Notes from STM NDR

Research evidence excerpt

Notes from STM NDR

IdeaMpersistent underloading charges, notably related to China, representing a further

70bp headwind. For longer-term margins, the more important variables remain the

execution of the restructuring programme, rising utilisation as capacity ramps, and

the transition to larger wafer diameters. Management quantified the capacity uplift

from both SiC and silicon fab expansions, noting that the Crolles 300mm fab should

support 15k wspw exiting 2027 before reaching 17k wspw in 2028, while the Agrate

300mm wafer fab should support 8k wspw exiting 2027.

Personal Electronics is a transition-year headwind, not a structural concern.

Management identified Personal Electronics as the weakest revenue driver this year,

expecting only low- to mid-single-digit growth year-on-year and a year-on-year

decline in H2. The softer demand profile is not surprising, given memory-related

headwinds to handset builds and changes in the product pipeline at the company’s

largest customer, Apple. That said, management continued to point to rising

medium-term content as a source of improved visibility, suggesting the current

weakness is more cyclical and product-cycle related than structural. As a reminder,

we currently model Personal Electronics sales declining 6–7% year-on-year in Q3.

Data center guidance uptick should not be overlooked. At the print, management

raised FY27 data centre guidance to “well above $2bn”. Our understanding is that

this is primarily driven by silicon photonics and optical strength, with management

providing additional detail on meaningful STM32 content in 800G and above optical

applications. Management reiterated the breadth of the customer base, while also

highlighting a sharp growth trajectory into year-end, with Q4 CECP sales expected