By Mauro Orru


STMicroelectronics slashed its annual guidance for the third time this year after posting a slump in net profit and sales in the third quarter as demand for chips in cars and industrial equipment remained weak.

The European chip maker also said Thursday that it was launching a company-wide program to reshape its manufacturing footprint and cut costs. Chief Executive Jean-Marc Chery said the move would bring annual cost savings in the high triple-digit million-dollar range at the end of 2027.

The company--which counts Apple, Samsung Electronics and Tesla among its customers--said it was expecting revenue of about $13.27 billion this year compared to a previous range of $13.2 billion to $13.7 billion, down more than 23% from 2023. Its gross margin should be slightly below 40%, it said.

Demand for semiconductors has been uneven across the industry in recent months. Orders for artificial-intelligence chips keep booming, but manufacturers of smartphones, laptops, electric vehicles and industrial machinery aren't placing many orders for chips as they stockpiled the semiconductors they needed years back.

Chip makers with significant AI exposure like Nvidia have grown exponentially in recent years. However, those mostly exposed to personal electronics, the automotive sector and industrial equipment have been grappling with sluggish demand.

Dutch semiconductor-equipment maker ASML Holding warned earlier this month that while AI demand remained strong, the recovery for other parts of the industry could stretch well into the next year. STMicroelectronics had already cut its annual guidance twice this year after sales and earnings declined in recent quarters.

STMicroelectronics posted $351 million in net profit in the third quarter, down nearly 68% on year. Analysts had forecast $302.1 million in quarterly profit, according to consensus estimates by Visible Alpha.

Revenue fell almost 27% to $3.25 billion. Analysts had forecast $3.24 billion in revenue, according to the Visible Alpha consensus. "Our revenues, compared to our expectations, were higher in Personal Electronics, declined less in Industrial and were lower in Automotive," Chery said.

Gross profit--a closely watched metric for companies operating in the semiconductor industry--declined to $1.23 billion from $2.11 billion, generating a 37.8% gross margin.

For the current quarter, STMicroelectronics is forecasting revenue of about $3.32 billion and gross margin of about 38%. Chery said he was expecting a revenue decline between the fourth quarter and the first quarter of the new year well above normal seasonal trends, based on current customer order backlog and demand visibility.


Write to Mauro Orru at mauro.orru@wsj.com


(END) Dow Jones Newswires

10-31-24 0326ET