Ladies and gentlemen, welcome to the STMicroelectronics First Quarter 2025 Earnings Release Conference Call and Live Webcast. I'm Moira, the Chorus Call operator. I would like to remind you that all participants have been in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Jerome Ramel, EVP, Corporate Development and Integrated External Communications. Please go ahead.

Thank you everyone for joining our first quarter 2025 financial results call. Hosting the call today is Jean-Marc Chery, ST President and Chief Executive Officer. Joining Jean-Marc on the call today are Lorenzo Grandi, President and CFO; and Marco Cassis, President, Analog, Power & Discrete, MEMS & Sensors Group and Head of ST Micro Electronics Strategy System Research and Application and Innovation Office. This live webcast and presentation materials can be accessed on ST Investor Relations 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 results to differ materially from management expectations. 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 STMicroelectronics' regulatory filing for a full description of these risk factors. Also, to ensure all participants have an opportunity to ask questions during the Q&A session, please limit yourself to one question and a brief follow-up. Now I would like to turn the call over to Jean-Marc Chery, ST President and CEO.

Thank you, Jerome. Good morning everyone and thank you for joining ST for our Q1 2025 Earnings Conference Call. I will start with an overview of the first quarter, including Business Dynamics, and I will hand over to Lorenzo for the detailed financial overview. I will then comment on the outlook and conclude before answering your questions. So starting with Q1 in A. In a persistently uncertain environment, our first-quarter net revenues were in line with the midpoint of our business outlook range, driven by higher revenues in Personal Electronics, offset by lower revenues in Automotive and Industrial compared to expectations. Q1 gross margin was slightly below the midpoint of our business outlook range, mainly due to product mix. On a year-over-year basis, Q1 net revenues decreased 27.3% to $2.52 billion, gross margin decreased to 33.4% from 41.7%. Operating margin decreased to 0.1% from 15.9% and net income decreased 89.1% to $50 million. Let's now discuss our business dynamics during Q1. In Automotive, we expect Q1 to be the low point of our automotive revenues. During the quarter, we saw lower revenues across all geographies. The current situation on trade and tariffs is creating uncertainty in car production levels leading to a slight downward revision of forecasts for the year more pronounced for electric vehicle volumes. Despite this, our book-to-bill ratio was above one. In dollar terms, bookings were also up significantly quarter-on-quarter. During the quarter, we continued to execute our strategy in car electrification. We had wins with both silicon carbide and silicon devices and modules for new onboard charger and traction inverter designs as well as with our Smart Power and Smart Fuse solutions for electric vehicle power systems. We remain focused on solid execution in power and discrete for car electrification in the continuing challenging market environment. In car digitalization, we saw further traction with our portfolio of automotive microcontrollers. Automotive microcontrollers are one of our revenue growth drivers beyond the medium-term horizon. We are confirming strong progress in executing our roadmap with many new products set to launch in 2025 and in 2026 across our Stellar and STM32A product families. We are also continuing to see strong designing momentum in China, EMEA and the Americas with both large scale OEMs and Tier-1s. During Q1, our Stellar P microcontroller family was selected in a dual inverter powertrain application by a fast-growing OEM in China and we continue to expand our business with our current high-volume automotive microcontrollers in applications like EyeQ6L air compressed systems. To support the challenges of developing software design vehicles, we recently announced our extensible memory offer for Stellar microcontrollers. ST's proprietary PCM technology enables the smallest memory cell size for the automotive market. Thanks to this, our customers can benefit from increased headroom to continuously innovate their products over time and in the field while also simplifying logistics. In ADAS, we saw our customers mobilize EyeQ6H being adopted to improve safety and driving comfort in high-volume vehicles. This enables hands-free driving, smart parking and improved occupant and pedestrian detection with a single integrated system. We also introduced our newest family of Global Navigation Satellite System receivers, aimed at advanced driving systems for ADAS and autonomous driving. They are the industry's first to integrate multi-constellation and co-advanced signal processing in a single line. With our automotive-grade sensors, we have a number of wins for ADAS vehicles, angle detection