意法半導體 (STM) 2016 Q1 法說會逐字稿

Ladies and gentlemen, good morning.

Welcome to the STMicroelectronics first-quarter earnings results conference call and live webcast.

I am Maria, the Chorus Call operator.

(Operator Instructions).

The conference is being recorded.

(Operator Instructions).

At this time, it's my pleasure to hand over to Mr. Tait Sorensen, Group Vice President, Investor Relations.

Please go ahead, sir.

Thank you, everyone, for joining our first-quarter 2016 financial results conference call.

Hosting the call today is Carlo Bozotti, ST's President and Chief Executive Officer.

Joining Carlo on the call today are Jean-Marc Chery, Chief Operating Officer; Carlo Ferro, Chief Financial Officer; Georges Penalver, Chief Strategy Officer.

This call can be accessed live through ST's 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's expectations and plans.

We encourage you to review the Safe Harbor statement contained in the press release that was issued with the results 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, please limit yourself to one question and a brief follow up.

And now I'd like to turn the call over to Carlo Bozotti, ST's President and CEO.

Carlos?

Thank you, Tait, and thank you all for joining us this morning on our first-quarter earnings conference call.

Today's agenda includes an overview, followed by a detailed discussion of our results and product groups, an update on the market environment and our outlook for the second quarter.

So let's begin.

We have started the year by putting in place the key initiatives to improve our market presence and financial performance and, in turn, we have delivered some initial encouraging results.

First, we have started to execute on our strategic focus with people, resources and investment centered in two areas: smart driving, enabled by digitalization and electrification of the car subsystems; and the Internet of Things, which includes consumer devices as well as smartphones, city and industry applications.

Second, the new go-to-market organization we put in place in January is now fully operational.

Our product portfolio is well structured into three groups to reflect our focus and, importantly, to leverage the synergies and working together with the automotive and discrete group, ADG, which includes all of our automotive ICs, both digital and analog and our discrete products; the microcontrollers and digital ICs group, MDG, which includes our general purpose and secure microcontrollers, our (inaudible) memories and all of our digital ICs outside of automotive ICs; and the analog and MEMS group, AMG, which includes our low-power analog ICs, smart power products for industrial and power conversion and all of our MEMS activity.

Third, two major product areas accounting for about 50% of our 2015 revenues, automotive and microcontrollers, delivered year-over-year growth.

This is an important first result towards a more broad-based revenue growth.

As we move further in the year and, based on today's visibility, we expect to see a larger proportion of our businesses driving growth.

Fourth, aligned with our sharpened focus is the set-top box restructuring plan, targeting $170 million in saving on an annualized basis.

We expect to progressively capture these savings, generating about $145 million in 2017.

The remaining savings will depend on the lifespan of the residual products.

During the first quarter, we recorded restructuring charges of $26 million related with the set-top box plan and we expect to be on track with our timing exiting the second quarter.

Now let's turn to the first-quarter results.

Q1 was in line with our guidance.

Total revenue came in at $1.613 billion, representing sequentially a decrease of 3.3%.

We saw better-than-normal seasonality, despite entering the quarter with a volatile macroeconomic scenario and mixed industry dynamics.

Looking at our revenue results on a year-over-year basis, our goal to return to growth met with some promising indicators: automotive, driven by our pervasiveness in all domains, and microcontrollers, driven by the STM32 family.

Both grew above 4% excluding negative currency effects.

Our gross margin came in at 33.4% in the first quarter, better than the midpoint of our guidance of about 33%.

Unused capacity charges were still meaningful, as they negatively impacted gross margin by about 60 basis points.

Operating expenses were well aligned with our plans, with combined R&D and SG&A of $571 million compared to $591 million in the year-ago quarter.

As we progress through 2016, our set-top box restructuring plan will further reduce our cost structure.

We had an operating loss of $5 million before impairment and restructuring charges.

On year-over-year basis ADG and MDG operating results improved, while AMG registered lower profitability, mainly due to lower revenues.

