意法半導體 (STM) 2017 Q4 法說會逐字稿

Ladies and gentlemen, good morning or good afternoon.

Welcome to the STMicroelectronics Fourth Quarter and Full Year 2017 Earnings Results Conference Call and Live Webcast.

I am Moira, the Chorus Call operator.

(Operator Instructions) The conference is being recorded.

(Operator Instructions) The conference must not be recorded for publication or broadcast.

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 fourth quarter and full year 2017 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, Deputy CEO and Designated President and CEO; Carlo Ferro, Chief Financial Officer; and Georges Penalver, Chief Strategy Officer.

This live webcast and presentation materials can be accessed 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.

(Operator Instructions)

Today, Carlo Bozotti will begin with a summary overview of 2017, and then Georges Penalver will discuss our 2017 products and application review.

Carlo Ferro will then review our financial results in detail.

Jean-Marc Chery will then discuss the strategy and key programs driving our technology, R&D and manufacturing investments.

Finally, Carlo Bozotti will provide closing remarks and lead our Q&A session.

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

Carlo?

Thank you, Tait, and good morning, everyone.

Well, this has been a morning of important news for ST.

Therefore, before we start our usual review of the fourth quarter and full year 2017, allow me a few minutes to comment on -- sorry -- on the press releases.

As you know, I'm going to retire this year at the time of our Annual General Meeting of Shareholders.

I will leave ST after 41 years, proud to retire at one of the best times in the history of our company and extremely glad about the decision of our Supervisory Board to propose the appointment of Jean-Marc Chery as sole member of the managing board and President and CEO of ST, subject to approval by ST's shareholders at 2018 Annual General Meeting.

Our Board's decision is supporting the continuity of ST's strategy, plans and the management culture, and I'm really pleased about that.

Jean-Marc has been with ST since 1986.

He knows the company in depth, and you will get to know him better as a skilled, result-oriented, proactive, pragmatic and trustworthy leader who has gained in all these years an extensive experience in technology, manufacturing, critical business management and, more recently, also in sales and marketing.

As part of my succession plan, the ST Supervisory Board has also approved, upon Jean-Marc's proposal, the establishment of a newly formed executive committee, entrusted with the management of the company and led by ST's President and CEO as its Chairman.

The executive committee will, of course, become effective upon shareholder approval of the appointment of Jean-Marc Chery at ST's 2018 AGM.

But before I mention the list of the proposed members of the executive committee, let me comment on another important development.

As you may have read today, someone that we all know and respect, Carlo Ferro, has informed our company about his intention to step down from his position at the same time as my retirement in order to pursue other personal opportunities.

Carlo remains committed to our company with unchanged dedication during this transition -- period of transition, and Carlo will remain until the end of 2018 as President of ST's Italian affiliate.

I want to deeply thank Carlo.

As you know, he has been associated with ST in various capacities since its IPO in 1994.

Since then, he has strongly contributed to the company's average compound total return to shareholders of about 10% per year.

In his role of CFO and then with increased responsibilities in legal, IP, infrastructure and planning, he has fully supported ST's transformation, inspiring and driving key initiatives of product, portfolio management, financial discipline, asset management and financing on the capital markets.

Through his leadership, he has developed an outstanding and talented finance organization, and this is allowing us to plan for a highly qualified internal succession to his role.

I am sure you will join me in wishing him all the best for the future.

Going back to the proposed members of the executive committee, all the members underline the strong intention to guarantee continuity of ST's strategy and result.

Let me go through them: Orio Bellezza, President, Technology, Manufacturing and Quality; Marco Cassis, President, Sales, Marketing, Communications and Strategy Development; Claude Dardanne, President, Microcontrollers and Digital ICs Group; Lorenzo Grandi, President, Finance, Infrastructure and Services and Chief Financial Officer; Marco Monti, President, Automotive and Discrete Group; Georges Penalver, President, Human Resources and Corporate Social Responsibility; Steve Rose, President, Legal Counsel; and Benedetto Vigna, President, Analog, MEMS and Sensors Group.

During the coming months, Jean-Marc, the incoming executive committee, Carlo and myself, will continue to work together to prepare for a very smooth leadership transition with our strongest commitment to continue to deliver strong business and financial results.

And now it's time to start our Q4 and full year 2017 review.

Building on the results of 2016, our priorities for 2017 were: first, deliver year-over-year sales growth across all our product families and across all regions, both with OEMs and in distribution and in mass market; second, continue to lead innovation, supporting our customers through product leadership and optimize application-oriented solutions; third, invest for growth, maximizing innovation with our R&D spend and leveraging our manufacturing investment to quickly ramp up our major programs; fourth, continue to be disciplined on operating expenses; and finally, as a result, continue to improve our operating profitability.

During 2017, we made significant progress quarter-after-quarter, and we achieved our goal of placing ST on a sustainable profitable growth trajectory.

As you have seen for our press release this morning, we closed 2017 with strong fourth quarter results.

Net revenues increased 32.6% year-over-year to $2.47 billion.

Our year-over-year growth was broad-based with all regions contributing and with double-digit growth across all product groups.

We maintain a very good balance of revenues between OEMs, and distribution.

This is an important point as this indicates that we are matching new product ramps of OEMs with a diversified business including tens of thousands of small and mid-sized companies.

Today, we have more than 100,000 customers worldwide.

Moving to profitability in the fourth quarter.

Gross margin reached 40.6%.

Operating margin as reported was 16.5%, and net income was $308 million.

For the full year 2017, net revenues increased 19.7% to $8.35 billion, gross margin expanded 400 basis points to 39.2%, operating margin increased 880 basis points to 11.9% and net income grew to $202 million.

But now, let's focus on growth and product leadership.

Yes, sorry, $802 million of net income -- but now -- or net income growth.

But now, let's focus on growth and product leadership and I will hand over to Georges Penalver for that.

George?

Thank you, Carlo, and good morning, everyone.

Actually, we are executing on the growth strategy centered on the most promising application domain; Smart Driving, Internet of Things including industrial and the non-digital part of Smart Phones.

This enables us to cover 40% volume of the total semiconductor market.

We have deployed an aggressive and very successful stage in marketing strategy, targeting distribution and the mass market as well as share count.

Revenues from our Top 10 customers in 2017 grew 37% year-over-year.

Distribution increased significantly in absolute numbers and moved to 34% of total revenue in 2017 from 33% in 2016 with year-over-year point of sales growth of 12%.

Importantly, our unique product portfolio offers all the essential blocks to serve the IoT and Smart Driving applications.