and occupancy monitoring applications. Also, this is a clear growth opportunity for us in the mid-term. In industrial, we expect Q1 to be the low point in terms of revenues. In Q1, orders were also up versus Q4 and, overall, inventory decreased, particularly for smart industrial and, to a lesser extent, power energy. By region, the improvement in inventory was driven by Asia, while we have not seen a significant improvement in Europe and in the Americas. Our book-to-bill ratio was above 1. During the quarter, we had wins for our power-enabled portfolio across a range of applications. This included motor control, industrial drives, wild goods, solar panels, air conditioning, and data switches. At the end of March, we signed a development and manufacturing agreement for Gallium Nitride technology with Innoscience. It includes a joint development initiative on GaN-powered technology, as well as a reciprocal agreement allowing each company to use the other's front-end manufacturing capacities. This allows ST to accelerate our roadmap in GaN-powered technology to complement our silicon and silicon carbide offering. For ST, this is a further step in the China-for-China operating model, coming on top of the joint venture with Sanan for front-end manufacturing of silicon carbide and the foundry agreement with HS Grace on multiple technologies, including 40 nanometer. In embedded processing, our STM32 microcontrollers continued to gain traction with the broad developer community. Facing the current challenging market conditions, we were able to reconfirm our number one ranking in the general-purpose microcontroller market in 2024, with a market share that has consistently grown sequentially from Q2 2024 onward. In 2024, our software ecosystem grew 30% to over 1.3 million unique users, and we continued to see a strong growth trend in the first quarter of 2025. One area of particularly strong growth is in edge AI projects developed on our tools. Over the past 12 months, we saw over 160,000 projects, more than twice the number in the previous 12 months. We continue to reinforce our portfolio and ecosystem with new innovative products, leveraging our popularity 40 nanometer and 18 nanometer process node technologies. In 2025-2026, we plan to introduce 18 new lines, leveraging embedded non-volatile memory technologies at and below 40 nanometer. Between 2025 and 2027, the percentage of our STM32 overview coming from this advanced product at 40 nanometer and below will double, reinforcing our leadership in this market segment. Based on our design momentum, we are equipped to grow faster than the market, going back to well above 20% market share. In personal electronics, Q1 was slightly better than expected, while communication equipment and computer peripherals was in line with our expectations. Here, our engaged customer programs are progressing to plan. Our high level of innovation and ability to execute with MEMS and optical sensing as well as with our analog technology portfolio are a key competitive advantage enabling us to win and grow our business, and our specialized technologies also position us for growth in low earth orbital satellites and data centers. For example, during the quarter we introduced new technologies to enable higher performance optical interconnect in data centers and AI clusters. Our silicon photonics and next-generation technologies bring better performance to address the ongoing evolution of optical interconnect for customers like Amazon Web Services. Finally, in terms of corporate development activities, during Q1, ST announced the detail of its three years program to reshape the manufacturing footprint and resize the global cost base. We also confirmed the annual cost savings target in the high triple-digit billion dollar range exiting 2027. The reshaping and modernization of ST's manufacturing operations aims to achieve two main objectives: reutilizing planned investment towards future-ready infrastructure such as 300-millimeter silicon and 200-millimeter silicon carbide water tubs to enable them to reach a critical scale and maximizing the productivity and efficiency of legacy 150-millimeter capabilities and mature 200-millimeter capabilities. This program is expected to see up to 2,800 people leaving the company globally on a voluntary basis over three years on top of normal attrition. This is expected to occur mainly in 2026 and 2027. To conclude, for sustainability, we issued our first annual integrated report during the quarter. This report integrates our sustainability statement detailing our performance in 2024. We remain on track for our commitment to becoming carbon neutral by 2027 on scope one and two and on product transportation, business travel and employee commuting for scope three. Our carbon neutrality program includes a comprehensive strategy covering the reduction of direct and indirect greenhouse gas emissions and the sourcing of 100% renewable electricity by 2027. Now over to Lorenzo who will present our key financial figures.

