ST: Fixed Contracts Trigger 2024 MCU Sales Plunge

European semiconductor company STMicroelectronics (ST) has acknowledged a significant decline in its microcontroller (MCU) sales during 2024, attributing the drop to non-cancellable and non-reschedulable sales contracts executed in 2022 and 2023. These agreements contributed to an increase in customer inventory, creating ripple effects that led to decreased sales.

In the first nine months of 2024, ST's MCU sales totaled approximately $2.58 billion, a sharp 41.3% decline compared to $4.4 billion during the same period in 2023.

At its recent Capital Markets Day in Paris, ST sought to address concerns about the downturn and outlined its strategic vision for the next decade. CEO Jean-Marc Chery described 2025 as a transitional year, paving the way for stronger performance in 2026 and 2027. He emphasized that inventory adjustments remain challenging, particularly in weaker markets like industrial applications, and forecasted that these adjustments would extend at least through the first half of 2025.

Remi El-Ouazzane, President of the MCU, Digital IC, and RF Products Group at ST, elaborated on the multifaceted reasons behind the market decline. He highlighted macroeconomic headwinds, such as geopolitical tensions that have dampened consumer confidence since 2021 and led to downward revisions in global economic growth forecasts. Specific to the MCU market, ST faces mounting competition from Chinese manufacturers and a downturn in European industrial sectors and factory automation.

These challenges prompted the World Semiconductor Trade Statistics (WSTS) organization to revise its 2024 MCU market forecast from $27.7 billion to $23.2 billion. A deeper revision was noted in the general-purpose MCU market, excluding security and automotive applications, which was adjusted from $14.1 billion to $8.8 billion.

El-Ouazzane acknowledged that ST's market share has declined due to decisions made during the 2021–2023 allocation period. The fixed nature of procurement contracts has resulted in a significant inventory surplus, which ST expects to gradually absorb by 2025. According to El-Ouazzane, inventory-related factors account for 60% of the decline in ST's MCU sales, with the remainder stemming from overall market contraction and share loss.

Despite these challenges, there are signs of recovery. El-Ouazzane noted that ST’s book-to-bill ratio for MCU sales exceeded 1.0 in Q3 2024, signaling a potential turnaround.