We launched many new products in 2017 and we continue to innovate at a fast pace.

Turning to some of the key 2017 achievements of our product groups, I will start with our Automotive and Discrete Group, ADG.

Our Automotive revenues considering all our product groups grew about 10% for the full year.

Also in 2017, the average ST content in a car has continued to increase with our company now providing up to 1,000 semiconductor components in a premium car like the Audi A8.

In the area of safer driving, we made good progress in product development and production ramp-up and we achieved substantial growth with ADAS-related components.

We started production of our partner Mobileye EyeQ4 product for semi-autonomous vehicles based on our 28-nanometer FD-SOI technology.

As Mobileye said at the CES 2 weeks ago, 13 automakers are planning designs on this stuff and 5 major brands will launch their EyeQ4-equipped vehicles during 2018.

Development of the new -- the next-generation Mobileye EyeQ5 is ongoing with first silicon planned for later this year and we have started joint work on the next-generation EyeQ6.

We also had success with our 24-77 gigahertz RADAR product, which grew revenues by about 25% in 2017.

In the area of greener driving, we won new designs in car electrification growing our market share in power components.

This will include our Silicon Carbide products.

We have already talked about important wins in the U.S. and Asia and I can now mention that we are collaborating with Renault Group on the next On-Board Charger with our SiC Diodes and MOSFETs.

Silicon Carbide revenues started to materialize last year and looking forward, we see big opportunities as the adoption of hybrid and electric vehicles increase.

We also continued to see strong growth and market traction with our 32-bit microcontroller family for automotive, particularly in Body and Gateway applications at several car makers.

Power Discrete had a robust 2017 with sales up by about 13% for the year in total and with a strong contribution from automotive applications.

On top of silicon carbide for automotive, we also enjoyed growth in low and high end -- and high voltage power MOSFETs components for industrial applications.

Now let me move to Microcontrollers and Digital ICs, MDG, where year-on-year revenue grew 15.8% during 2017.

Our Microcontroller business grew throughout the year to deliver year-on-year growth of about 25%.

The strong expansion of our business was driven by our STM32 general purpose family where we shipped more than 1 billion products during 2017.

This achievement is impressive as 1 year ago, our cumulative shipments since 2007 had been 2 billion units.

The STM32 family now offers more than 800 parts.

The key part of our success is linked to our development ecosystem, which allows fast and easy access to tools and design resources.

And during the year, we added a number of tools to enable product development for the IoT as well as integration with leading Cloud services providers.

During the fourth quarter, we acquired Atollic to offer our customers a full integrated development environment, specifically tailored for the STM32 family and the STM32 Nucleo development ecosystem.

Our Secure Microcontroller solutions and Near Field Communication connectivity both benefited from the acquisition we made in 2016.

We announced 2 key products; the ST54 and ST53, targeting mobile and wearable for NFC and secure applications.

We also made significant inroads with our RFID readers and NFC controllers in areas such as game console, automotive and smart furniture.

In the digital area, we were recognized by many OEMs for our technology leadership and service excellence and we achieved several design wins for digital ASICs in advanced technology for optical and satellite communication.

Let's now move to the newly formed group.

Starting in the fourth quarter of 2017 we organized the activities related to our sensors into 1 group transferring the Imaging product division previously reported in others, include the Analog and MEMS Group formerly known as AMG, to create the new organization Analog, MEMS and Sensors group or AMS.

In our MEMS, Sensors and Actuator business, revenues grew over 20% compared to 2016.

We further developed the business with our high volume consumer and mobile customer base thanks to multiple sensor design wins with leading smartphone, wearables and game console makers.

We also saw strong growth with our industrial and automotive customers to whom we shipped over 60% more sensors in 2017 compared to 2016.

In this area, we received new business awards for sensors to support assisted driving and to accelerate growth in industrial application, we introduced a number of new sensors with 10-year longevity.

Our analog business also performed well in 2017 achieving growth of over 20% year-over-year.

This growth was broad-based across our wide Analog and Power product portfolio.

We saw solid progress, both with design wins and revenue growth with our high-end industrial customers with product families such as our STSPIN motor control family and our intelligent power switch solutions, which target smart industry applications.

We continued to assist this with our smart metering solutions and we announced a new modular programmable chipset.

We also grew with power conversion product such as our ViperPLUS family of high voltage AC/DC converters.

In 2017, our Wireless Connectivity revenues more than doubled versus 2016.

We launched a new system-on-chip Bluetooth Low Energy 5.0 certified and we won multiple designs in a range of applications.

In Imaging, 2017 was a year of continued success as revenue grew triple digit year-over-year.

Our proprietary Time of Flight technology gained traction and we released our third generation of laser ranging sensors.

Also, our specialized 3D sensing technology ramped in volume for a major customer and we are also won design for a depth sensing time of fluctuation to support assisted driving with a Tier 1 automotive supplier, certainly a priority for us.

Now let me turn the presentation over to Carlo Ferro to discuss in detail our business and financial performance results.

Thank you, Georges.

Good morning to everyone.

It's really a great pleasure to be here today to present the results and particularly to present the 2017 fourth quarter and full year earnings results, which are the best historical performance for our company in the last 17 years.

Beginning with a brief summary of our fourth quarter.

The significant progress we have made over the last year, including the substantial creation of shareholder value, is quite visible.

Net revenues up 32.6% year-over-year, gross margin up 310 basis points, operating income was $408 million translating into an operating margin of 16.5% and a positive free cash flow of $145 million.

On a sequential basis, sales grew 15.5% and we were 200 basis points above the high end of our guidance on higher than expected revenues in Imaging products and Microcontrollers.

This performance is above our historical seasonality.

In fact, this reflected the strength of our offer with sequential growth in each of our Microcontrollers, Analog, Power Discrete, Automotive and MEMS sub-groups.

And this also reflects the fact that with the Imaging product ramp, our seasonality is evolving as our product portfolio evolves leading towards higher sales in the third and fourth quarter of the year.

Turning to the full year 2017.

Net revenues increased 19.7% year-over-year equivalent to the addition of $1.37 billion in revenue.

Operating income came close to the $1 billion mark, indeed $993 million.

Operating margin of 11.9%, almost a fourfold increase over 2016 and clearly above the anticipated 10% target.

Net income increased $637 million to $802 million and free cash flow increased about 7% to $338 million.

The key element of our strategy to achieve sustainable profitable growth has been synchronizing growth in each of the area of our strategic progress; IoT, Smart Driving, Industrial and Smartphones; after having positioned our portfolio in multiple growth markets.

