STMicroelectronics will hand over the production of MCU chips to Chinese companies for manufacturing
European chip giant STMicroelectronics held a grand Investor Day event in Paris, France, on Wednesday, where it announced a major strategic decision: to collaborate with China's second-largest wafer foundry to produce 40nm node microcontrollers (MCUs) locally in China. This move aims to fully support the company's medium- to long-term revenue goals and highlights its deep layout and strategic considerations in the Chinese market.
STMicroelectronics has actively pursued manufacturing restructuring and cost base adjustment plans, achieving remarkable results. Compared to current costs, the company expects to save up to millions of dollars in expenses by 2027. Its future revenue expectations are also optimistic, with projected revenues of approximately $18 billion in 2027-2028 and operating profit margins stably maintained between 22% and 24%. These initiatives and expected outcomes have laid a solid foundation for the company in the competitive market.
To ensure the smooth progress of this ambitious goal, STMicroelectronics' CEO, Jean-Marc Chery, announced on Wednesday that the company will establish a close partnership with Huahong Group, China's second-largest wafer foundry. According to the plan, the goal of producing 40nm MCUs locally in China will be achieved by the end of 2025. The company deeply recognizes that local manufacturing in China plays a crucial role in its competitive position in the global landscape and is an indispensable part of its strategic layout.
Fabio Gualandris, the manufacturing director of STMicroelectronics, further explained the multiple reasons for producing in China. On the one hand, the local supply chain offers significant cost-effectiveness advantages, effectively reducing production costs and enhancing product competitiveness. On the other hand, compatibility issues and the risk of government restrictions are also important factors to consider. Furthermore, it cannot be ignored that China, as the largest and most dynamic electric vehicle market globally, producing chips anywhere else could potentially miss out on China's rapidly developing electric vehicle development cycle, which would undoubtedly be a huge loss of development opportunities for STMicroelectronics. "They are moving faster," he emphasized, "if you're not there, you can't respond in time."
At the time when Jean-Marc Chery made these important remarks, the global semiconductor industry was undergoing profound changes. Major countries and regions worldwide, including the United States, Europe, China, and Japan, are actively promoting more chip manufacturing to take root locally. Many chip companies are also expanding vigorously in places like Singapore and Malaysia to better serve the Asian market. However, as one of the strongest manufacturers of energy-efficient silicon carbide (SiC) chips for electric vehicles, with clients including well-known companies such as Tesla and Geely, STMicroelectronics has a deeper understanding and strategic judgment of the Chinese market. The Chinese market, with the most electric vehicles and the most innovative, occupies an indispensable position in its global market layout. Competing from outside would make it difficult to fully tap into its market potential and value.
Jean-Marc Chery explicitly stated, "If we give up our market share in China to another company working in the industrial or automotive sector, namely a Chinese company, they will dominate their own market. And with such a huge domestic market, it will be an excellent platform for them to compete in other countries." According to STMicroelectronics' careful planning, the strategic deployment of its STM32 series products manufactured in China will help the company significantly expand its customer base by 50% in the next five years, undoubtedly injecting strong momentum into the company's sustained development. He also added that STMicroelectronics is actively absorbing the best practices and advanced technologies learned in the Chinese market and cleverly applying them to Western markets, achieving two-way exchange and integration of technology and experience. "The story of the missionary is over," he vividly compared.
It is worth mentioning that before Jean-Marc Chery made these statements to reporters in Paris, the company had just gone through a severe test of the downturn in the industrial chip market and suffered a heavy blow. Even so, STMicroelectronics still firmly chose to continue increasing its layout in the Chinese market. Looking back, as early as June 7, 2023, STMicroelectronics signed a significant agreement with a wholly-owned subsidiary of Chinese chip manufacturer San'an Optoelectronics, planning to invest $3.2 billion to jointly establish a new 8-inch SiC device joint manufacturing factory in Chongqing. At the same time, San'an Optoelectronics will independently establish an 8-inch SiC substrate factory locally as a supporting facility, further consolidating the foundation of their cooperation. Obviously, amidst the complex backdrop of escalating Sino-US trade conflicts, some foreign chip manufacturers are transferring their manufacturing operations out of China, while STMicroelectronics is resolutely "going against the trend" and continuously increasing its investment in chip manufacturing in China. This fully demonstrates its deep dependence on and firm optimism about the Chinese market, while also highlighting the excellent wisdom and extraordinary courage of STMicroelectronics' CEO. His strategic vision and decision-making ability are worthy of industry reference and learning.
