Everyone, I'm Alex Duval. Delighted to see you all. I head up the European Tech Hardware and Semis Research team here at Goldman in London. Delighted to be joined today by Jean- Marc Chéry, CEO of STMicro. I'm sure you'll see all the disclosure slides, but this conversation is off the record and not intended for the media. Welcome again. Thank you so much. Thank you. Perhaps we can kick off with two or three minutes recap just on your latest results, and in particular, the high level demand trends that you're seeing across the business at the moment. Okay. I will speak only about 2022. I don't come back on Q4. 2022, in fact, we deliver $16.1 billion. It's an additional growth of 26% year-over-year. Well, as we are looking our benchmark, it is clear looking at our peers. TI, NXP, ADI, ON, Microchip, and Renesas, they all communicated their results. I have to say that ST overperformed the average of the peer. Infineon, I have forgotten Infineon. Sorry. Our sum grew 16.5%. This year of 2022 has demonstrated our capability to overperform the market we serve and the average of our peers. Interestingly, I would like to give some color about the breakdown by verticals. All the product group have contributed to the growth. Interesting is to look the growth by verticals. On automotive, we grew slightly above 50%, so five zero. Industrial market, we grew well above 30%, around 35%. Communication equipment and computer peripheral, okay, we grew about 20%, 19%. Personal electronics, we have been basically flattish. We have been flattish on personal electronics for basically two reasons. Reason number one is a market in H2 that started to be softening. Reason number two is because it has been allocation decision. We have squeezed, okay, some customer part of this consumer market by decision to allocate our capacity on automotive and industrial. All in all, we are 2022, if I want to give the takeaway in term of revenue, is just consistent with our strategy to have a leadership position on automotive and industrial market, and being very selective on personal electronics and computer and communication. When we address personal electronics with general purpose device and so on and so forth, facing allocation decision, of course, we allocate to automotive and industrial market. At the end, these two vertical all together in 2022, represented 62%-65%, and personal electronic and computer and communication, 38%-35%. What about the dynamic? After I can speak about the gross margin and we finish at 47.3% and operating margin above 29%, more into, let's say, improving performance of course versus 2021. About the dynamic. Entering in 2023, I have to say that we have a higher backlog compared the same period one year ago, so entering in 2022. Basically, we have a backlog about $28 billion total, out of which, okay, $20 billion are requested by customer on 2023. It is not the peak. The peak has been $30 billion, $31 billion. In Q4 and end of Q3, we have cleared the backlog, mainly at distribution. All the order which were still on the not scheduled or to be advised or too much in delay, okay, we have decided in cooperation with distributor, okay, to really clear the backup. Now, okay, our backlog is clean. I have to say of old order, okay, what sometime you ask as double ordering this kind of stuff. Now the backlog is really, really, really clean. I have to say that is basically a bit unbalanced because, okay, it is clear that this backlog is still very high, representing six-eight quarters of running revenue for automotive and industrial, what we call the B2B, so energy, power conversion, power storage, transportation, robotics, automation, this kind of B2B business. On consumer overall market, of course, we came back to a normal, more normal situation where you have a lead time around 6 months and a backlog coverage representing, three-four quarter maximum of revenues. Situation a bit unbalanced. However, it's important we speak about what we provided as an indication for the year 2023. Of course, I can speak again on Q1, but Q1 is done. I have nothing to say more. On 2023 overall, we have given an indication at the midpoint of $17 billion-$17.3 billion, which is representing a growth of 7%. Here again, the dynamic by vertical will be different. At the midpoint of this indication, automotive and industrial market will continue to grow about 20%. Driven by the acceleration of the electrification and the ADAS, definitively, and the content of semiconductor still increasing in legacy automotive. This is based on 83 million-85 million of vehicle produced. It's not based on 92, 93. It's based on 83 million-85 million of vehicle produced. Of course, out of which, okay, electrical car will be about 10 million cars. It is based on the visibility we have on our engaged customer program in automotive, okay? And mainly the one related to ADAS and mainly the one related to the electrical car. Personal electronics will significantly decrease in 2023 at ST for two reason. In H1 because the overall volume weakness and the demand weakness clearly on, let's say the Android-based operating system for phone. The second reason why ST will have a revenue decrease in 2023 versus 2022 is because of a change of mix in the second half of the year in one of our major engaged customer program. This change of mix, I have to say, is significant in term of revenue losses but is accretive in term of gross margin. Okay, as it's quite material, okay, that the reason why I have to explain it. On the, on the dynamic, let's say H1 and H2, it's a bit complex that the reason why, okay, I have to comment. Now you see that at the midpoint of our guidance, Q1, we will grow year-over-year 18.5%. Well, I have to say that H1 2023 versus 2022, we can grow about 15%. Okay? In