In the fourth quarter, our sales growth of 32.6% year-over-year reflected double-digit growth across all the product groups.

AMS revenues increased 70.1%, MDG revenues were up by 21.4% and ADG revenues were higher by 14.6%.

For the full year 2017, our revenues growth of 19.7% reflect the broad-based growth across all product groups and geographies.

Asia-Pacific revenues increased 26.5%, EMEA revenues were up by 14.3% and America was up by 3.2%.

Turning to our first quarter outlook.

Based upon the midpoint of our guidance range, we are anticipating year-over-year revenue growth of about 22%, that remains the usual 350 basis points, which on such a strong Q4 '17 is a sequential decrease of 10% at the midpoint.

This revenue dynamics reflect a better-than-seasonal quarter-to-quarter evolution for Smart Driving and Internet of Things applications combined with the negative influence of seasonality in Smartphones.

One year ago I have outlined the 4 key drivers of expanding growth in the operating margin to translate into higher net earnings and significantly enhanced return on invested capital.

Leveraging sales growth, fully loading on fabs, manufacturing scale and technology reducing cost and innovation improving product mix.

Indeed, they all have been well-implemented and in 2017 $1.37 billion of additional sales year-over-year translated into $779 million of additional operating income or a 57% margin on incremental sales, 57%.

So let's see in greater detail how our P&L performed.

Manufacturing efficiencies and favorable product mix has been the main drivers of our gross profit and gross margin improvement during the fourth quarter and for the year in total.

Our fourth quarter gross profit reached $1 billion and our gross margin was 40.6% above the midpoint of our guidance and this is the best performance for ST since the Internet bubble in the early 2000s.

On a sequential basis, gross margin increased 110 basis points due to improved product mix and increased manufacturing efficiency, partially offset by normal price pressure and negative currency effect net of hedging.

For 2017, our gross margin is up 400 basis points bringing it up to 39.2%, a level that already generates solid earnings.

For the first quarter of 2018, at the midpoint of our revenues range, we anticipate a gross margin of about 39.5% reflecting the anticipated decreasing revenues on a sequential basis.

And importantly, we are starting the year 2018 above the prior year gross margin.

We have maintained a very strong expense discipline with average quarter operating expenses in 2017 and net of the R&D grants of about $555 million, in line with our target range.

As a result, we saw significant operating leverage with 2017 OpEx-to-sales ratio of 27.4%, which is an improvement of about 5 points from the 2016 level.

As we first discussed in October, operating expenses net of R&D grants are anticipated to increase to somehow above $600 million per quarter in 2018 in average reflecting revenues growth, inflation dynamics, currency, lower R&D grants and increased marketing and sales at quarter while keeping tight expenses discipline.

Commencing in the fourth quarter of 2017, the company transferred the Imaging Product Division, previously reported in Others, into the new reorganization Analog, MEMS and Sensors Group, the AMS.

And please note and you may have noted in the press release that we have reclassified the data for 2016 and 2017 to facilitate your job.

Operating income, before impairment and restructuring, significantly improved from $153 million to $428 million in the fourth quarter of 2017 versus the year ago's quarter.

Importantly, you can see that all the 3 product groups improved their profitability progressively during the year and achieved in Q4 '17 a double-digit operating margin before impairment and restructuring.

In Q4, ADG posted an operating margin of 12.3%, a year-over-year improvement of 500 basis points.

AMS, now including Imaging, operating margin was 20.9%, well above the 10.1% in the year ago quarter.

And MDG operating margin was 19.6%, 9.9 points above Q4 '16.

All product groups have reached their operating margin targets for the second half of 2017, and that is as anticipated at our Capital Markets Day in last May.

In particular AMG driven by the improvement in both Analog and MEMS and MDG, driven by bulk improvement in Microcontrollers, a significant reduction in Digital ICs well exceeded the target of low teens.

Our free cash flow increased to $338 million after absorbing $1.3 billion of capital expenditure in the year while covering our cash dividend to shareholder totaling $214 million in 2017.

CapEx at the end followed well our anticipated route to support revenue growth.

Free cash flow came in higher than anticipated, clearly the higher EBITDA which reached about 25% of revenues in the fourth quarter.

The expansion of our profitability and acceleration of our net asset turns have driven a strong increase in our return on net assets, which for us is the measure for the return on invested capital, accelerating quarter after quarter during 2017.

Already in the third quarter to take as a reference a period with available data from competitors, asset position in the ranking places us among the best in the semiconductor non-memory IDFs.

Well, we made a significant step forward in Q4.

RONA reached almost 36% in the fourth quarter, well above the 15% in the year-ago quarter.

This result is significantly exceeding our weighted average cost of capital, which is currently about 9%.

In 2017 we also accomplished a significant improvement of our balance sheet with the successful offering of $1.5 billion new convertible bonds at an average of zero yield, the full settlement of $1 billion convertible bond issued in 2014, and new credit facility.

As a result, the overall liquidity increased to $2.19 billion at the year-end 2017 with a negative yield of 1.5%.

At the same time, our financial debt cost has been significantly lower this past year as a result of our refinancing bringing our cash cost of the debt to 44 basis points thereby creating a positive spread of over 1 point.

We also strengthened our financial flexibility by signing a new $500 million euro credit facility with the European Investment Bank and we had over $1 billion of available undrawn credit facility at the year-end.

Further, we continued to maintain our financial flexibility with a financial position of $489 million at December 31 compared to $513 million 1 year earlier showing our ability to manage the planned increased investment made in 2017.

Importantly during the year, shareholder received a cash dividend paid quarterly of $0.06 per share representing an yield of about 1% based on the current share price and we repurchased in the year shares for $300 million.

Finally, we are pleased to we have our progress in operating profitability coupled with maintaining a very solid capital structure recognized with a return to the CAGR 14% versus September 2017 as well as with the rating agencies with the Moody's most recent upgrade of our rating and Standard & Poor upgrading their outlook for now.

Now to describe our technology and manufacturing strategy and the related capital investment, I will turn the stage to Jean-Marc Chery.

Thank you, Carlo.

So first of all, I would like to deeply thank the Supervisory Board of ST for their confidence and I am honored to have been nominated as the successor to Carlo Bozotti.

Carlo has set a very high bar and I owe him great debt of gratitude for his guidance and support of my candidacy for this estimated leadership role in ST.

I would like also to deeply thank Carlo Ferro for all the years we have worked together and the solid legacy he leaves behind both in term of the financial solidity of the company as well as the highly capable finance team soon to be led by Lorenzo Grandi.