Our free cash flow was positive at $31 million.

Also in the first quarter ST Supervisory Board proposed to resolve at ST's annual general meeting of shareholders to be held on May 25 the distribution of a cash dividend of $0.25 per share to be distributed in quarter installments of $0.06 per share in each of the second, third and fourth quarters of 2016 and first quarter of 2017.

The proposed dividend represents an attractive yield of about 4.1% on our current share price; substantially in line with the historical dividend yield for STM shares.

Of course, the dividend is subject to our shareholders' approval.

Now let's go through a deeper review of our product groups' performance during the first quarter, starting with our automotive and discrete group.

ADG's revenues of $671 million were substantially flat on a year-over-year basis and when excluding negative currency effects were up about 1%.

As I mentioned earlier, automotive grew over 4% excluding negative currency effects, partially offset by market softness in discrete.

On a sequential basis, ADG's revenues increased 5.4%, driven by strong demand, especially in Europe, in automotive products.

This was partially offset by the performance of our discrete products, impacted by market conditions as well as seasonality due to the Chinese New Year.

ADG operating income in the quarter was $39 million, representing an operating margin of 5.7% compared to 5.4% in the year-ago quarter.

ADG's strategic focus is mainly on smart driving.

That, for ST, means making cars greener, safer and more connected.

A part of our offering to make cars greener is our powered discrete products.

They are increasingly important to enable the pervasion of car electrification and they represent an important opportunity moving forward.

In this area we achieved a significant design win with multiple products in a silicon carbide technology for electrical traction in fully electrified cars.

Our innovative SiC MOSFET and rectifiers provide greater power efficiency and will significantly reduce the size of the electrification modules.

In the area of active safety we extended our series of design wins for blind-spot detection with our 24-gigahertz radar offering being selected by a leading European car maker.

Our 32-bit micro controllers were selected by a leading European Tier 1 to drive a 77-gigahertz radar system, which will be used by Japanese and European premium car makers.

Continuing with safety, our automotive MCUs were selected by a major Japanese Tier 1 for a braking system platform to be used by a leading car maker.

Other significant design wins include a major global Tier 1 for an automotive gateway application, as well as the continued penetration of American and European markets with multiple design wins for our microcontrollers with several industry-leading customers.

Moving to AMG.

Our analog and MEMS group enables a broad range of Internet of Things applications; supplying sensors, analog and power solutions for everything from wearable devices to the smartphone and factory automation.

AMG is also offering products for automotive navigation and telematics.

On a year-over-year basis, AMG sales decreased 17%, due to the weakness in PC peripherals and in smartphones and to the commoditization of motion MEMS.

AMG revenues were substantially flat quarter to quarter.

AMG operating margin was 0.5% in 2016 first quarter compared to 8.4% in the year-ago quarter, mainly due to lower revenues.

Based upon visibility with customers, we expect to see an improved second half of the year for AMG, both from a revenue perspective as well as operating income.

Looking at our progress with customers, in the consumer segment our sensors were chosen by a number of smartphone and wearable OEMs.

In smartphones we captured the optical-image stabilization, the 6-axis inertial measurement unit and the pressure-sensor socket in a flagship smartphone from a top manufacturer.

And we won the 6-axis motion sensor in another flagship smartphone by a top Chinese brand.

In China we also had design wins for our touchscreen controllers and [ARM-led] driver.

We expanded our presence with top wearable OEMs around the globe, winning sockets across our product portfolio into next generation wearables.

And, finally, we confirmed low-power high-performance accelerometer and Bluetooth low-energy socket in a new activity tracker for a top player.

We also won several projects in smart towns, smart city and the smart industry applications.

I will give three examples of key markets where we won sockets during this quarter: electricity metering, factory automation and datacenters.

In electricity metering we won a significant first order for a next-generation meter from a key European manufacturer.

In factory automation we delivered engineering samples for a new IO-Link communication transceiver device that is designed to support the transition of factories to industry 4.0.

