Ladies and gentlemen, welcome to the STMicroelectronics Q3 2023 earnings results conference call and live webcast. I'm Andre, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must now be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Céline Berthier, Head of Investor Relations. Please go ahead, madam. Thank you, Andre. Good morning, and thank you everyone for joining our third quarter 2023 financial results conference call. Hosting the call today is Jean-Marc Chery, ST's President and Chief Executive Officer. Joining Jean-Marc on the call today are Lorenzo Grandi, our Chief Financial Officer, and Marco Cassis, President of Analog, MEMS and Sensors Group, and Head of STMicroelectronics Strategy, System, Research, and Application Innovation Office. This live webcast and presentation materials can be accessed on ST's Investor Relations website. A replay will be available shortly after the conclusion of this call. This call will include forward-looking statements that involve risk factors that could cause ST's results to differ materially from management expectations and plans. We encourage you to review the safe harbor statement contained in the press release that was issued with the result this morning, and also in ST's most recent regulatory filings for a full description of these risk factors. Also, to ensure all participants have an opportunity to ask questions during the Q&A session, please limit yourself to one question and a brief follow-up. I'd now like to turn the call over to Jean-Marc, ST's President and CEO. Thank you, Céline. Good morning, everyone, and thank you for joining ST for our Q3 2023 earnings conference call. Let me begin with some opening comments, starting with Q3. So third quarter net revenues of $4.43 billion came in above the midpoint of our business outlook range, and Q3 gross margin of 47.6% was 10 basis points above guidance. Q3 net revenues increased 2.5% year-over-year. As expected, the revenue performance was driven mainly by continued growth in automotive, partially offset by lower revenues in personal electronics. Looking at our year-over-year performance, gross margin remained stable at 47.6%, while, as expected, operating margin decreased to 28% from 29.4%, and net income was stable at $1.09 billion. For the nine-month period, net revenues increased 11.1% year-over-year to $13 billion, driven by growth in the ADG and MDG product groups and partially offset by a decline of the AMS product group. We reported gross margin of 48.7%, operating margin of 27.6%, and net income of $3.14 billion. On Q4 2023, our fourth quarter business outlook is for net revenues of about $4.3 billion at the midpoint, declining year-over-year and sequentially by about 3%. Gross margin is expected to be about 46%. For the full year 2023, the midpoint of our Q4 guidance translates into revenue growth of about 7.3% to $7.3 billion, with a gross margin of 48.1%. Now, I will move to a detailed review of the third quarter. Net revenues increased 2.5% year-over-year. This performance was driven mainly by ADG on continued strength in automotive and to a lesser extent by MDG. As expected, AMS revenue decreased, mainly reflecting lower revenue in personal electronics. This includes the impact of the change in product mix in a long-term customer program in personal electronics that I first mentioned in January. Year-over-year, sales increased 2.1% to OEM, sorry, and 3.4% to distribution. On a sequential basis, net revenues increased 2.4%, with ADG up 3.6%, AMS up 5.3%, and MDG down 1%. Net revenues came in 130 basis points above the midpoint of our outlook, mainly reflecting higher sales than expected in personal electronics. Gross profit was $2.11 billion, increasing 2.4% year-over-year. Gross margin of 47.6% was stable year-over-year, as improved product mix was offset by higher manufacturing costs and unused capacity charges. Year-over-year, third quarter operating income decreased 2.4% to $1.24 billion. Operating margin was 28%, decreasing by 140 basis points versus 29.4% in the year- ago quarter. This was due to a higher OpEx to sales ratio, as we continue to invest in innovation and in the digital transformation of the company. On a year-over-year basis, both net income and earnings per diluted share in the quarter were stable at $1.09 billion and $1.16, respectively. Looking at the year-over-year sales performance by product group, ADG revenues increased 29.6% on a double-digit growth in both the automotive and power discrete subgroups. AMS revenues decreased 28.3%, with lower revenues in the three subgroups. MDG revenues increased 2.8%. Revenues grew in RF communication and were substantially flat in the microcontroller subgroup. In terms of operating margin by product group on a year-over-year basis, ADG operating margin increased to 31.5% from 25.9%. AMS operating margin decreased to 18.8% from 27.2%, while MDG operating margin decreased to 35.1% from 36.7%. Net cash from operating activities increased to $1.88 billion in Q3 versus $1.65 billion in the year-ago quarter. Net CapEx in the third quarter was $1.50 billion, compared to $955 billion in the