Thank you, Jean-Marc. Good morning everyone. Before commenting on the Q1 results, let me remind you that following ST's reorganization into two product groups and four reportable segments announced in January 2024, we have made further progress in reorganizing our global product portfolio. This results in some adjustment to our reportable segments effective starting January 1, 2025 without modifying subtotals at product group level. Therefore, from Q1 2025 we report revenues and operating income according to those four adjusted reportable segments. For more details, please refer to the appendix of the earnings press release we published today. And now let's start with a detailed review of the first quarter, starting with revenues on a year-over-year basis. By reportable segments, Analog products MEMS and Sensor was down 23.9% mainly due to a decrease in analog. Power and discrete products decreased 37.1%. Embedded Processing revenues declined 29.1% mainly due to general purpose and automotive MCU. RF and optical communication declined 19.2%. By end market, automotive declined by about 39%, industrial by about 32%, personal electronics by about 11% and communication equipment and computer peripherals increased by about 1%. On a year-over-year basis, sales to OEMs decreased 25.7% and 31.2% to distribution. On a sequential basis, revenue decreased 20.7% in AMS, 34.1% in power discrete, 26% in AMD and 16.5% in RF and OC. By end market, automotive declined by about 34%, industrial by about 18%, personal electronics by about 17% and communication equipment and computer peripherals by about 40%. Turning now to profitability, gross profit in the first quarter was $841 million, decreasing 41.7% on a year-over-year basis. Gross margin was 33.4% decreasing 830 basis points year-over-year mainly due to product mix and to a lesser extent to higher unused capacity charges and lower sales price. Total net operating expenses excluding restructuring amounted to $830 million in the first quarter. This was better than anticipated reflecting the continued strict monitoring of our expenses in the current market environment. In the second quarter of 2025, we expect net operating expenses to stand between $860 million and $870 million, a 6% year-over-year decline. As a reminder, these amounts are net of other income and expenses and exclude restructuring. First quarter operating income was $3 million. Q1 operating margin was 0.1% with AMS at 7.7%, P&D minus 6.9%, EMP at 8.9% and RF&OC at 13.9%. Q1 2025 net income was $56 million compared to the $513 million in the year ago quarter. Earnings per diluted share were $0.06 compared to the $0.54. Net cash from operating activity decreased 33.2% in Q1 to $574 million. First quarter net CapEx was $530 million compared to the $967 million in Q1 2024. Free cash flow was positive $30 million in the first quarter compared to a negative $134 million in the year ago quarter. Inventory at the end of this quarter was $3.01 billion compared to the $2.69 billion in Q1 2024. Days of sales of inventory at the quarter end was 167 days in line with our expectation compared to 122 days for both the previous quarter and the year ago quarter. Cash dividends paid to stakeholders in Q1 2025 totaled $72 billion. In addition, ST executed a share buyback of $92 million. ST maintains its financial strength with a net financial position that remains solid at $3.08 billion as of March 29, 2025 reflecting total liquidity of $5.96 billion and total financial debt of $2.88 billion. Now back to Jean-Marc who will comment on our outlook.

Thank you, Lorenzo. Now let's move to our business outlook for Q2 2025. In the first quarter, our book-to-bill ratio improved with both automotive and industrial growth parity. We are expecting Q2 2025 revenues at $2.71 billion plus or minus 350 basis points. At the midpoint of our Q2 2025 net revenues, we expect a decrease of 16.2% year-over-year and an increase of 7.7% sequentially. We expect our gross margin to be about 33.4% plus or minus 200 basis points impacted by about 420 basis points of unused capacity charges. This business outlook does not include any impact for potential further changes to global trade tariffs compared to the current situation. For the full year 2025, considering the level of uncertainty for the economy globally and specifically for ST and its markets, we are not providing an indication for the full year 2025 revenues. We plan to maintain our net CapEx plan for 2025 between $2 billion and $2.3 billion mainly to execute the reshaping of our manufacturing footprint. To conclude, while we see Q1 2025 as the bottom in the current uncertain environment, we are focusing on what we can control. We are maintaining strict expense control while protecting R&D, continuously innovating to enhance and accelerate the competitiveness of our product and technology portfolio. We are on track with our company-wide program to reshape our manufacturing footprint and we confirm that the cost savings target is in the high triple-digit million-dollar range exiting 2027. ST's medium-term growth drivers remain solid. Specifically, they will come from MEMS and optical sensing solutions, general-purpose microcontrollers, analog devices for low earth orbital satellite communication. While we see lower and delayed growth in power and discrete primarily due to the well-known electrification market dynamics, we anticipate further growth beyond the medium-term horizon thanks to automotive microcontrollers and AI applications at the edge, and for power management and cloud optical interconnect in data centers and AI clusters. We will do so by leveraging our product and technology portfolio and roadmap and our competitively reshaped manufacturing footprint. Thank you, and we are now ready to answer your questions.