And in datacenters we introduced a family of ICs that delivers the industry's highest power-conversion efficiency for the next generation's, which is at 48 volts, datacenter architecture recently presented by Google.

Turning now to MDG.

Our microcontrollers and digital group's broad portfolio of general purpose microcontrollers, secure microcontrollers, (inaudible) memories and digital ASICs successfully serve all application areas within the Internet of Things.

MDG's first quarter net revenues totaled $532 million; slightly up from $530 million in the year-ago quarter, thanks to microcontrollers, which increased over 4% when excluding negative currency effect.

On a sequential basis MDG's sales decreased 13.4% due to the anticipated lower demand of microcontrollers after a strong prior quarter and due to the phase-out of certain legacy products.

At the operating income level microcontrollers delivered a strong operating margin.

On the other hand, digital posted an operating loss, primarily due to the set-top box.

This led to essentially breakeven operating result for MDG.

Our set-top box restructuring plan, together with the top-line revenue growth we are expecting in digital ASICs, will help drive financial performance improvement.

In that regard, earlier I was highlighting our success in the domain of power conversion for datacenters.

We also serve the cloud infrastructure with ASICs and during the past quarter we won a silicon-photonics socket with a networking module manufacturer for 100 gigabit per second datacenter upgrade as well as two projects in optical access network applications.

In secure microcontrollers we ramped production of an embedded SIM for the new generation of tablets and watches being designed by leading OEMs.

Moreover, our near field communication controller and secure element have been qualified to enable secure near-field communication transactions in the ARM mbed wearable reference design.

Finally, in the quarter we continued to expand our highly successful general purpose microcontroller business.

In our STM32 product family we introduced one new high-end and nine new ultra-low-power MCU product lines, along with their related comprehensive development ecosystems.

Our high-end STM32F7 has been selected by an American OEM for its next-generation smart watch.

And our entry level STM32F0 has been selected by a major OEM for a smart charging application.

Turning now to our second quarter guidance, let me share a few key points.

We have started to see signs of some improvement in the semiconductor market, following the market softness that held back revenue growth from the second half of 2015.

More specifically, bookings are improving across our three regions: EMEA, Americas and Asia Pacific.

This improvement was most visible in automotive and industrial.

So we enter the second quarter with a higher level of optimism on the semiconductor market environment than we did three months ago.

Based upon our current visibility, this translates into a sequential revenue growth guidance of about 5.5% plus or minus 3.5%; so somewhat better-than-normal seasonality.

All product lines, excluding set-top box, are contributing to this sequential growth.

In terms of gross margin, we are targeting about 34% plus or minus 2 percentage points, reflecting unused charges negatively impacted gross margin by about 60 basis points.

Similar to the first quarter, we expect that in the second quarter the automotive and microcontroller businesses will continue to deliver year-over-year revenue growth.

In Q2 we also expect year-over-year improvements in our imaging business.

Based upon our current visibility, we expect the year-over-year recovery of power, discrete and AMG to start later in the year, enabling them to grow their second half of 2016 revenues versus the second half of 2015.

My colleagues and I would now be happy to take your questions.

Thank you.

(Operator Instructions).

Gareth Jenkins, UBS.

Just a quick question on margins, if I can.

I wondered whether you could talk us through what the MDG margins would be excluding set-top boxes.

And so what run rate we should expect for that business going forwards.

And then, more widely, just on your margin guidance.

I think you're forecasting 60 basis points of underutilization again going forwards, but your bookings seem strong and you're talking about recovery.

So I just wondered how you can -- whether you can help us square that one away for the forward quarter.

Thank you.

Gareth, I guess, I take the first part of your question on the MDG margin.

At the end, the margin is very similar to the one that we have already experienced in the course of year 2015.

The microcontrollers and the memory part of this new group, its margin well in the teens.

And this quarter on the digital part of the business we have experienced significant losses, not so much mitigated in respect to the prior quarter.