year- ago quarter. Inventory at the end of the third quarter was $2.87 billion, compared to $2.38 billion in the year- go quarter. Days sales of inventory at quarter end was 140 days, compared to 126 days in the previous quarter and 96 days in the year- ago quarter. Free cash flow was $707 million, compared to $676 million in the year-ago quarter. During the third quarter, ST paid $58 million of cash dividends to stockholders, and we executed an $87 million dollar share buyback under our current share repurchase program. ST net financial position of $2.46 billion as of September 30th, 2023, reflected total liquidity of $5.05 billion and total financial debt of $2.59 billion. I will now go through a short update on some of our strategic focus areas in Q3. First, wide bandgap semiconductors. We began volume production of gallium nitride transistors, which simplifies the design of high-efficiency power conversion systems. We support the development of safe and reliable wide bandgap-based power systems for high power application, with industry-leading galvanically isolated drivers. In the quarter, we introduced a new STGAP products specifically designed for GaN transistors based on ST's unique IP and advanced BCD technology. In silicon carbide, we continue to increase the number of engagements. We are now working with 94 customers and 150 projects, up from 90 customers and 140 last quarter, which here range from electric vehicle applications, such as onboard chargers to power module and solar power system. We confirm our revenues for silicon carbide products will reach about $1.2 billion this year. In Car Digitalization, we saw continued design win momentum with our latest generation of automotive microcontrollers, called Stellar, across key applications. These include design wins in zonal modules for software-defined vehicle architectures and in next-generation battery management systems, in partnership with major car makers. In ADAS, the EyeQ6 project with Mobileye is progressing to plan, with early volume ramp up this year. We have also seen a strong market interest in ST high precision GNSS solution, Teseo V, adapted for ADAS systems. At the end of September, we held our annual industrial summit event in China. It drew over 1,300 customers in person and over 50,000 participating online. The theme of this year's event was powering new sustainable innovation, and was focused on helping customers address climate-related challenges. We showcased 150 demos in three market segments: automation, Power & Energy, and motor control, where ST has created dedicated competence centers located close to our customers. The registration of new designs in distribution we are receiving for our flagship STM32 family is increasing year-over-year on all our products, including mature ones. This is a really positive indication of the market structural appetite for our products. Moreover, we released the first ST cellular narrowband IoT ultra compact and low-power modules, combining cellular IoT connectivity and geo-localization capabilities for wide-ranging IoT, smart metering, and industrial application. We further enlarge the reach of application and use case for industrial customers by introducing new products such as time-of-flight and Thermal MOS infrared sensors, as well as the third generation of inertial sensors. To support our strategic focus areas in embedded processing, we announced new ecosystem tools for our STM32 family. We also continued to expand our engagements with customers to deploy edge AI for a growing range of use cases. This is based both on our extensive toolset, allowing porting of AI algorithm to our existing MCU portfolio, as well as the alpha customer engagements for our latest neural processor-enabled MCU. To conclude this review, in our radio frequency communication business, we are continuously expanding our strategic co-collaboration on SpaceX Starlink, which provides high-speed internet connectivity to a growing customer base in more than 60 countries around the world. They are helping hub their next-generation products, which leverage our BiCMOS9 processes, as well as innovative and highly differentiated packaging technology. Now, let's move to our fourth quarter 2023 financial outlook and our plans for the full year 2023. For the fourth quarter, we expect net revenues at the midpoint to be about $4.3 billion, representing a year-over-year and sequential decline of about 3%. Q4 gross margin is expected to be about 46% at the midpoint, including about 130 basis points of unused capacity charges. For 2023, our Q4 guidance at the midpoint translates into 2023 net revenues of about $7.3 billion. This represents growth of about 7.3% year-over-year, with a gross margin of about 48.1%. The $7.3 billion is consistent with the indicated range we provided late July. The $100 million difference at the midpoint relates mainly to the industrial end market in Asia, where the level of orders materializing towards the end of Q3 to load our Q4 backlog has been below our expectation. We confirm our 2023 net CapEx plan of about $4 billion. To conclude, in September, the supervisory