The first question comes from Francois Bouvignies from UBS. Please go ahead.

Thank you very much. So the first question that is in everybody's mind, and you saw it with TI yesterday, is how much of your Q2 is driven by tariff pulling. So effectively, you are plus 7% quarter-on-quarter guiding on the revenue side. And I was wondering if you saw any strange or unusual behavior as maybe the industry is trying to get some inventories ahead of a tariff. So I just wanted to have your view on that; provide any data that you have seen during the quarter that would support any pulling or not would be helpful. That's my first question.

No, we have not seen specific pulling related to tariffs. The Q2 forecast and guidance has been built smoothly with our backlog entering the year, along with a booking plan that has been achieved on a very linear and smooth model. So no, no specific pulling due to tariffs for Q2. Thank you, Francois.

Thank you, Jean-Marc. My second question is about your inventories. Your inventory levels on the balance sheet have reached an all-time high, both in absolute terms and in days of inventory. I'm curious about the implications for gross margin since it seems like it will take some time to clear this inventory. Given the uncertain environment for revenue, is it realistic to expect a significant increase in gross margin in the second half? Can we really anticipate a notable improvement in gross margin considering the current inventory levels?

I appreciate the question about inventory. It's true that our inventory at the end of Q1, which is about 167 days, is on the higher side, but we anticipated this. The revenue in Q1 was lower than our usual trend, partly due to an unfavorable calendar. We expect to start reducing our inventory levels in this quarter, aiming for around 160 days. Additionally, we are gearing up for the ramp-up of Personal Electronics in Q3. We have a clear plan to reduce inventory and are closely monitoring the situation. This quarter, we will also have a week of closure at one of our sites to help manage our inventory levels.

What does that mean for gross margin in the second half of the year? With inventory decreasing, does that imply that gross margin could increase as well?

In Q2, our guidance for the gross margin as you have seen is substantially to stay flat in respect to the first quarter. There are a few components of this dynamic of the gross margin. On one side, the gross margin is impacted negatively by the manufacturing efficiency that we had during Q1. Manufacturing efficiency during Q1 was impacted by the significant number of days of closure that we have done in our fabs and in our backend plant. You know that when you have this kind of actions to close the sites, not all the efficiency, let's say, not all the negative impact of closures is captured by the unloading charges. So there are some impacts that are negatively affecting the efficiency, and this is reflected in the dynamic of the second quarter gross margin. On top of that, there is an unfavorable impact on the euro to dollar conversion moving from 1.06 to 1.08. This is offset on the other side by the improvement in the product mix. Product mix is improving as Personal Electronics is declining while Automotive is improving in the second quarter. It's improving also Industrial. This is offsetting the negative impact that we have related to the manufacturing, which rightly, you say is coming from our inventory. Why I would say that in terms of pricing, we don't see any significant high pressure in terms of pricing; it's the normal trend that usually we experience quarter after quarter.

Thank you very much.

Thank you, Francois. Moira, can we move to the next question, please?

The next question is from Janardan Menon from Jefferies. Please go ahead.