And, of course, these will be cured and fixed towards the year with the execution of our set-top box restructuring plans.

As far as unloading charges are concerned, of course, it will depend greatly on the evolution of the business and the booking strength.

Today what we see is a degree of unloading charges hitting the quarters during the course of this year and then a significant improvement starting from beginning of next year.

Great.

Thank you.

Achal Sultania, Credit Suisse.

First to Carlo, maybe, on the restructuring plan.

If I remember correctly, I think you were targeting about $100 million of savings in year 1. Can you just talk about are we on track to hit that level?

And how much should we expect in H1 versus H2?

And the second one, more longer term, about the Nano R&D grant that you are receiving currently.

I think it's about $125 million per year.

I think this contract -- this agreement expires end of 2017.

So how should we think about the continuation of that contract into 2018, because that's a substantial contribution to your EBIT margins currently?

Thank you.

Maybe I take the first part of the question and then, certainly, Jean-Marc can comment on the Nano 2017 grant.

Indeed, to report the few data points that we have shared with you introducing the plan at the end of January, the total plan target savings at completion of $170 million, we said that we were expecting a level of completion, so a run rate of savings, at the end of this year in the range of $100 million, 60% of the total plan; another important chunk in 2017; exiting 2017 with a rate of savings in the range of $145 million; and then the rest detail to follow the lifespan of the legacy product to be maintained.

The plan has been launched, started, all of these references are well confirmed and we are on track in this respect.

When looking at the short-term execution, and to address your question also on the quarterly impact in the course of 2016, the impact in Q1 has been so far quite soft.

The reason also being due to the fact that after the announcement of the plan, as usual, we had to discuss and review some of the future of each of the programs being part of this family with customers, with a lot of attention to customers.

And, in this respect, we spent a few times before starting.

The good is that now this process is totally completed and we exactly know where and from which program and when to pull out resources.

So, in this respect, you may anticipate an impact in the next quarter to progressively come.

I would quantify in about $8 million to $10 million the further cost benefit from Q1 into the second quarter and in a range of $20 million the cost benefit from Q1 into the fourth quarter of 2016.

Jean-Marc?

So about Nano 2017.

First, I would like to highlight one point; that the grants we report are not only Nano 2017.

There are many other programs, and especially from Europe, which, let's say, bring to our R&D or give some incentive on other types of grants.

So this is point number one.

Then the point number two about the future of Nano 2017.

So I would like to simply say that we have not yet opened some discussions so I cannot comment about the future.

What I would like to say that, in terms of timing, there is nothing special.

If I remember well Nano 2008, Nano 2012, Nano 2017, we are absolutely not late about any possible discussion.

So, for the time being, okay, as a takeaway, first, grants are not only Nano 2017.

Then, second, we have not yet started discussions.

And third, okay, we are not late according what we have faced during the past.

That's clear.

Thanks a lot.

Jerome Ramel, Exane BNP Paribas.

I had one question concerning the top-line guidance for Q2.

Could you give us a little bit more color in terms of end market, which market you see outperforming or underperforming versus your average revenues growth you see in Q2?

And I have a follow up concerning the OpEx.

How should we model the OpEx in Q2?

Thank you.

So I take the first part of the question and Carlo Ferro will take the question on the OpEx.

Well, certainly the market where we see stronger traction, they are automotive, industrial.

And, in general, we see a good trend of our point of sales with our distributors, I would say, in all the regions in the work.

The areas where we see, let's say, more weaknesses is certainly the PC industry.

You know we do not have many products for the PC motherboard, but we have certainly an important business in the area of PC peripherals and PC and power supply; PC peripherals, hard disk drives, the power supply, etc.

So this is the part that is more under pressure.

And another one, of course, is the one of wireless.

Naturally, market here is important but also our presence in terms of new products in new flagship model makes, or can make, a difference.

So, overall, I would say automotive, industrial and the general distribution market pretty strong and, today, weaker PC, PC peripherals and smartphone industry.