board asked me to be available for a reappointment as a sole member of the managing Board and president and CEO. I was very honored and pleased to accept the proposal. This will be proposed for shareholder approval at ST's 2024 Annual General Meeting of Shareholders. Thank you for your attention, and we are now ready to answer your question. We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question or a comment may press star and one at this time. The first question comes from the line of Didier Scemama with Bank of America. Please go ahead. Good morning, everyone. Thanks for letting me on. Maybe just a couple of questions, Jean-Marc, if I may, on Q4, if you could give us a sense of, you know, the various end markets. We're hearing obviously weakening demand in industrial. I think in a conference earlier this year, you mentioned that you were fully booked for autos for 2024. So I wondered whether you could, you know, maybe talk also about the rest of the business next year, any sort of early indication on revenue growth and also growth margins. Thank you. Well, for Q4, I repeat, clearly we have seen on the industrial market, well, especially, especially in China, Asia, China, that the order booking entering in the lead time window were not materializing at our expectation. And it has mainly impacted general purpose microcontroller. Well, this is for Q4, but now we have to acknowledge all together that we went back to normal in term of lead time and capacity utilization for this kind of device and for semiconductor industry, except few, very few product line, like silicon carbide as well. But about 2024. Well, clearly we have a very good visibility for 2024 for automotive and for whole, I have to say, the engaged customer program with our global strategic key account everywhere we have a, let's say, a custom design product or where we have proliferated our product. Well, then for, let's say, industrial market, both mass market distribution and OEM, well, now the visibility is limited. And for sure, customer, let's say, wait to the habit to put order, okay, when they are in the lead time window. So we have to monitor very carefully the order entry in Q4, well, to understand, okay, all will be, will be, let's say, next year for mass market industrial, both for OEM and distribution. Well, if you want to classify next year very simply, well, we are convinced that automotive will grow definitively because we have the visibility. And again, okay, the demand will be driven by the e-mobility, by the digitalization, by the pervasion of, let's say, the electronics in legacy application. Well, it is based on the production volume that will remain around 85 million-90 million vehicles. We do believe that for personal electronics, we touch down some bottom in Q4. And next year, like- for- like, because, okay, again, we have to re-remove the optical optical module still present in 2023. Like- for- like, okay, we will slightly grow. Well, then again, on industrial mass market and distribution, it's a bit early, so we have to monitor carefully what is happening in Q4 in terms of order entry. But it is clear that discussing with some customer, okay, they are assessing their end demand. They are assessing, okay, their inventory level, and this could also trigger some inventory correction both in Q4 and maybe early next year. Okay, very well. And on the underloading of the fabs in Q4, is that where do you think your inventories will end up at the end of this year? And do you expect the underloading of fabs to carry on into the first half? So I let Lorenzo to answer. Good morning, everybody. But in respect to this quarter, we do expect, let's say, at the end of the year, to be substantial in term of inventory in the range of between 100 and 110 days, in the midpoint 105 or something like that. So there will be a further decline in our inventory during this quarter. This, of course, is triggering, as it been done, already done in Q3, some unloading charges. These unloading charges in this quarter will impact, of course, our gross margin, are fully embedded in our guidance. But as I said, for sure, let's say for the gross margin of the evolution of the loading in respect to the next year, a lot will depend from what Jean-Marc said about the evolution of the market or the entry for the industrial market. But we expect still some unloading charges continuing at least for the first half of next year. Thank you. Thank you, Didier. Next question, please. The next question comes from the line of Andrew Gardiner with Citi. Please go ahead. Good morning. Thank you for taking the question. Just following on the cost side of things, Lorenzo, obviously, you've given us some clarity in terms of unloading and how you expect gross margin to track. But given how the end market is shaping up at the moment, you know, what are your plans in terms of OpEx? I suppose specifically for fourth quarter, can you help us there in terms of the breakdown? And then perhaps just more generally into 2024, again, I understand you don't wanna quantify things too much, but just sort of your initial thoughts in terms of