I joined ST even before it was ST.

I know and admire this company, its people and its future in depth.

You can say that when appointed I will put the utmost commitment growing ST supported by a strong executive committee composed of great colleagues.

I have been working with them for many, many years and I deeply respect and trust.

Moving now to my presentation.

So ST has a broad portfolio of differentiated technologies that allow us to address the wider market and application requirements we target.

I would like to highlight 2017 development and our key focus areas for 2018.

BCD, our BCD technology is a long-standing area of strength for ST and a major enabler of our business in automotive and industrial application.

During 2017 we expanded our product portfolio and continued the manufacturing arm of our 110-nanometer technology.

We also completed the transfer of our 160-nanometer node to major silicon foundries in order to expand our capacity to serve the growing smart power market.

For 2018, we are focusing on the development of our tenth generation which addresses the need for more digital logic and memory intensive smart power products.

This new 90-nanometer platform enables the development of fully integrated system-on-chip smart power product.

We are also developing differentiated flavors of our BCD technology family, which allows us to address higher power and voltage application as well as galvanic isolation.

Our advanced CMOS technology roadmap is evolving along 3 axis of development.

First, we are enriching our 28-nanometer FD-SOI platform with additional features to address RF and space application.

Second, we recently announced our adoption of 22Fdx foundry technology as the next node in our FD-SOI road map targeting specific high performance and low power products.

And third, we are working with 16- and 7-nanometer FinFET platforms from a foundry partner where we have designed a product for high-density digital applications, including system-on-chip for autonomous driving.

In addition to the development of RF features on our 28-nanometer FD-SOI platform, we also continued to raise our differentiated BiCMOS 55-nanometer technology.

This unique platform offers best-in-class bipolar transistor capable of operating at frequencies up to 300 gigahertz.

This technology is really positioned us to address high-speed communication needs for data center and cloud infrastructure and 5G infrastructure application.

In 2018 we will continue to improve the performances of this technology with additional bipolar devices operating at even higher frequencies.

Now embedded nonvolatile memory.

This technology is a key enabler for our microcontroller family, which addresses both spectrum of applications from consumer to automotive and industrial.

In 2017 we expanded our capacity for 40-nanometer in Crolles on 12-inch wafer for all flavors of 32-bit microcontrollers.

Embedded nonvolatile memory is also important in our 28-nanometer FD-SOI offering as we can embed phase change memory to deliver a competitive low power high-performance technology platform to address automotive and IoT application.

This is one of our focus areas in 2018.

Imaging now.

2017 saw our continued deployment and penetration of our patented FlightSense Time-of-Flight technology.

With the launch of our next generation of product introducing optic and advanced processing to boost performance.

This enables us to grow our wireless business, but also to drive growth in wider applications such as PC, robotics and the general mass market.

We also successfully ramped up an important Time of Flight product and a specialized Imaging sensor addressing a 3D sensing application for our major customer.

For 2018, we are focused on the further development of our next generation of imaging technology.

We will launch a new Single Photon Avalanche Diode (SPAD) in 40-nanometer technology enabling a step change in performance of Time of Flight application.

We will also secure the following generation with the 3D SPAD further boosting the performance, scalability and enabling higher resolution Time of Flight sensor.

This is key for multiple markets from 3D sensing to LIDAR.

We are also developing our next generation of Global Shutter technology with significant performance improvement in near-infrared light detection as well as our future image sensor with backside illumination and 3D integration for visible and non-visible light application.

MEMS Sensor and Actuator, 2017 saw significant increase in our manufacturing volume in MEMS associated with prior introduction of a number of new market-leading motion and environmental MEMS product based on our optimized micromachine technology.

Our focus in 2018 is on developing next-generation technology.

For example, we are developing a version of our Motion MEMS technology that support even the industrial application.

We are also developing our next generation of Motion MEMS technology for consumer and automotive that will boost performance and a new magnetic and resonator capability.

Our pressure sensor technology also continues to evolve with higher level of integration and waterproofing.

Our focus in actuators is on our Thin Film Piezoelectric technology, which enables a number of different applications such as inkjet and 3D printing, smaller and lower camera autofocus solution and MEMS speaker.

Silicon Carbide, moving now to Silicon Carbide.

As we have said before, this is an area where ST developed the technology organically for a number of years and today we are one of few semiconductor companies able to supply Silicon Carbide products in volume.

In 2017 we started volume production in our newly installed 6-inch manufacturing line Catania and Carlo already mentioned some of our business presence.

In 2018 we plan to increase our 6-inch capacity in line with customer demand while expanding our product base on our third generation of Silicon Carbide technology.

At the same time, we are continuing the technology development of our next generation of automotive grade MOSFET, which will include a move to trench technology in the fourth generation.

Let me turn now to our manufacturing strategy and here I would like to explain how we ensure the strategy support our revenue growth, competitiveness and ability to differentiate.

First, our wafer fab where our currently available and planned capacity rely and the smart combination of internal wafer fab and a network of foundry partners.

We follow a number of principles consistent with our technology strategy and our ability to differentiate our offer to Silicon.

Some technologies are completely outsourced.

In digital CMOS technology BM 28-nanometer, we rely on foundries for all application focus area.

Some technologies are partially outsourced, a good example is digital CMOS derivative technology like embedded nonvolatile memory, which enable IoT and smartphone application.

Some technologies where ST has unique top priority, IP remain internal.

This include differentiated CMOS technology imaging automotive application for Analog and RF ASICs and specialized imaging sensors and Time of Flight.

Differentiated Analog, Power and MEMS technology also remain generally internal whatever the application focus.

However, we also have a flexible approach for the internal technology as they mature and as some of the opportunities evolve.

For example, this year we set up partial outsourcing to support strong BCD demand opportunity.

ST internal manufacturing rely on the smart combination of appropriately scaled with the fab, which then dedicated to differentiated processes like our wafer fab in Agrate, Catania, Crolles and Tours and some really high volume production starts capability like in Rousset and Singapore.

All of these fabs are engaged in a continuous lean manufacturing improvement program including an absolute focus on quality and in each of them, we have stabilized and modular approach to adjust internal capacity to demand whether for technology needs or selective capacity addition.

In order to support our anticipated product portfolio mix and to fuel strong revenue growth in the second half of 2018 compared to the first half, we expect to invest approximately $1 billion to $1.1 billion.

In front-end manufacturing at ST, we will further expand capacity in Crolles 12-inch within the current footprint to increase flexibility and support the introduction of new technology.