The second part of your question, Jerome, is on the operating expenses for the second quarter.

I said earlier that the set-top box restructuring is anticipated to progress with a further saving in the range of $8 million to $10 million.

Then all the rest, altogether, I could expect that they substantially [wash].

We have, assuming exchange rate stays at the current level, in the range of $1.13, the currency net of hedging will play negatively.

We have a bit of positive effect from the calendar but we have other cost-control initiatives that are expected to positively contribute.

So, overall, I would expect all the rest may wash and in the quarter we can take advantage of the $8 million to $10 million further savings from the restructuring plan.

Thank you very much.

Sandeep Deshpande, JPMorgan.

I've a couple of small questions.

When we look at the new makeup of the business units that you have disclosed, none of them are at the 10% margin level.

You did explain to an earlier question on the MDG that the underlying microcontroller business is at double-digit margins.

How are you planning to take these different business units towards a double digit overall?

The Company needs to be at around 10% margin.

How do these different business units go towards that 10% margin?

And secondly, Carlo Ferro, why haven't you reported those discontinued items within the digital business as discontinued items under IFRS?

Thank you.

Well, to respond to the first one, I think certainly manufacturing is going to play for important roles because the manufacturing performance, after the strong reduction of the bookings in the third quarter of last year, did negatively contribute to the progress of the gross margin.

And particularly Q4 was difficult from the point of view of manufacturing, and not only in terms of unloading charges but also in terms of the overall manufacturing efficiency.

And certainly this has impacted the two analog and discrete units significantly.

The second element, of course, is growth.

We have been hit particularly in the area of the mass market in Asia with a strong correction.

And I believe that now we are encouraged by the trend of the bookings, also on families like discrete and other standard products.

So this will certainly contribute to a top-line evolution on these lines.

But, as I said before, only in the second part of this year we see AMG and the discrete families to grow year over year, to be back on growth year on year.

So this is the contribution of these two major elements for these families.

Second part of your question, Sandeep, is on the segment reporting.

And I have to admit that the segment reporting has been always one of the most complex and arguable gap when falling into implementing the reporting under US GAAP.

At the end, to have a very clear and undisputable approach, also in agreement with our auditor, our segment reporting exactly follows the organization of the Company.

At the end, the overall operating income of the Company is the sum of the operating income of three product groups, where three general managers help Carlo to deliver result and the division imaging and the result of manufacturing, where Jean-Marc helps the Company and to help the Company to deliver result.

So we thought that at the end the most appropriate and respectful of the accounting guidance segment reporting is the one based upon the three product groups, and imaging and manufacturing in the other segment report.

Just a follow up, Carlo Bozotti.

In regard to the margins in the different divisions, which in the first half of last year were also, for instance, in automotive and discrete below 10%, for instance?

Are you saying that your [fab], even taking into account that in the latter half of the year they were underloading charges, that the fab is not being fully filled and which is what is impacting the overall operating margin?

Because other companies don't seem to report these sort of operating margins in the business where you should -- you have market leadership and you should be seeing 10% margins, as such, really.

Yes.

I think we need to make a difference between our automotive and discrete.

In the case of automotive certainly we believe we are at the level we should be.

For discrete this is not the case and is certainly a matter of top-line evolution.

We had an important deterioration in the second half of last year, in terms of working.

This reflected, particularly in Q4 and in Q1, in an important deterioration of the top line.

But also the manufacturing facilities were impacted.

It's not only a matter of unloading charges; it's also a matter of overall manufacturing efficiency.

And we had a hit in this respect during the course of Q4 and this has materially impacted the performance in the first quarter of this year of the gross margin.

Thank you.

Adithya Metuku, BofA Merrill Lynch.

I had a quick follow up.

Can you comment a bit on how you -- can you comment a bit on the FX sensitivity, given the DPG restructuring?

So how do you see -- if you could comment on the gross profit line and also on the EBIT line that would be really useful, post the restructuring?

And --

Adi, did you say the FX, the currency, or --

Yes, FX.