OpEx trends into next year would be helpful as well. Thank you. But for the question, well, this quarter, the OpEx, let's say last quarter, in Q3, OpEx came quite low in respect also to our expectation. But this is mainly driven, let's say, by the seasonality of Q3. You know that in Q3, we are impacted, positively impacted in term of cost by the vacation period, especially in Europe. But looking at the current quarter, our expectation in this quarter to have OpEx ranging between $950 and $960. This is including, I remind you, always, the other income and expenses, so let's call it net OpEx. This is increasing, compared to the previous quarter, compared to the Q3. There is a lower level of grants, R&D grants. I remind you that the level of grants in Q3 was quite high, also because there was a catch up over the previous quarter for grants, that were possible to be recognized during Q3. Then for sure, Q4 has a, let's say, unfavorable seasonality in respect to the, to the previous quarter. Well, this means that for, for this year, our average quarterly of net OpEx will be something between $925 million and $930 million when we look at the full year. For next year, of course, our OpEx will be in line, respect to the business evolution. We will maintain, control on our operating expenses. For sure, we will continue to protect our R&D, and we will continue to protect our digital transformation programs. Thank you. If I could also just follow up on the comment you've made in terms of seeing weakness start in the industrial space, particularly in China, and that it's affecting general purpose microcontrollers. Clearly, I think that brings some flashbacks to September 2018, where that was a part of the market that started to face troubles as we hit that particular down cycle. Things are a bit different this time around, but I'm just wondering how you're handling things, what you might be able to do a little bit differently this time around, given that you're starting to see some of the same signs. Well, compared to, yeah, remember very well, 2018 and 2019, well, first of all, okay, the overall, overall economy situation and world is, is rather different. Here, I, I can only say fact. Okay, again, the, the dynamic, in Q3 of order, when customer, okay, acknowledge the fact that they are entering the lead time window, were, were below our expectations. This is the fact number one. Well, fact number two, yes, we discussed with our customer, OEM and distributor, especially in China, but, this is also, overall, a, a bit a global dynamic. We see our customer that are, are really reassessing their end demand. They are revisiting their sales and operating plan, and of course, as we supported well, from supply chain point of view, since Q4 2022, of course, they will certainly readjust their inventory. Well, then again, from the other side, for the industrial market, clearly, and that's the reason why I mentioned the registration on STM32, the demand will be clearly driven by all application related to renewable energy generation, energy storage, power conversion, charging infrastructure for mobility, more factory automation and motor control, which are more related to CapEx. Well, this will be related to the overall economy, so that's the reason why we have to monitor it. Well, consumer application for the time being are still weak. Discussing with our customer, they don't expect, okay, to have a strong recovery before Q2 next year. So this is the situation that we have to monitor, and now we know how to do it, okay. We clearly monitor the order entry. We adapt our supply chain, and for sure, entering in January, we will have a better visibility and moving forward as well. Thank you, bye. Thank you very much, Andrew, Andrew. Can we, have the next question, please, operator? The next question comes from the line of Joshua Buchalter with TD Cowen. Please go ahead. Hi, guys. Thanks for taking my questions. Good morning. I wanted to ask about gross margins also. So I think last quarter you had called out mix, startup costs, and underutilizations driving the sequential decline. As we go from the third quarter to the first quarter, is it all underutilization charges or mix and startup also playing a role here? And then, as we think about exiting the year, you know, you should have inventory at your target, but the first quarter is seasonally down. And so I'm wondering how would underutilization charges trend in the first quarter of the year, under that dynamic, where you're at your inventory level, but you're also seasonally down? Thank you. No, as I was saying also before, yes, for sure, in Q4, we are impacted by some underutilization. You remember that, we were preparing the year in the first half of 2023, let's say, expecting a stronger second part of the year, second half of the year. So that was the reason why we were creating some inventory in order, let's say, to serve this expected demand that at this stage did not materialize, as you see from our guidance of the second half. So this is the reason why we put under control our inventory. This is creating some unloading charges that we have