In our other facilities, we will continue the next evolution to advance BCD and prepare for the 12-inch pilot line.

In Catania, we are focusing on capacity growth of 8-inch advanced BCD and 6-inch Silicon Carbide.

And in Singapore, we will continue 8-inch capacity expansion for Power Discrete and BCD broadening our technology capability.

In 12-inch assembly and testing, we will continue to invest to align our revenue growth and new products, particularly in Silicon Carbide as well as new product lines for automotive MCUs and advanced BCDs.

We will also accelerate the base of equipment modernization in our assembly and testing center.

With that, I would like to hand back over to Carlo.

Well, thank you to Jean-Marc.

Indeed, a very impressive package of new technologies so important for new products and future growth.

So as we discussed, we have demonstrated exiting 2017 capability to grow revenues at accelerated pace and to significantly improve our operating profitability and net income.

In 2018 our objective is simple and straightforward, to leverage our achievement and to continue to drive sustainable and profitable growth thanks to our continued product leadership.

Just starting from Q1, we will be adding $400 million additional revenues compared to Q1 last year.

The progress we made in 2017, a truly successful year for ST, materialized during the third year anniversary of the formation of the company.

We are very happy to be able to celebrate this milestone with a much stronger ST with solid product leadership in IoT and Smart Driving, strong market position in distribution and with major accounts and a world-class team of engaged employees.

We are certainly very well set to continue to grow and to leverage this growth to bring additional improvement to our 2017 financial performance.

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

Thank you.

(Operator Instructions) The first question is from David Mulholland from UBS.

Just one clarification.

First of all, on the commentary you're giving on the second half on your growth expectations.

Could you just clarify that, that is growth in absolute terms H2 versus H1 rather than a kind of year-on-year acceleration into the second half?

And could you give us a bit of color on what is actually giving you confidence in the business and potentially by business area?

And what's giving you confidence into H2?

And then the second question.

There's been a lot of volatility in currency rates recently and quite a few changes in ST's business mix.

So can you just give us an update on what the sensitivity is at the kind of gross profit and operating profit level of the business to each change in the euro-dollar rate if we exclude the impact of hedging?

Yes.

Well, I'll take the first one, the first part, and then Carlo will comment on the second one.

Well, it's broad.

I think certainly, as I just said, if I take Q1 this year over Q1 last year, this is an addition of about $400 million of revenue.

We want to keep going.

So certainly we plan to have an important growth H2 this year over H1 this year.

But first, we planned for growth H2 this year over H2 last year.

And this is, of course, based on the visibility that we have today.

The visibility today is of a strong automotive market.

Last year, as we said, automotive overall for ST grew about 10%.

In Q4, our overall automotive business grew, Q4 over Q4, almost 18%, and we expect a very strong year in automotive.

We are targeting a growth this year in automotive that is certainly stronger than 10%, and this is across the company.

It's not only in our ADG but also our MEMS for automotive, other products we mentioned before; for instance new things like LIDAR based on our imaging technologies, et cetera.

We have last year enjoyed a great distribution business.

Our stock turn last year increased.

Inventories are very low.

I think we had -- at the end of last year, we had an unprecedented level of stock turn.

I think with our product portfolio, we should have around 3 months of inventory and it's certainly below that with our distributors and we do not have any -- of course, with the visibility that we have today, any negative sign on our distribution business.

We are particularly pleased about our microcontrollers.

As we said, last year we sold more than 1 billion pieces of STM32.

This is great technology.

This is so many customers.

We had certainly more than 50,000 customers in microcontrollers.

It's very, very broad.

And finally, it's projects -- a new project in wireless.

So this is, for us, of course, the important additions that this is also changing somehow the pattern of the quarterly sales.

As Carlo said before, we expect to see moving on in the future a different way quarter-by-quarter, with typically the second half that is significantly higher than the first half.

So our visibility is based on this.

Certainly not everything is perfect, but there are many things that are moving into the right direction.

So Carlo?

On your second question, David, I would first summarize the currency exposure and then offer you a rule of thumb to compute the rate sensitivity.

So our revenues are about 87% in U.S. dollar and about 13% in euro.

Then when looking at the operating expense structure, the U.S. exposure has a little bit to reduce in favor of exposure to other currencies.

So in cost, about 1/4 there of costs are based on the euro; about another 10% is based on other currency, and those are mostly Asian currencies; and 55% is in U.S. dollar.

In operating expenses, about 60% is still euro denominated, and the rest is a balance between U.S. dollar and other currencies.

Then to the part on a rule of thumb on sensitivity, we estimated that 1 percentage point -- not 1 figure.

1 percentage point of change in the exchange rate between the euro and the U.S. dollar translates into $6 million of operating income per quarter.

As I would say, an approximate estimate.

So just one very quick follow-up.

On the commentary you gave on OpEx through 2018, you said around $600 million run rate.

Just given the currency sensitivity around that, what currency assumption have you used in the guidance?

$1.25...

Again, what we are referring today is where we were basically last Friday $1.225 before, of course, considering the effect of the hedge.

The next question is from Janardan Menon from Liberum.

Just going back to the strength that you're seeing in the second half versus the first half, if you can compare that with last year, how does your visibility stack up because you were pretty bullish about the second half around the same time last year as well and last year you did about 23% growth second half versus first half?

I was just wondering can we expect that kind of seasonality because of what's happening in the wireless business or will it be lower than that this year for various reasons?

Listen we -- of course, we do not give guidance for the second part.

I think the way that I see is, first of all, our market is good.

So in Q4 year-over-year, we grew almost 18% in the automotive business and this year overall we grew 10% and we expect that in 2018 our growth will be more than 10%.

So this is the first data point and in the automotive, the visibility is longer term.

We have better visibility.

So then there is a second element to that I would like to give to you as a better point.

There are certain projects that last year they were more concentrated in 6 months while, of course, this year we will enjoy them on 12 months because they started -- they started mid last year.

Then a third data point, we also have new projects with big customers.

And now, of course, if you take the smartphone, we have three blocks of technology.

We are not in the digital part in the smartphone and we will not be in the digital part of the smartphone, but we have three blocks of technology.

One is sensors, the other one is security, the third one is power management.

And we are working on all these three blocks, and of course, we also have new projects that are important for the year.

Finally, there is distribution in mass market.

Of course, clearly we are living in a moment where the demand is very, very strong and we know that we will not live in a super cycle forever.

However, we are encouraged by two things.

First, that we are very sticky with our microcontrollers.

We have 1 billion pieces of the STM32.