H2, okay, it will be more flattish at the midpoint of the indication. Why? Because of the implication related to the product mix I have mentioned to you a few minutes ago. If you look this dynamic without imaging, which is impacted, division by this product change, the growth in H1 is basically the same, so about 15%. Why? Because as I have explained during my values, let's say address, in H1 2023, we are enjoying, okay, this famous, let's say module we have not one year ago. That the reason why the growth year-over-year is similar. In H2, if we remove imaging, the growth H2 2023 versus H2 2022 will be 6% at the midpoint. If we are at the upper range, the growth will be 12%, 12.5%. Clearly it is driven again by automotive and industrial. The difference between the midpoint and the upper range will be most likely driven by what will happen in China. Of course, under the assumption that we will have no collapse of the market in automotive and industrial in the Western countries. If China recover smoothly as expected, the company feel confident that can deliver the high range of the indication we have provided to the market. With the current visibility we have, we provided this midpoint. This is the dynamic, okay, in term of market revenue. My takeaway is at the end, 2023 should be another step consistent with our mission at $20 billion between 2025- 2027. More important will be a strong step to demonstrate our strategy to have automotive and industrial representing 70% of ST. Broad range leadership and being very selective on the other market, representing about 30%. Thank you very much, Jean-Marc. I'd like to talk next a bit about technology and specifically silicon carbide, which I think is probably one of the drivers on the way to that long-term, intention. you know, your traction there continues to be very strong. it'd be great to investigate a bit the competitive differentiators you have on the automotive side for silicon carbide, whether we're talking about performance or about cost. Can you give us a bit of a sense of what you're shooting for in terms of 2030, if we think long term, where do you want to get to in terms of your share or your revenues, and what needs to fall into place externally or internally for you to do that? Well, here let's try to be, let's say structured. I can say again, it's a sales and operating plan. It's not a guidance. We indicated this year that we are comfortable to deliver above $1 billion revenue. We have capacity, we have the demand. It's I think. Starting April and July, of course, okay, I will disclose the number in a more accurate way. We are really confident to achieve in 2025 above $2 billion and going to a plan today to achieve $5 billion, okay, by 2030. Maybe a bit in advance, but, okay, certainly by 2030. Why? Because you know that every quarter I provide the awarded project. Now it's 115, I guess, projects spread between industrial market and automotive. I can disclose one number, but that I today, only today, thanks to the fact I am here. What is important to be aware about this program awarded is what we call the project value opportunities. What is project value opportunities? When you are awarded in a project for automotive, you know that you are participating to a platform. Okay? You know the revenue that will be extracted in term of this platform overall. You have not the warranty of the market share, okay, you will have because you are speaking the car maker or the industrial OEM. They are spreading the share between two, sometimes three source. You have a good ideas of what we call the project value opportunities. Basically, the project value opportunities ST have because I've been awarded between 2023 up to 2027 is $25 billion. If you apply decent but realist market share of ST in silicon carbide, which is 30%. Today you know that we are much higher. We are basically at 50% market share. If you apply 30% market share average, which is pretty realistic, okay, of $25 billion, so it's $8 billion. Cumulatively between 2023 up to 2027, okay, we will have with this new program, okay, $8 billion of cumulative revenue. This make us comfortable, okay, to have established this sales plan of one above two and five. How we will support it in term of manufacturing strategy. Clearly today we are at 150 mm with two source, which is, okay, Singapore and Catania. We are sourcing, okay, the substrate from mainly two source, okay, which is one American and one Japanese source. Very marginally from one Chinese one and from our own source in Sweden. It is 150 mm. What will happen in the next three years? We will have, okay, two important cost down driver and capacity increase driver. It will be the 200 mm wafer size conversion, and it will be the internal source growing up to 40% as a run rate in Q4 2024 and onward. Of course we will work as well on 200 mm with one of the major source, external source we have today. We will introduce to support our business plan in the next three years, the 200 mm conversion and the internal source. That the reason why, okay, we have built and we are building this fab in Catania, be capable, okay, to deliver the monocrystalline silicon carbide ingot and the epitaxy and then the wafer processing. What we will introduce as well in the next three years, not in mass production but ready to support mass production beyond 2024 and 2025 is a SmartSiC. The SmartSiC technology is a technology that, to make it simple, today when you use a substrate, the substrate is obtained slicing ingot of monocrystalline silicon carbide. So drawback of this approach is that the ingot of silicon carbide monocrystalline is quite thin and is not a ingot of silicon and you slice, okay? You can obtain a limited number and the cost is quite high. The SmartSiC process to