in this second half of the year, impacting our gross margin, bringing back to the level of days of inventory, as I was saying before, at our, let's say, I would say, standard normal level by year end. Something, as I said before, that will be ranging between 100 and max 110, but I think it will be closer to 100 days, 105 days of inventory. Moving on the next quarter, in Q1 and in the first half, but a lot of will depend on how the order entry will materialize during this quarter on the- especially for the industrial market. Because, you know, as was said, for automotive, we have a quite clear visibility where, let's say, the visibility is on the industrial. But our expectation, and still, we will have some level of unloading in Q1, and probably also something in Q2. And the level of unloading in Q1 will be probably similar to the one that we have in this quarter. Thank you for all that color. For my follow-up, I wanted to ask about silicon carbide. You know, there are concerns given some, you know, slightly weaker commentary at your lead customer, that silicon carbide growth could slow. Could you talk about the diversification efforts that you're undergoing? And in particular, how is your visibility into both substrate supply, both externally and your internal vertical integration efforts going for next year? Thank you. But for us, next year will be, let's say, a step ahead, consistent with our objective to deliver $2 billion in 2025. And, so we have the capacity installed, we have the supply chain secure, and we have the customer base, and backlog consistent with this objective. And I will communicate, okay, at Q4 earnings, end of January, the objective of silicon carbide revenue we would have next year. But, be sure it will be a consistent step with the $2 billion objective for 2025. Thank you. Thank you very much. Can we have another question, Andre, please? The next question comes from the line of Sandeep Deshpande with JP Morgan. Please go ahead. Yeah. Hi, thanks for letting me on. I have two questions. Firstly, you know, this is the first quarter that we are seeing since the whole COVID period, that you're seeing a year-on-year decline in terms of your guidance in the fourth quarter. How do you see this progressing? Clearly, you've seen this softness in the industrial space. First quarter is typically also a seasonally weak quarter for you. How do you see this progress on a quarter-to-quarter basis in the first and second quarter? Will you go back to growth in the first or second quarter of the year on a year-on-year basis? And then my second question is regarding the mix of the product into next year as such, really. Now, you've lost some business in personal electronics, and maybe that goes up a little, as you said, but automotive will be a larger part of it. So will the mix overall help the gross margin into next year, or is it that the underutilization charges continue, and so that the gross margin is more going to be driven by underutilization charges rather than product mix? Thank you, Sandeep, for your question. So for next year, well, I repeat what we see. Again, for us, the visibility is very clear again on automotive and where we will grow next year. And one very quarter, we will grow year-on-year, I have to say. For engaged customer program is exactly the same, and I repeat with our strategic accounts. So whatever are related to personal electronics, but also to communication equipment, and where we have all this important program. So we have the full visibility, and again, on personal electronic, like for like, okay, we should grow. Communication equipment and computer peripherals, now, here, I have to say that next year will be a transition year, because we will shrink also step after step, our legacy activity, where we want to be no more present. It is basically enterprise communication. But we will accelerate with our engaged customer program, with SpaceX Starlink and the other opportunity we want. Well, the important question is mass market distribution and industrial OEM. Well, you know, this market is fragmented. Yes, Q4 is a sign that, again, I repeat, we discuss with customer, they are revisiting and assessing their end demands because it is related to the overall economy. It is related also to the automotive. Of course. Okay, making this achievement, it could trigger some inventory adjustment. But an inventory adjustment is difficult now to assess how long it will last. So, this is what I can say. That's the reason why I say very confidently that Q4 order entry for industrial mass market will be very key to understand the dynamic. So this is what I can say at this moment. Thank you. There was a question on the mix? Well, well, the mix, I think, somehow Jean-Marc was answering or, giving us some color. Of course, let's say, no doubt that, when we look at, at the, at the industrial market, for us, is very accretive. So it means that depending on the way that this will evolve, will of course be positive for our gross margin in respect to what is now in Q4. In respect to personal electronic, well, here, actually, we have not lost anything here. In