STMicroelectronics Reports Unexpected Loss in Q2 Due to Asset Impairment

STMicroelectronics NV has announced an unexpected loss in the second quarter, impacted by a $190 million asset impairment and restructuring costs related to its business streamlining plan. The Franco-Italian joint venture reported an adjusted operating loss of $133 million, while Bloomberg data indicated that analysts had previously expected an operating profit of $54 million. During the same period, STMicroelectronics' revenue decreased by 14% to $2.77 billion, compared to analysts' average forecast of $2.74 billion. The company noted that automotive chip sales slightly missed expectations, but growth in the consumer electronics and industrial sectors offset this impact. In October last year, STMicroelectronics announced a cost-cutting plan and later announced a 6% workforce reduction due to ongoing industry downturns. Over the past year, the company's stock price has dropped by 27%, drawing criticism from the Italian government, which, alongside France, owns over a quarter of STMicroelectronics. The majority of the company’s revenue comes from the automotive sector, but rising tariffs due to global trade disputes are disrupting the automotive market, placing increasing pressure on the industry. Last week, Renault Group revised down its operating profit margin forecast for the year, and Stellantis Group also reported a net loss for the first half of the year. Tariffs have disrupted the global automotive supply chain and caused volatility in customer orders. Some automakers have stockpiled chips ahead of time to avoid tariffs, potentially overstretching future market demand. Meanwhile, STMicroelectronics' U.S. competitor Texas Instruments Inc. also saw a sharp decline in stock price this week, as market concerns about tariffs and trade disputes threaten the nascent recovery in automotive chip sales. Kurt Sievers, CEO of rival chipmaker NXP Semiconductors NV, stated that the two-year surplus of automotive chips is coming to an end, which had previously constrained business growth. However, Ken Hui, an analyst from Bloomberg Intelligence, reported that European chip manufacturers may struggle to maintain their revenue recovery momentum. He anticipates a decrease in orders from China, suggesting that regulatory efforts to strengthen industry consolidation may lead Chinese automakers to lower vehicle delivery targets, thereby impacting chip procurement demand.