make it simple is the following. You remove a layer of monocrystalline of SiC and you use a polycrystalline silicon carbide substrate, which is easier to have and much easier to produce. On top of that you can dope this polycrystalline. At the end, you put the layer of the monocrystalline on the polycrystalline doped, you have a lower resistivity, you enable better performance and overall the cost of ownership is lower. We will introduce this technology in 2024 on our Generation four planar technology, and we will qualify it. This will be another cost decrease and performance improvement. This is basically the three main manufacturing action that will support our ambition to go to $5 billion. eight-inch conversion, internal sourcing, SmartSiC introduction. Of course, we have the technology roadmap to continue to enable the performance of the device. Now we have our Generation 3 planar. We will introduce mass production Generation 4 in Q4. We will introduce a Generation 5 on 200 mm, boosted with a SmartSiC, still in planar, and then we will introduce a new technology that I cannot disclose publicly for secret asset, okay, of our IP and technology development. Honestly, ST, we are always a discipline to never disclose information which has not been proven, okay, as mature enough. Okay? That's the reason why we have this discipline. For sure, it is in our roadmap. All in all, we are very convinced that on silicon carbide, we will support this $5 billion with adequate cost structure, 200 mm SmartSiC internal sourcing, vertically integrated. By the way, introducing the technology roadmap at the right speed, okay, to follow the demand of customer in terms of performance. This is our strategy and plan on SiC. Can I also just follow up two things there. That was super helpful. Firstly, on margins, how should we think about the kind of profitability versus the group or ADG? Obviously, if we think about the structure of the market, there are more people trying to do this than perhaps on IGBT for auto inverters. How do you think about that in the long term, given that actually the value theoretically you can deliver to a customer is very high? Secondly, just thinking about the tech roadmap, you talked about planar, high level for the industry, how important is trench technology in your view? Trench for the time being is volume marginal, I have to say. After it is an architecture that has been decided by our competition. Well, okay, we respect it. What we will introduce will be more complex. But for the time being, okay, we don't need this trench. Coming back to the product group, it is clear that with our 50% gross margin ambition, taking into account the portfolio, when we deploy this ambition by product group, you do not extract the same gross margin when you have a power device versus a microcontroller or a microprocessor for industrial or an analog. An analog depend if it is a power switch or if it is a consumer analog or high-precision analog. We have a clear breakdown of this objective by product group categories and technology cluster. What I can confirm to you that the silicon carbide, okay, will play the contribution of the 50% gross margin, okay, according the model we have deployed. Thanks to the initiative I have disclosed to you, which I repeat, is a 200 mm wafer size conversion, is internal sourcing at 40% or beyond, but at this stage, 40%, and the SmartSiC introduction. The SmartSiC introduction is a buffer, because when we disclose the 50% gross margin, okay, we were not yet sure that the SmartSiC will contribute. Now it's an additional buffer we have in our weapons to improve our profitability. The SiC, okay, which has been an investment up to, let's say last year or one year ago, now, okay, is really a contributor according the model we have fixed of the ambition of ST in terms of gross margin. Super helpful. If we sort of stay on the automotive side and ADG, it's been interesting to contrast some of the guidance given by STMicro and some of your European peers versus some of the American peers, and you've been quite bullish near term, others have been a bit more subdued near term. I wondered sort of to what degree that's a function of the different areas that you're serving within automotive. That's my first question. Second question. There seems to be a high degree of tightness in certain areas of automotive, and I wondered if you could talk about the extent to which you think in the long run, auto companies and those working with them are more willing perhaps to reserve capacity for longer or perhaps price a little bit more favorably for companies like ST. Well, I think, yeah. Well, it's complex because the automotive is really facing one of the most challenging and biggest transformation of its history, okay? Basically, no industry faces such a transformation. To let's say, try to assess the complexity, we have to break down in three parts, okay? It is what is related to the electrical car, so the electrification. 