After many quarters financial losses due to an attempt to compete in the business of selling mobile processors, STMicroelectronics NV, Europe's largest chip company, made a net profit in the second quarter of 2014. The profit came despite a sales decline of 8.9 percent year-on-year.
The costs of disengaging from the failed ST-Ericsson joint venture have been paid and ST has emerged with a greater emphasis on analog and mixed-signal technologies and on non-consumer applications such as automotive and industrial. However, the analog and MEMS (AMS) business unit suffered a decline in revenue both sequentially and year-on-year in Q2. Analog and MEMS had been one of the most successful parts of ST's portfolio during the struggles over ST-Ericsson, but it has now been hit after ST lost inertial MEMS business with Apple in 2013.
ST’s second quarter net revenues increased 2.1 percent on a sequential basis to $1.864 billion but fell 8.9 percent sequentially from $2.045 billion in 2Q13. ST made the point that excluding legacy ST-Ericsson products and certain one-time licensing fees, revenue increased 4.7 percent.
ST made net profit of $38 million in 2Q14 compared with a loss of $24 million in the previous quarter and a loss of $152 million in 2Q13.
Nano2017 helps, 3Sun hinders
On thing that helped ST's profit was the recognition of $100 million of income from the European Union, related to funding of the Nano2017 R&D program, which started on January 1, 2013, but was only approved by the European Union in the second quarter of 2014. ST is the coordinator and project leader of Nano2017 and has been allocated an overall funding budget of about €400 million (about $540 million) for the period 2013 to 2017.
However, ST recognized a loss on equity investments in the second quarter of $52 million, mostly related to ST’s investment in the 3Sun joint venture, based in Sicily. The company was set up as three-way between ST, Enel Green Power and Sharp to make use of a building in Catania, Sicily that had originally been constructed as the M6 shell for a 300mm wafer fab. The building remained empty for many years before the creation of the joint venture in 2011. ST has agreed to transfer its share in 3Sun to Enel Green Power.
Sales of the analog and MEMS business unit fell to $264 million, down 13.2 percent sequentially and down from $327 million, 19.3 percent, from the same quarter a year before. The digital convergence group saw a steeper decline to $184 million, down from $205 million sequentially and from $375 million in the year-before quarter, down by 50 percent.
Sectors that did well for ST included automotive, up year-on-year by 11.3 percent to $463 million, and microcontrollers, up year-on-year by 12.8 percent to $396 million.
"Our performance benefited from the combination of favorable macro-economic and market dynamics, especially in industrial and automotive, and from the traction of our innovative portfolio and mass-market initiatives," said Carlo Bozotti, CEO of ST, in a statement. He added that the digital and ASIC business overall had started to grow again.
ST expects third quarter revenues to increase 3 percent on a sequential basis plus or minus 3.5 percentage points.
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