reality is a change of the architecture in which we are present. So it means that at the end, we have not any longer the optical module, but we have, let's say, silicon inside. For us, it's positive in terms of gross margin mix. Let's put it this way, not in the revenues, of course, because the ASP is different, but definitely in terms of the gross margin is positive. Okay. Thank you. And it? Yeah. Thank you very much. Next question, please, Andrew. The next question comes from the line of Aleksander Peterc with Société Générale. Please go ahead. Yes, good morning, and thank you for taking my question. My first question would be really on what we should expect on the price front. Usually, if I remember well, you had in the first quarter some customary price declines every year, so that was a little bit of a pressure on gross margins in Q1. That didn't really happen in this year because of the general price increases, but is the normal pricing pattern set to return in 2024, in the first quarter? And then I have a quick follow-up. Thank you. No, about price, okay, and Lorenzo will comment. Okay, what I can say, basically I already said in April. We say some price effect, okay, in distribution, which is normal, okay? When you go back, normal, let's say, situation in terms of supply, POS, POP, that you have a well balanced, okay, between demand and offer. Well, you go back to normal, let's say, price effect, okay, let's say low single digit on a yearly basis, okay? We know it, okay, everybody know it. This is something which is intrinsic, okay, the semiconductor industry. So generally speaking it start on distribution, so we have seen it in April. Okay, we see it in Q3, and we will see it in Q4, clearly. Well, then for the rest, okay, there is no specific, okay, price effect and price pressure from customer. We have contract, okay? We have new product, okay? We have engaged customer program. Well, there is no surprise, okay? There is coming back to a normal situation. Well, more than that, okay, I cannot comment. Okay, thank you very much. A quick follow-up just on automotive, where you have very good visibility. Can you tell me if excluding silicon carbide, is your automotive business set to grow meaningfully next year or not? Yes. Meaningfully? Okay. Yes. No, no, I have, I well understood, so, so if I remove silicon carbide, yes. Short answer. Excellent. Thank you very much. Thank you. Thank you very much, Alex. Next question, please. The next question comes from the line of Francois Bouvignies with UBS. Please go ahead. Thank you very much. So I've wanted to follow up on Alex's question on automotive. I mean, this quarter you delivered 30% growth. I mean, if you look at TSMC, it was down 11% year-over-year, calling that the industry is going through an inventory correction. And also, I'm sure you saw as well, the macro data with OEMs orders for auto is coming down significantly, especially in Europe. We also saw GM and Honda with like push out of EVs. So it seems to be very different than what you report and also what you say in Tonex, what you just said. So I'm just wondering, do you see anything or is your guidance factoring some maybe EV penetration slow down into next year? Because I guess it's something that you would see that happening, or is just your lead times, you know, so long that basically you don't see it yet. I'm just trying to reconcile basically what we see on the ground and what you are delivering and how it can be disconnected, if you see what I mean. No, yeah, perfectly. I think there is no disconnection. Now, if your question is this year, basically at 17.3, the automotive segment we support basically will grow 36%. Well, clearly, also embedded in this fantastic growth, well, there is a specific item which are related to the period of shortage that ST has benefited in 2023, was a capacity fee reservation, and which is quite material. However, even if you remove this effect on our gross performance, our automotive segment in 2023, okay, basically will grow 28%. So next year, I have to say that this capacity fee reservation will be still present, but in a, let's say, less order of magnitude than 2023. And it's normal because, okay, except few product line, now we have the capability to better support the car maker through the Tier 1 or directly. Well, then, the Tier 1 and the car maker, they are acknowledging as well that we are reducing our lead time. And reducing our lead time, but step after step, okay, we could see booking order with the book-to-bill below 1 on automotive, simply the fact that they will stop to load 18 months in advance on 2024 in advance. We could anticipate that in 2025, okay, instead to have a 100% backlog coverage, we will be maybe 80% backlog coverage. So this is a trend we are seeing, point Number 1. Point Number 2, well, I'm sorry again, with all due respect I have with TSMC, they have a partial view of automotive. Okay, we have the full spectrum of product portfolio to see what is happening in automotive. And I confirm to you that except, so like for like without the silicon carbide, we will grow. For sure, we will not grow