10 billion vehicle in 2023, you know that up to 2030, it will grow close to 40 million cars. At the other range, it is the ADAS. ADAS, you know that for security reason, norms reason, and so on. You will have a provision of level two, level three, and then after you will have, sorry, mission profile, the level four or level four plus, but the main, the big volume will be level two, level two plus or level three. In 2023, both, it is both electrification and ADAS will grow a lot. ST is totally exposed to this market. That the reason why I disclosed above $1 billion revenue in silicon carbide, compared to the $700 we have done this year. It's another, most likely, 70%-80% growth. The ADAS as well. We will more than double our revenue on ADAS. Thanks to the partnership we have with the guy owning 75% of the market share of ADAS. This is the two big growth driver of ST in 2023 on automotive. You have the car, because whatever is a car on the ADAS or a car electrical, you have all the legacy of the subsystem. The body, braking, lighting, airbags, okay, all this stuff. Here, okay, basically there is a different dynamic. There is one dynamic which is still very active today, is that semiconductor are increasing in the legacy without still main architecture change of the car. Today, we are not yet in a, in a domain architecture car or a zone. Basically will be more zone than domain. Domain, okay, certainly something that will not fly. In the current architecture of the car, the provision of semiconductor is very high. Okay, you have much more device on braking system. You have much more device on door control, much more device on internal monitoring system of the driver. The provision of the semiconductor is huge, and it is making us immune to the fact that in 2023, the production of vehicle will be 83, 84. We don't care. If it is 1 million car or 2 million car less, we don't care. Okay? They are doing it on technology which are still struggling in term of capacity. It is a 40 nm for microcontroller. It is 28 or 16 for standard microprocessor. It is advanced BCD 110 nm technology for power driver, I have to say. It's IGBT, it's VIPower. This kind of technology are still struggling a lot. Of course, everywhere you have general purpose analog, diodes, okay, SCR power, and so on, the situation is now clean. On all the critical devices, the situation is still under stretch. Here, by the prices and volume, okay, are warranted for 2023, and we are working for 2024 and 2025 because they want to have warranty and volume. This is for the next two, three years. We know that the architecture of the car will change. Going for, let's say, software-defined and certainly zone architecture and following two important paths. One path is to have the capability to update the car on a over the top, because the complexity to update the car now is a nightmare. Also is for service purpose. Means, okay, you can improve the consumer experience of the car, changing the software. We know it. It has been already done, okay. Some car maker are offering a booster of performance depending of what we pay as a service. Is point number one. Point number two, also the car maker, they want to make their car lighter, especially, okay, the electrical car, because they want to look, okay, for an electrical car for many things. First of all, the critical point is range of kilometer between two charge. Of course, here is a matter of battery, is a matter of inverter, and is a matter of weight. Lighter is your car, okay, more extended will be your range. To hunt as much as you can and decrease the weight of a car is critical, especially the weight of the wiring. That the reason why the zone architecture will be certainly the winning one, because you will minimize the wiring instead of the domain. The domain you have still, unfortunately, you need to have wire everywhere. This change of architecture from some side of the product portfolio will reduce the number of ECUs, so maybe will reduce the MPUs and MCUs. The computing power you will need real time or, let's say not real time, will increase tremendously. In term of what we call DMIPS, digital million of instruction per second on a car, it will increase continuously and will be breakdown between real time and non-real time. Of course, with lower number of, either microcontroller and more high-performance microcontroller and microprocessor. ST, we play both. We play high-performance microcontroller, what we call as a Stellar on 28 FDSOI with PCM, but we play the Stellar up, which is a microprocessor. We are co-designing, okay, with Volkswagen and CARIAD. Okay, we will also offer other product timely. You will have other implication, wiring and fuse, okay, remove using semiconductor. Some technology like the vertically integrated power, which is key to replace an electromechanical fuse and replace, okay, all this wiring, will boom in the next few years. Power Management ICs. More computing power you have, more Power Management ICs you have. More feature you have with processor, more Power Management ICs you have. In fact, the semiconductor content of the software-defined vehicle by zone will continue to increase in term of dollar, maybe less in term of numbers, because the architecture will be more structured and concentrated. This is the, the trend that we will see in the next five- 10 years. This is everywhere. Okay. Electrification, ADAS, and the change of architecture and consumer experience increase. Of course, this period will cover now up 2030 definitive. Super interesting. Jean-Marc, I think some other semis players have talked about potential for a cyclical inventory correction sometime this year, perhaps in the second half of the calendar year. Just wondered if you could give an update on what kind of visibility you see on the second half. How do you get comfortable it won't be weaker than expected, and sort of how do you bake that into your guidance? Then perhaps related to that, if you can talk a bit about inventory levels, what you see in the industry, what you see in the channel, any sort of signs on double ordering, things like that would be really helpful. No, I mean, in the channel, okay, for sure, we are going to a normalization, which basically is a copy-paste of the image of the market dynamic I disclosed to you. When you have a microcontroller high performance, including some connectivity or security feature for industrial market, inventory is very lean, turn very high. If at the extreme you have a mainstream general purpose microcontroller addressing consumer