery said the COVID-19 outbreak, and subsequent containment measures by governments around the world, "brought challenges in our manufacturing operations and, especially in the last few days of the quarter, logistics." Net income increased 7.9% year-on-year to $192 million, but it was 51% lower on a sequential basis.

As with most companies in the technology sector and elsewhere, STMicroelectronics also finds it difficult to predict how the year will progress. It's already decided to cut capex from $1.5 billion to between $1 billion and $1.2 billion for 2020, and to decrease the 2019 dividend payment from $0.24 to $0.168 per share, although an increase back to the original payment may be considered in September 2020. Revenue for the full year is expected to be in the range of $8.8 billion to $9.5 billion, but much will depend on the removal of supply constraints.

In terms of smartphone components, Chery noted that short-term smartphone consumer demand is impacted by retail lockdowns and the inability to purchase devices. However, he said the company still observed sustained semiconductor demand during the quarter, also driven by increased demand for tablets and gaming devices, as well as accessories.

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— Anne Morris, Contributing Editor, Light Reading