This is penetrating in many, many applications around the world and I think it's really a solid presence in the mass market.

Let's face it, we want -- if you exclude memories and deep processor we are not in, we want to be #2 in the world in this market and I think we can be #2 in the world.

We are getting there.

And the other encouragement point here is the inventory turns.

As I said before, the inventory turn is -- at the end of last year is higher than what we had at the end of 2016, but we do not have the crystal ball and we know that particularly in this area some correction in the cycle may come.

But based on all of this, I think we expect another interesting and good year of growth for the company.

Can I just ask a small clarification on that from another angle, which is you said your automotive business will be growing faster than the 10% you grew last year?

In your businesses, which division do you think will clearly grow slower than last year or will all your businesses grow roughly at the same rate or faster?

In the automotive or in general?

In general across the company.

In general.

So maybe, Carlo, you have the data in front of you, why don't you comment?

Again it's early I believe to share another -- they are expected to phase by segment across all the different groups.

Certainly, we have to consider that in digital we are still progressing on the phaseout of legacy products from the set-top box business and maybe today taking to your question perhaps digital will be the less growing of the other 7 -- the overall 7 subgroups.

This is digital within the MDG business?

This is digital in the MDG.

Today, frankly what we see is another year of good growth across the board towards the part digital where we have phased products that is out.

We still have some other products that we don't support any longer that are going down.

But in general, we see the opportunity for another year of growth across the board both from the products point of view, but also from the geography point of view.

And for us it's very important to make sure that yes, key customer major programs, we are vital, crucial; but our distribution and mass market presence is also crucial and we want to keep growing.

The next question is from Adithya Metuku from Bank of America.

I just had a quick question on wafer pricing.

We've been hearing a lot from the likes of TSMC on that and about the impact on margins.

So could you give us some color on how you expect to see the impact from wafer pricing increases on your gross margins in 2018?

Yes, indeed there are certainly some price increase particularly on the 8-inch diameters.

You need also to consider that again the price increase on this material already start mid of last year so some of in effect is already in our cost of goods sold in the fourth quarter.

Then overall, we may expect some further negative impact in the course of 2018.

Nevertheless, our global procurement campaign is anticipated to continue to generate overall savings on materials and services included also for the year 2018, including the already defined and the fixed prices for silicon substrate.

So, do you think your gross margins can go up in 2018 despite the wafer price increases?

We are not here to guide on the 2018 gross margins, but generally again there are really a number of factors of ingredients from the product innovation to the product pricing to the manufacturing efficiencies to the overall advantage on scaling up the fabs plus the overall cost of manufacturing materials and we have not considered the silicon substrate pricing as one of the major ingredient affecting our gross margin dynamic next year.

The next question is from Jerome Ramel from Exane BNP Paribas.

Best of luck for Carlo and Carlo and congratulation to Jean-Marc.

First question concerning gross margin, actually I'm surprised by the resilience of the gross margin in Q1 because revenues is down, you guided for down 10% sequentially.

So I just wanted to understand what is offsetting this volume decline you are seeing in Q1 for the gross margin?

Is it better mix, is it better pricing?

I just like to understand how resilient it has been.

Carlo, please.

Jerome, I think your question again trying to drive on the evolution of gross margin from the 40.6% reported last quarter and 39.5% anticipated as midpoint for the current quarter.

Then we started to see some of the currency impact.

There are about a 30 basis point of currency impact.

And then the other 80 basis point is a combination of sales price and you know that the Q1 is particular for the same applications and customers as we enter into the yearly new price for the full year.

So Q1 normally is heavier than the second half of the year in this respect.

And then overall again we continue to generate efficiencies for the fab, but some of the seasonality effects of some of our -- in some of our applications, particularly in assembling is generating some negative on the overall efficiency of one assembly line.

And maybe as a follow-up.

What do you think will be the biggest challenge for STMicro in 2018?

The biggest challenge.

Well, the biggest challenge we still have many ramp-ups to do.

We have opportunities for new programs, for new products.

Some of the things you guys know, some of the things you guys don't know.

There are still challenges in terms of ramping up new technologies internally, ramping up new technologies outside.

There is a big effort with our silicon foundry partners.

So these ramp-ups, we are getting used to it.

We had a major ramp-up in Q4 -- Q3/Q4 2016 and we had really 2 major ramp-ups last year in the second half, in fact 2 important fabs for the company.

We are not -- there are more opportunities to ramp up which is good, of course.

This is, of course, on different technologies.

It is not always the same fabs, the same technologies.

So, these ramp-ups we must execute and we must make sure that this is properly done and this is certainly a challenge.

Another area that I would like to mention, of course, but it's been already touched is the euro-dollar.

This is not helping ST.

I think we are becoming more resilient.

Carlo was mentioning how much of our manufacturing cost now is euro denominated.

We are becoming more resilient, but this is certainly not helping.

Then what I said before, of course, we will be very pleased to see this strong pattern of business coming from distribution and mass market and the proliferation of the STM32 and building around the STM32; maybe the market may correct here, but it is not what we see today.

This is another potential concern.

I think we will remain visible, for sure.

I mean we will be very attentive with CapEx, with expenses; but I would say a number of ramp-ups important, of course, also this year of new things, the euro-dollar rate, making sure that the STM32 is very, very, very sticky with all these 500,000 customers and that we could yield more around the STM32 with other products.

So these are the things.

The next question is from Stephane Houri from Natixis.

So I have a question around the CapEx and I would like to understand a little bit more if this CapEx you are announcing for this year is related to 1 specific project and if you can give us some information about the capacity of coal to where you want to take it?

And the follow-up is a little bit related.

I'd like to understand a little bit more the seasonality now of ST sales during the year now that the exposure to mobile I would say has increased again.

So the minus 10% is on a strong basis, of course.

But what is the normal seasonality for ST now?

Well, I would say yes, 10% is, of course, also starting from a level of revenues that frankly we did not expect.

When we started Q4, we did not expect to end up with $2.466 billion.

This is what -- I mean for us this was really unexpected.

I believe that the best way for you to look at this -- I think in ST there is new opportunities for us.

We keep going with this project for a number of years because a very complex project.

We believe we are innovating a lot so it is important for us to keep going for a number of years -- a number of generations.

And to study the seasonality of our wireless business, I think you need to look at, of course, our major customers in Korea, in China, in United States and look at the space of smartphones quarter-by-quarter.

There is certainly a next generation in the second half of the year.

And I would say that considering the very, very strong Q4, 10% is possibly on a little bit of the high end if we look at the future because we really start from a [84] that is very, very high.