So you used to give the sensitivities before, until Q3 last year, and then you stopped providing that.

So, given the DPG restructuring, I just want to understand how the FX composition of OpEx has changed?

And, going forward, how should we think about the impact of FX on gross margins and operating margins?

I think the question at the end, the FX exposure, the euro exposure, is not changing on the set-top box restructuring dramatically.

You have, look at prior quarter, when we introduced the plan at the breakdown of restructuring between Europe and non-European countries and you know that at the end it further reflects the cost structure of the average company.

So once the plan will be completed, the euro/dollar exposure will not -- and the total overall will not change.

Equally, if I look at the cost of the goods sold at the end, the mix of sourcing of other set-top boxes, we have already discussed in other context, is also including a very significant sourcing from our foundry, which is dollar dominated and is including some sourcing from European fab, which is euro dominated.

So, overall, at the end there is no change in the overall exposure.

Then, going back to the currency effect, it's obvious that moving from first quarter at an effective rate of $1.10 to a second quarter at an effective rate of $1.13, $1.12, in the range of $1.12, we have a slight negative impact affecting both the cost of goods sold and, as said earlier, the expenses.

Would it be fair to assume that it's roughly still $8 million for every 1% change in the euro/dollar rate on the operating profit line?

Yes, the rule of thumb remains a similar, yes.

Okay.

Thank you.

Amit Harchandani from Citigroup.

Just maybe firstly, quickly, if you could just remind us of what your CapEx plan is for the full year and whether that has changed depending on how you are seeing demand shaping up.

And I have quick follow up.

Thank you.

The CapEx plan is the same, is $600 million.

This is what we had already announced late last year.

No, we do not have any changes at this moment.

Great.

And secondly, in terms of -- as an unrelated follow up, you obviously had some challenges on the analog and the MEMS side where you're talking of the business returning to growth in the second half of the year, or much more positive growth.

Would you remind us of your traction outside?

What are the key product families or areas within analog and MEMS that you are thinking of that would drive this growth?

Is it going to be market share gains, design wins?

And, more broadly, could you also comment on your market share dynamics across the other segments of the Group?

Thank you.

Well, I think we can go through, I think, the major, let's say, weaknesses that we have seen are, as I said before, in the area of smartphones and in the area of computer peripheral products for us.

If we look at the evolution of the business, I believe that we will not see any significant changes in the personal computer and computer peripheral market.

So here there will be a level of stability and, as I said, we are running below what was the business of last year.

On the other hand, we expect a significant improvement and recovery in the area of smartphones and this is more driven by new product contribution.

If we look at the distribution market during the course of Q4 and Q1, Q4 last year, Q1 this year, there was an important correction in terms of inventory in distribution.

And this has been completed and the trend of the point of sales is encouraging across the board in all the regions.

And this will be also an element of, let's say, positive growth evolution moving from the first half of this year to the second half of this year.

If we move to other lines, I would say that on discrete is very similar comments.

We have important new discrete programs, let's say, on new flagship smartphone models.

This is certainly -- will give a boost to our sales in discrete.

And then we believe that, with the strength of the bookings and the good evolution of the point of sales, there will be also in the mass market and in distribution growth moving on in the years.

I'm talking about these families because these are the families that have been mostly impacted by either market situations, like the one in the PC, MPC peripheral business for us, and by the correction of the overall semiconductor market that started in Q3 last year.

Andrew Gardiner, Barclays.

I just had two, building on the last one, really.

First on the analog and MEMS side, I can understand what you're saying in terms of anticipating an improvement in the back half of the year, given some of the product cycles, particularly on the smartphone side.

But, Carlo, you also referenced in your statement the commoditization of motion MEMS.

This is something that I think we've been monitoring for the last couple of quarters; it's clearly still there.

How does that change your medium to longer term view of profitability of this group?

Is there more to be done in terms of some of your new products within MEMS that can offset it?

Or is it going to be a structurally more competitive market?