devices, okay, wearable, this kind of stuff. Yes. Now, okay, you have inventory at the right level. Lead time are quite short. Okay. definitively, okay, we are entering a phase of more term business, okay? It's business as usual, okay? Never forget that. When you look, okay, our kind of components, the normal situation entering in a year is basically to have a coverage of 60%-65% of our revenue expected for the full year when you enter in the year with a backlog. This is normal situation. Also, when you enter in a quarter, okay, you have 75%-80% of backlog coverage. The rest is term business. That's the reason why, okay, you have some go-to-market approach with distributor. That's the reason why a distributor, you need to have inventory turn at, with three-four because, okay, there is this flexibility because the bill of material is very complex. Here, okay, we are again in a total different situation for the reason I explained a few minutes ago. For consumer, okay, we see for us something coming back to normal. We are not DRAM maker. We are not NAND flash maker. Here we know that the price are collapsing 30% and there is a big excess of capacity, and that some company will struggle in the next few quarters. Here we are in a different situation. For ST, I repeat, okay, we have the visibility on automotive. We have the visibility on B2B industrial market. We have the visibility on personal electronic from our main customer, okay, that is updating us every two months. Those visibility is really clear. We have the visibility of the main engaged customer program on communication, the low Earth orbit satellite. The rest. The rest, okay, on personal electronic Android base, okay, it is what it is. If China recover and there is stimulus on consumer market in China, this will increase, and then it will increase at a speed we don't know. What we have taken is a cautious approach, which is embedded in our guidance. on consumer, industrial, home appliances, battery-operated tool and so on and so forth, same. Today, yes, there is a right inventory level in the channel. There is a right inventory level at our customer. The voice of our customer is H2 should start to recover because of China as a main driver. okay, they expect that the in-inventory will be fixed, okay, in H1. At the end, the result is what we told to the market. It's seven to three at the midpoint. If something worse happen, we do believe that we can be resilient at 16.8. If something positive, China restart and the market in the western countries remain quite stable, we will be at the upper range. Great. Well, I think we're coming into the last, just under three minutes of very illuminating discussion. Just to squeeze one more in. We've had some questions about reshoring, and obviously we see more and more headlines about what players like TSMC are doing and more production perhaps happening in Europe. Can you help us understand and put into context what that could mean for ST in the coming years? Today we acknowledge what is granted 100% sure. Today we receive two important information. TI, I think, okay, they communicated one week ago their capital allocation. Clearly, they announced $15 billion of CapEx during the next three years to set up 300 mm fab that will address analog mixed signal and embedded Flash technology, including the 28 nm. TI is already a competitor. They are using foundry for this kind of technology. Now they will use their internal fab that they will have to grow, they will have to manage and so on. For us, for sure, we expect to see TI more aggressive on consumer market because to load a 300 mm wafer fab, you need to have volume. This is one element. Second element is our friend Infineon. Well, they announce a fab in Dresden, okay, for power electronics and smart power. Well, it's not a surprise, okay? They have the ambition to grow. The power market, if my memory, only power should be a market above $30 billion in 2030. Infineon is one of the leader. Okay? They need capacity. This is the right time, okay, they implement this kind of fab. Well, for us, it's again, it's not a surprise, okay. Today we have capacity more spread on the 8-inch and on the silicon carbide. In our mind, okay, we have roadmap of manufacturing, and we know that what we will do in the next five, six year. We did not announce because did not get decided or validated. It's for us, it's not a surprise. The third element you did not mention is Microchips. Mm. On silicon carbide. It's not a surprise, they have the silicon carbide through Microsemi. We know they are developing this kind of activity. Why? Because they want to tackle the industrial market. When you want to tackle the industrial market like microinverter for renewable energy and so on, if you go and you offer the full solution, it's much better. This is what we have as a position. For us is not a surprise. All the rest. TSMC in Europe that by the way, has just been postponed as a decision. U.S., which is more, Samsung, TSMC for very advanced technology, is not our business. Intel in Germany is not our business. TSMC in Japan, that has been already announced, for Sony. Yes, and Renesas. Yes, it's something important. What we are monitoring very carefully is what is happening in China. In China, okay, they are building capacity massively at SMIC or other foundry on 28, 40, 65. This is something we are monitoring very well because we want to have access of this capacity to address the China market. All in all, okay, yes, okay, but this is something we take into account, but it's not disruptive for ST. Great. Well, on that note, really like to thank you very much, Marc, for a very interesting dialogue and look forward to continuing the discussion and thanks everyone for joining. To play a good match, we have to be two.