However, I think this year automotive and industrial and distribution are certainly better.

In practice, we are eating up completely the negative effect of the Chinese New Year and I do not believe that this is sustainable in the future.

But the drop in wireless is material and I believe is also related to a fairly very strong Q4 frankly.

But overall I think maybe little bit on the high end if we project in the future even if, of course, we just started.

It's not that simple, but I try to give you few points; the fact that this year the Chinese New Year basically we don't see it, but on the other hand pretty strong decline on wireless.

So the other question was for Jean-Marc, I think, on CapEx.

So CapEx, I would like to repeat the 2 points.

First, in spontaneity I see for basically slow growth.

The first block of CapEx is to continue to invest our capacity in advanced BCD in Agrate and in Catania and again this puts also in perspective what we are doing with foundry.

I mentioned in my speech that we are qualifying this kind of technology in the foundry partner.

So this is the first block to see probably growth on advanced BCD.

The second block, of course is Power Discrete so in Catania and in Singapore you see probably growth and especially the Silicon Carbide.

The third block is Crolles so Crolles is a wafer fab in 12-inch which supports basically 3 big block of business; automotive, microcontroller, secure and general purpose and the specialized imaging console.

So here, we have again to support primarily according to the demand to grow within the current footprint.

And again, please put it in perspective with the fact that we have intense and stronger technology transfer and activities in foundry especially to support the Microcontrollers business.

So this is the 3 main block in Crolles.

On top of that I said that we are preparing the 12-inch pilot line in Agrate.

Then in what we call assembly, test and electrical wafer fab foundry, here clearly this is support our goals, particularly in the Silicon Carbide as well as new products for automotive MCUs and advanced BCD.

So this is let's say consistent with the capacity growth we are internally of the wafer fab as described and the capacity increase we are assembling up there.

So basically, this is the profile of our CapEx between $1.1 billion again, which is necessarily to support our growth of CapEX for this year.

The next question is from Andrew Gardiner from Barclays.

My first one was sort of related to the first quarter guidance and some of the comments you've been making about demand generally.

Clearly, there are some worries out there in the financial markets about the state of the cycle.

Can I take it from the comments you've made that you haven't seen any real cuts in orders or changes to customer demand in any area so far this year?

No.

We know that.

I do not believe in a super-cycle, but frankly, we never had outstanding distribution in any of the years with the stock turn so high that we had this year.

So I think this is a good start.

The distribution if you ask in Q4 was at the very high level as Q3 with a significant growth compared to 1 year ago.

The inventory are low, I believe are too low for us.

Of course, this does not mean that we not change forever.

My opinion is that one day there will be some correction, but we don't see that -- we don't see.

And on the other hand, what we see now in the market is an acceleration of the growth, this is for sure.

We see a stronger growth in automotive across the board.

It is power technology, it is smart power technologies, it is digital technologies.

So I -- and then on projects, there are seasonalities, of course, there are new models, et cetera.

But this is the pattern that we see today.

So now we do not see any negative sign coming from distribution, mass market, from automotive and we believe smartphone you see, of course, most likely growth and more projects phase.

Okay.

Just another one on some of those specific projects.

There's lots of interesting things happening within imaging, some of that has been dedicated to one customer in particular.

I'm just wondering whether you're now seeing interest from some of the other OEMs to try and catch up and potentially use differentiated technology that you have in this area?

Any comment on how you see the rest of the space?

Listen, I think it's for us very difficult to talk about specific customers, and certainly, there is a great interest in automotive.

I believe that with our imaging technology we can certainly contribute to the new wave of autonomous driving, the LIDAR, the Flicker free sensors.

For us, it is important and rather than talking project for smartphone customers because we cannot talk about project for smartphone customers.

There are a limited number of leaders in the smartphone customers.

There is a great leader in the U.S., there is leadership position in Korea, in China, but they are not many.

So I think that automotive -- I am sure it is an important opportunity for all our sensors.

Last year in MEMS we grew in automotive, industrial, but it is more automotive 60% as we said before.

There is a big space to grow.

I believe for the next 10 years, we see imaging becoming more and more important in the automotive and we want to be there and I think we can be there with our technologies.

The next question is from Amit Harchandani from Citigroup.

Amit Harchandani from Citi.

Firstly, with respect to I guess the current demand cycle, if I could just ask a question slightly differently.

At Q3 you talked about your lead time which was still stretching and I just wanted an update on the same whether in Q4 they are still stretching or have they at least stabilized even at a high level and do you anticipate your lead times to come back to normal based on the CapEx plans by the end of this year?

That would be my first question.

My second question is with respect to the industrial end market.

We have talked a bit about automotive and wireless, but I was very keen to understand what kind of visibility do you have in the industrial space?

Is it more short cycle and how sustainable do you think that is likely to be going into the second half of the year?

Amit, maybe I start from the investor market and well, Carlo will talk more what we see in the supply chain.

But we have so many families that's basic and there is no doubt and yes, we want to go back to a more normal.

But I would talk few -- I would say a few words on investor.

For us first of all, the definition of investor is many things, but certainly the biggest -- the biggest area of interest for us is the smart things.

So it's the digitalization of the manufacturing line, industry process here in Europe or whatever name in the other countries.

Here we have an important portfolio of products and we are really working to contribute and we can do this, of course, with leaders, for instance the leaders in fact for the automation, but we can also contribute working with the final customers particularly in the mass market.

The key products for us are very much around our microcontrollers.

At the end of this year, we will introduce also a microprocessor for industrial.

This is still based on ARM so it is really targeting industrial applications.

But in general what we have with our microcontrollers is very critical.

Another area that is very much associated with microcontrollers is connectivity.

In this kind of applications there is a must to be connected.

If you want to control a number of smart sensors on an industrial line, these sensors must be connected and this connection is wireless.

You cannot conceive models where you upgrade a manufacturing line and it is through a wired application, it's wireless.

So wireless connectivity is crucial, security is crucial.

Fourth, some form of artificial intelligence into the microcontroller to make the sensor really smarter and somehow independent so distributed artificial intelligence.

So, this is a big block of the things that we are doing.

And then, of course, there is all the other domains for us that is smart power and for these applications, impact to the automation and industrial is really motion control.

60% of the energy that is consumed by a typical manufacturing line is on parts that are moving so it's motion control.

So energy saving, better solution, a smarter solution for motion control.

Again more distributed solutions with a simplification of the cabling, putting electronics directly into the model, all of these things.