And then secondly, just on your comments on the point of sale and distribution being a bit more positive, do you get the sense that your customers are willing to hold a bit more inventory?

Or is it purely just sell-through the entire channel is better?

Thanks very much.

Well, maybe before I get to your question one more comment.

Already moving from Q1 to Q2, with the exception of the set-top box, all product lines will contribute to the growth.

This includes our AMG products.

So already moving from the second quarter we will see growth across the board in terms of products.

I was more referring to a year of growth in the second part of this year.

Now if we go the question specifically on the MEMS, certainly we are and we need to accelerate in all kinds of MEMS application, both sensors and micro actuators that are not specific products for the smartphone.

We need the volume of the smartphone socket, the smartphone products and we need more value from all other applications, particularly in the area of industrial, particularly in the area of, very important, of course, automotive, but also new interesting projects and products in the area of MEMS microcontrollers.

So, in a synthesis, we need to accelerate in terms of diversification both for the market but also for the products themselves.

On the other hand, we still need the volume on sensor MEMS to drive the overall operation at a higher level of financial performance.

Okay.

And just if I could quickly follow up on that.

The competition in these other areas outside of smartphones, do you see that changing at the moment?

Or is it still a slightly more benign vertical in which to operate?

No.

The competition, I would say, if you refer to competition in MEMS, for instance, in the automotive industry is there are no substantial changes.

It is the same few suppliers that are operating in this area.

We do not see any real changes in this domain.

And I would, of course, not comment on certain projects that we have on micro actuators because these are more specific to certain important customers.

The second question was, sorry?

On POS, whether driven by end of demand or inventory in the channel.

No.

The POS is what we see is, of course, driven by end demand.

I think the pressure on inventory is there and I believe will remain there.

What is crucial and important for us is, of course, the evolution of the point of sales and I think, overall, the track record is not bad at all.

Already in Q4 we had some good performance in the point of sales and this is continuing.

And now also what we see, of course, is the trend of bookings, starting from the lows of the Q3 of last year.

Now I'm talking not about the POS but our own bookings.

Starting from the lows of Q3 of last year, we have seen progressive improvement in bookings moving from Q3 to Q4 and then from Q4 to Q1 and then from Q1 to Q2.

So there is the POS that is moving in the right direction but also a continuous progressive recovery in the bookings trend.

Thanks very much, guys.

(Operator Instructions).

Gianmarco Bonacina, Equita.

Just a couple of quick ones.

The first, if you can just confirm the impact in the P&L from the saving from the set-top box, because you mention $10 million in the second quarter and, if I understood correctly, $20 million in Q3, Q4.

That makes about $50 million, while before you were speaking about a run rate of $100 million.

So just to clarify on that.

The other question is about the level of inventory, which was going up in Q1 by 4% while sales were dropping.

Can you give us some indication on why was that and also for the second quarter if you expect the inventory level to normalize a bit?

Thank you.

Maybe I take both of the questions.

Thank you for the first one; it helps to clarify.

The $10 million to Q2 and the $20 million to Q4 I have mentioned are additional in respect to the savings already achieved in the first quarter, which I said is not so important but was already over $4 million.

That's why $4 million plus $20 million, plus some decimal times four is a run rate of about $100 million.

And this, hopefully, squares the number.

Then on inventory, at the end, as I believe we said since the beginning of this call, we have in front of us a path and a plan of growing revenues quarter after quarter and in order to optimize the utilization of the capacity we have and we are preparing in the manufacturing the sales for the second quarter and the next quarters.

So, in this respect, we do anticipate that inventory terms will progressively improve quarter after quarter.

Thank you.

Guenther Hollfelder, Baader Bank.

My first question is on imaging systems.

So what sort of sales level do you expect for imaging systems in 2016 and what related losses here for this business?

I think we expect, first of all, the sequential improvement in the top line on our business on imaging and also a year-over-year improvement, broad, comparing Q2 2016 with Q2 2015, as I said before.