at 28%. We will grow significantly, but not at 28%. This I can confirm to you. So as a takeaway, I can tell you that, yes, next year we will have a little bit benefits less on capacity fee reservation. We will see our customer acknowledging our capability in 2024 to better deliver with shorter lead time. So normally, their booking will, let's say, decline in order to adjust themselves to this fact. So we will expect to enter in 2025 with 80% coverage on automotive. So this is the point number two. Point number three, we will grow overall in 2024, and it is based on stable production car volume that we consider around 85. Well, yes, the feedback we have from our customer and the feedback there is from analysts next year is more than 90 million vehicle produced. This is not the base of our forecast. Well, then point number three, I repeat, okay, this year is 11 million-12 million of battery-based electrical vehicle. But next year, we can expect, okay, to go well above 16 again. So this will call for big demand for power electronics and micro. Well, then, okay, you have the change of architecture that are coming from the all, definitively. Well, and then the customer, having acknowledged that we can better supply, they come back to better sophistication of the legacy, so there is more and more semiconductor and electronic in legacy application. So all in all, this is building a scenario for next year of growth for automotive, for ST, taking into account the portfolio we have. Great. Very clear, Jean-Marc. Thank you for the answer. Maybe my follow-up would be on the CapEx. I mean, as we see the orders, I mean, excluding autos, you know, a bit uncertain and the utilization charges, how do you think about the budget of your CapEx next year? And obviously, I don't expect you to give your CapEx. I mean, you can if you want. But, is it something that you review given the current situation, that maybe delay some of a project or CapEx? I mean, how flexible do you want to be on your CapEx side, given the current environment? That's the second question. No, maybe we are running, let's say, every two months, okay, let's say two years, S&OP with different scenario and so on and so forth. I can confirm to you that, we have the flexibility, okay, to adjust our CapEx. And yes, in current circumstances, okay, where there is, okay, not on automotive, I repeat, not on our global key account engaged customer program but on mass market distribution and, let's say, small OEM, some uncertainty that we have to monitor, that the CapEx we will spend next year will be below the CapEx we have spent this year. Thank you very much. Thank you. Next question, please, Andrew. The next question comes from the line of Stéphane Houri with Oddo BHF. Please go ahead. Yes, hello, good morning, thank you for taking the question. Actually, the question is about the Chinese market and the competition you may face there. Because if you listen to the large equipment manufacturers, basically they are selling a lot of machines, and those machines are probably gonna be used to manufacture or to build chips for automotive. So, how do you see this happening? Is it putting a bit more pressure, or is it changing your plans? And I have a follow-up. Thank you. Thank you, Stéphane. I think I've already answered this question. We have initiated now since two years some let's say diversification in our source of this microcontroller, but analog as well, including power analog, BCD, more silicon carbide, okay, with our joint venture with Sanan. We will use this, we will take benefits of this investment done in China to produce our microcontroller. And as I said during my address, we are building and we have already built, I have to say, an infrastructure in China to support this market. So foundry, we will use a local foundry for microcontroller, including transferring some of our technology. We have already built competence center to address the high-growing application, so power, energy, motor control, robotics, all this, kind of stuff. So we have reinforced our application engineer. We have a deep relationship, okay, with the distributor for demand creation, and they have hired a lot of application engineer. So, and then we have our ecosystem of the STM32 that we complete, okay, with all the different feature of connectivity and AI. So in fact, we are competing in China, like Chinese, but stacking our ecosystem and our wide portfolio, which is the widest portfolio of STM32. And, well, at the end, it's competition, but very Chinese, but with, with so South American, so it's competition as usual, I have to say. But yes, we have adapted ourselves step after step since two, three years, when we have seen this trend, to take advantage of the investment that are done in China. Okay, thank you. Very clear. And then the follow-up is that, maybe you have heard that one of your big European competitors has said that even with a flat car market, they will grow, you know, more than 10%. Basically, they said low teens. I guess with that, with all the elements that you've given for next year, this statement would apply probably to you