And here is really our BCD, the Silicon Carbide, all these kinds of products.

So we are working on the angle of the control.

We are not in the main processor.

We have a specific product like the IO-Links that are crucial to connect all the sensors.

But the big blocks are really the sensing, the smart sensing, the microcontrollers, the connectivity, the security, the distributed artificial intelligence on one part and everything that is power, not power, motion control on the other part.

For us, it is very important.

We want to push this.

We have a lot of technology here.

It is a fundamental area for Europe and we certainly want to push this.

So just so that I could -- I believe (inaudible) something.

Your other question was on lead times and here Carlo said it, demand remains very strong across almost all applications.

Again the lead time remains a pressure across all of the semiconductor supply chain, it's not only for us and it's not only for our own set of operations in the chain.

We have invested.

The investments are translating very effectively on increasing capacity, but also demand is increasing.

So we are in a catching-up phase where I have to say that certainly in the fourth quarter we have made progress in servicing the customers.

But again the priority remains the service for us and overall lead times remain stretched.

We have not totally catching up yet and this is also the reason why as Jean-Marc has said that we have a plan of capital expenditure for 2018, which is aimed at balanced supply and demand.

I was just trying to get a clarification on the earlier answer.

To what extent was the -- all the industrial factors you talked about, to what extent is the demand according to your cyclical versus secular what you're seeing right now?

Secular demand.

Secular demand for industrials.

I think certainly it's a great news for us, this one because this is what I said.

The digitalization of the manufacturing line, the quarter evolution, I believe this is robotics for instance.

We had a demo of a robot in Las Vegas and it was our robot.

I think if I remember well, there were in this robot 32 different products from ST, right?

So 32 different products.

And take for instance collaborative robotics, here is more and more products.

Certainly, this is a long-term plan and it's good that we have so many products for robotics and is going through the technologies that I was describing, but this is a very good example.

We build up our own robot as a demo for -- of the customer's specificity with our demo room in Las Vegas at the CES and in this robot there are 32 different components from ST.

Certainly a good opportunity.

We've got about 5 more minutes so if the remaining analysts can just ask 1 brief question, we'd appreciate that.

So we'll move to the next question, please.

The next question is from Quang Le from Credit Suisse.

It's Achal Sultania from Credit Suisse.

So just one question on the margin for Carlo.

Carlo, we've already seen your margins go up to 17% on the EBIT side this quarter and you obviously mentioned couple of headwinds like FX and wafer prices.

Can we talk about what are the positives from here because it seems like some of the manufacturing efficiencies you're already operating at 100% level?

So how can -- what are the positive drivers from here on?

Is it just mainly product mix or is there something else we can think off?

Well, last year we did U.S. GAAP operating income of 11.9%.

This was in 2017 overall.

Carlo, why don't you go through the drivers?

There are drivers.

Last year was an exceptional year in terms of leverage, 57% of the additional revenues fell down into the operating margin.

I believe that this is not sustainable, but certainly, we are working to guarantee another step in terms of leverage and I think, Carlo, if you want to comment here.

Maybe I may refer again to the drivers I was referring earlier that have significantly boosted margin in the course of 2017 and we referred to the 2017 operating margin level.

Certainly, the opportunity of leveraging on higher sales will continue to be a very significant booster and driver for margin.

On alluding to the fact there is frankly very little now, not to say nothing being recovered.

However, the other point, which is the continued improvement of manufacturing cost thanks to technology, thanks to scale, thanks to the hundreds of initiatives and actions that as we talk we are running in our fabs remains an important also driver of improvement.

And then you have noted that in the last quarter our product mix has been significantly able to offset or significantly offset the pricing trends.

So, product innovation also remain very well.

It is a fair point that Carlo highlighted that we need to consider for 2018 the headwinds back from the current.

Carlo, just one clarification.

In your business, do you still have some products which are loss-making, which was the case let's say 12 months back, like or relatively products?

We are seeing a problem so certainly there is not at all that are repeatable that are now very important areas.

It's more business unit is not -- I think anyhow you are right, we have -- and I'm not talking about the product divisions.

In the company we have about, how many, 17, 18 product divisions.

I'm talking about 1 level below because then each of the product division is a split in business unit so there are many business unit.

There are areas for improvement and we will focus on this area for improvement because I think it's correct that any single business unit perform.

And there are many?

No, but there are some.

And I think it is our duty to focus also on this limited number of business units and again, I'm not talking -- we have 7 subgroups, we have 17, 18 product divisions and then 1 step down, we have the business units.

So we certainly target those areas where it is not -- the leverage to be, but it's limited.

The next question is from Gianmarco Bonacina from Equita.

Going back to your strong revenue growth outlook for second half 2018, just to clarify the definition.

Would be fair to assume that this strong means at least 10% half-on-half growth?

And then in terms of the design win which are behind this, you have in the press release a couple of pages as usual with several design win.

Can we say that part of the visibility on this ramp in growth is linked to this announcement which are included in the release today or would you say that most of this ramp-up is linked to, let's say, private non-disclosed design win?

The other one is just going back to the rule of thumb on the euro-dollar, was mentioned before about $6 million impact on the EBIT every percentage points in the euro-dollar.

Is that before or after the positive impact on the top line because clearly, you have some headwind on the cost and some positive impact on the top line, if you can just clarify?

The quick answer to the last one, Gianmarco, this is all inclusive is the overall impact to the operating income.

We cannot quantify.

We express the sentiment that opportunities are there for another important step.

I try to articulate what are the areas, what is the visibility, but I would prefer not to quantify.

I think we will have an analyst or first of all, we will have the conference call in April and then during the month of May we will have our Annual Capital Market Day and certainly there will be a much better opportunity to go in detail to discuss and we will have also better visibility for the second half to quantify it.

In terms of the design wins, you're right, there are many things that we can write, but there are many things that we cannot write.

And there are also important opportunities that are not in this place and this we will not be able to comment.

I think it is normal so I think it is a combination of the 2. We try to be as much as possible transparent and giving all the information, but on certain things we cannot discuss and this is across the segment not talking particularly on a specific segment, it is across the segment.

So I would say these are 2 things.

There are certainly important things that are not in this.

At this point, we are going to need to close our conference call.

I apologize for those that still have questions on the line.

I would like to remind everyone that ST will host an investor event at Mobile World Congress in Barcelona on February 27.

If you need the details, please contact myself or any member of the Investor Relations team.

And thank you all for participating.

Thank you very much.

Thank you all.

Bye.

Ladies and gentlemen, the conference is now over.

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Goodbye.