And, moving on during the course of 2016, we see additional opportunity for both sequential and year-over-year growth.

As far as profitability performance, we do not provide the quantification at the divisional levels.

But we see some good opportunities and we see the evolution of this business also in terms of financial performance with a degree of optimism.

And do you expect a breakeven here in -- during 2016 or it is more 2017?

I just said that we do not provide at the P&L at a level because this is really a product division.

It's even a product group.

But certainly we (inaudible) grow sequentially there will be also in Q2, Q2 this year over Q2 last year, some growth.

We expect that we have the opportunities to grow also in Q3 and in Q4, both sequentially and year over year.

And we see with optimism the evolution of the financial performance of the product division.

Okay.

And the second question.

I saw that you had a nice design win here for transistors in ASIC transistors.

So I was just wondering, on what level did you receive this design win?

Is it on -- is it a module maker or is it a Tier 1 or is it directly won at an OEM?

What -- how is the business model looking here?

I'm sorry, but this I really cannot comment.

Okay.

And then in terms of timing, when do you expect sales from these silicon carbide MOSFETs with this project, because it's --?

No comment.

Good try, Guenther.

Okay.

Nevertheless, great design win.

Thanks.

Veysel Taze, Oddo Securities.

A question regarding your microcontroller business.

Can you comment a little bit on the microcontroller in the automotive, how the design wins look like?

And the second part would be to the microcontroller non-auto, the microcontroller division.

What is your exposure to China, particularly in secure MCUs, because we've got from one of your peers quite weak microcontroller revenues for Q1?

I think the evolution of the design, the evolution of the design effort that we have in the microcontrollers for automotive is positive.

Still, it is an important investment that we are doing in the automotive part of AMG.

I think we are focusing on 32-bit, of course, microcontrollers for automotive.

The design awards are continuing.

Now we have exceeded $3 billion of commodities and design awards on this business and, as I was mentioning before, more and more are coming.

But the order business on the 16-bit is going away; the 32-bit is growing a lot.

And still I think this is a tremendous opportunity for the Company but this today is still an investment.

And we are, in general, very satisfied about the evolution of the digital part of the business in the automobile in terms of design wins, in terms of the technology (technical difficulty) our presence in all the automotive microcontrollers for a variety of applications in the car, but also our presence in advanced safety systems with more complex ASIC products.

If I now look at the 32-bit for general purpose application, here, I think, the pervasion is very global.

I believe we have a good, sometimes great, position in the three regions.

And, as I said before, focus is to expand the product portfolio with more solutions at the low power, but also at higher performance.

We have also decided to redeploy part of the set-top box resources into this family, targeting more integration, integration between other frequency solutions and microcontrollers, so more peripherals.

And, as I said, more low power and also targeting higher performance applications.

So it's a big effort.

I believe we are prevailing everywhere and we are strong in the three regions and the ecosystem.

The STM32 ecosystem is certainly becoming a point of reference for thousands and thousands of customers in the electronic world.

And on the secure MTU exposure for China, what is your exposure there?

We are very strong in China.

We are very strong in general purpose microcontrollers, while our presence in China is certainly more limited in the secure microcontrollers.

And then a final question, if I may.

There was recently a Bloomberg report regarding the contract of the CEO.

If, I think, your contract is expiring somewhere in May and there were rumors, okay, STM, a new CEO.

Any comments there or did I miss here something?

No.

Certainly I will not comment on this.

We are very focused on, of course, on the operation.

We have a lot to do and I think we have the good opportunity to go back to growth now.

So our focus, of course, is just performance of the Company and expanding our presence with more and more customers in the world.

Great.

Thanks a lot.

(Operator Instructions).

So I think we don't have any more questions.

At this point I'd like to remind everybody that we will have our Capital Markets Day in New York on May 19, which is a Thursday.

If you need additional information on that please contact anybody in the Investor Relations office and we'll look forward to seeing you in New York on May 19.

Thank you very much.

Thank you, all.

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.