also, right? I will give you indication early next year. Okay, fair enough. Thank you very much. Thank you, Stéphane. Next question, please. The next question comes from the line of Jerome Ramel with BNP Paribas Exane. Please go ahead. Yeah, good morning, and thank you for taking my question. First question, Jean-Marc, if I look at your, whatever your SAM gonna be, and I understand the lack of visibility, can you share with us what you think about your own market share trajectory versus your SAM? The reason I'm asking is because if I look at your Q4 guidance, I think for the first time in maybe 20 years, you're gonna have higher revenues than one of your largest competitors in the U.S. Just to understand the dynamic of your market share gain, for the coming year, and how much of that is embedded in your guidance or target of reaching $20 billion revenue between 2025 and 2027? Well, thank you for to have taken note. Potentially Q4, if we deliver the midpoint of our outlook, and our main competitor delivers the upper range, we will be above. So, thank you. Well, it's good, but this is not the most important, okay? Yes, certainly this year we have increased our market share, most likely, because, well, we know that WSTS will make a revision in November, so we will see what will be the market. For the time being, they said in August, SAM should grow 3.4. So us, by fact, we will grow 7%, so means we will win market share. We are also indication from India that our SAM, okay, this year will grow 1%, so this is confirming. So when I take this data, I have to say that this year we will win market share. And again, it has been mainly driven by our capability to grow in automotive, to grow in silicon carbide. Clearly, $1.2 billion is quite material. We have taken benefits of this capacity reservation. Well, we have been heavily impacted by the personal electronics, and definitely, but as everybody, okay, no more than everybody. Until, okay, Q3, for sure, the industrial mass market was solid. But now, okay, we are entering this period. But about next year, well, it's difficult, again, to say today, but our ambition is to continue to win, year after year, market share driven by a new product introduction, technology differentiation. Well, yes, I confirm the $20+ billion model in terms of revenue. But in the time frame we indicated, 2025-2027. But clearly, 2024 will be a transition period to this model, clearly. And just to make sure you're confirming also the gross margin target of 50%? Yeah, we confirm the model. Yes. Okay. Yeah, thank you. And maybe just a follow-up question on silicon carbide. There were the rumors that you might need another silicon carbide fab in the French newspaper. I don't know if you can confirm or not, but maybe another way to ask the question: with the current capacity you have, how much revenue can you target with the current capacity, including the Sanan JV? Well, clearly, with the manufacturing footprint we have today, installed, we can support, okay, above the $2 billion of 2025. So, this is good news. Point Number 1, today, as you know, we are concentrating to ramp up our raw material fab in Catania, in order to achieve as soon as we can 40% of internal production. It will be a good cost driver. Well, then, if we plan to go well above $5 billion between 2028 to 2030, and this is clear that we will need to have, okay, two additional fab. One in China, that will support the Chinese market, so this is the JV we have just set up, and progress are moving very well, and I will visit them very soon. Well then, we will decide when timely, when we have to build another fab, and of course, we will communicate. But for sure, to go well above $5 billion between 2028 to 2030, we need Sanan and another fab. Thank you very much. Thank you. We have time for one last, I would say, short question, if possible. If you, if you can, Andre, let's, let's have another one. The next question comes from the line of Simon Coles with Barclays. Please go ahead. Hi. Thanks for squeezing me in. You talked about the under, like, utilization charges, but you didn't split out Agrate. So I was just wondering if you can confirm Agrate's sort of peak drag in 4Q, and we can continue to expect that to improve in 2024 and be accretive in the second half of 2024? Yeah. The plan for the 300-mm in Agrate is substantially unchanged. It's true that this year and in the first part of next year, Agrate will not be accretive. At this stage, we can confirm that Agrate will start to be neutral, and then to be, let's say, adding a positive contribution, starting the second part of next year and Q4, and then definitely in 2025. Yeah. Thanks. And can I just quickly clarify, the 130 basis points impact on gross margin in Q4, that doesn't include the drag from Agrate? No, it’s only the impact of the unloading charges. Great. Thank you. Thank you very much. Very short. Thank you very much, Simon. I think that now, this is, this is the last question, and we can conclude the call. Thank you. Thank you, everybody. Thank you very much. Thank you. Bye-bye. Bye. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.