November 27, 2024 /SemiMedia/ — STMicroelectronics noted during its Capital Markets Day that the significant drop in MCU sales for the first nine months of 2024 was partly due to non-cancellable, non-reschedulable (NCNR) contracts signed in 2022 and 2023, which led to excessive customer inventories. However, the company informed analysts that it is already seeing initial signs of recovery.

For the first three quarters of 2024, ST’s MCU sales were approximately $2.58 billion, a 41.3% decline compared to $4.4 billion in the same period of 2023.

CEO Jean-Marc Chery noted that 2025 would be a transition year for the company toward a brighter future, but inventory adjustments in some sluggish markets, particularly in the industrial sector, remain challenging. A broader inventory correction is expected to continue into the first half of 2025.

Remi El-Ouazzane, President of ST’s MCU, Digital IC, and RF Products Group, stated that the MCU market decline was influenced by multiple factors, including a weak overall economic environment and changes in specific market trends. Geopolitical tensions have undermined consumer confidence, and global economic growth forecasts have been downgraded. ST also faced challenges in its industrial applications and the Chinese market.

Additionally, increased competition from Chinese MCU manufacturers and a decline in demand for European factories and industrial automation have led WSTS to revise its 2024 global MCU market forecast down from $27.7 billion to $23.2 billion. The forecast for the general MCU market (excluding automotive and security MCUs) was also lowered from $14.1 billion to $8.8 billion.

Remi explained that procurement allocation decisions from 2021 to 2023 caused ST’s market share to decline and led to excess channel inventories. The current process of inventory absorption is expected to extend into 2025. He attributed 60% of the sales decline to inventory issues, with the remaining factors being reduced market demand and lost market share.

Despite the pressure, ST indicated that recovery signs have already emerged. By the third quarter of 2024, the MCU order-to-ship ratio had returned to above 1.0.

Remi added, “While this year has not been easy for the STM32 series, we are now on the path to recovery, and I am optimistic about the future.”