Good morning. Thank you for taking my question. Yesterday, Texas Instruments expressed strong optimism about their industrial business, noting a broad recovery across different segments and regions, along with their customers maintaining low inventory levels. Their comments seem more positive compared to what you've shared today about industrial. I'm curious about the reason for this discrepancy. Is it possible that their direct sales model enables them to see improvements sooner than you would through the distribution channel? Additionally, when considering the second half of the year, will the recovery rate of industrial microcontrollers significantly influence your gross margin outlook?

So I take the question for the revenue. Well, it is clear that for industrial, we see some positive trend. I repeat that our Q1 book-to-bill was above 1. In terms of orders, dollar, we were also up. But clearly, we have seen some inventory built in smart industrial and to a lesser extent in power and energy. And also we see some positive dynamics by region, especially in Asia, but still no improvement in Europe, particularly in America. So it's point number one. Point number two, you know that our industrial market, let's say, go-to-market is mainly related to general purpose microcontroller. And there is still a situation of other inventory in general purpose going in the right direction but at a slower pace than what we expected, a few months ago. Well, about H2. Well, as I have said, we will not provide any indication about H2. Why? Because of the uncertainty of the environment, the low visibility we have. However, we already communicated that we are pretty confident about our engaged customer program in Personal Electronics and in Communication Equipment and Computer Peripheral. This increase in H2 versus H1 related to this on the Edge customer program will not represent the full H2 growth versus H1. Another part should be related to the industrial market definitively, but it's too early to confirm this indication, but it is something that probably will happen.

But you are confirming that Q1 is the bottom in industrial. So it should be higher than Q1, at least.

We can see Q1 is the bottom in industrial.

Any follow-up, Janardan?

So if the second half is on the Personal Electronics where you have an engaged customer ramp into the second half. And just going back to the gross margin issue, where your Personal Electronics has lower gross margins than Industrial Automotive. So just from that perspective, would the level of improvement, all things being equal, just assuming that there is no big tariff impact in the second half, would your gross margin improvement be somewhat more muted?

In the second part of the year, clearly, at this stage, it's a little bit difficult to give any precise indication in terms of gross margin where we will land. But clearly, we have some elements that we can share with you. The impact of the growing in terms of Personal Electronics and with significant content in terms of silicon will definitely help significantly our reduction in terms of unloading charges and also improve our manufacturing efficiency, and this is clearly a positive benefit that we will have in the second part of the year. Clearly, in the second part of the year, as we were mentioning before, there will be expected improvement in the industrial, which is very accretive for us in terms of gross margin. So I would say that these elements are supporting for us some expected improvement moving from the first half to the second half. Clearly, there are also some headwinds that we have to take into consideration, one maybe is the dynamic of FX. But clearly, in this environment, it's not helping us. And the other element that we have to take into consideration is the fact that as we have said many times, the capacity reservation fees will progressively go down also moving from the first half to the second half. Anyway, I have to say that it's fair to say that the level of gross margin we have seen in Q1 and in Q2 will be the bottom for our gross margin. Gross margin will improve moving to Q3 and Q4.

So finishing on industrial revenue, what I can confirm to you is that the company will grow revenue at the midpoint of our guidance, 7.7% Industrial will do as well. Very similar to the average of the company in terms of growth. The main detractor of the lows of Q2 versus Q1 is the usual seasonality for ST on Personal Electronics. But it's a good sign that for the first time since many quarters now, that sequentially the industrial market we address will grow about 8% sequentially.

That’s very clear. Thank you so much.

Thank you, Janardan. Moira, we can move to the next question, please?

The next question comes from Joshua Buchalter from TD Cowen. Please go ahead.

Hey guys, thank you for taking my questions. I appreciate all the color on the inventory on the balance sheet. I was wondering if you can maybe provide additional details on how you're viewing downstream inventory in the channel. I think you had mentioned entering the year, you were sort of at 2 months more than you were hoping. Was there any progress on that front in aggregate, getting channel inventory lower during the quarter and sort of where you see things now? Thank you.

Yes, I take this question about the inventory. The inventory that you are mentioning is in the channel. But during the last quarter, in Q1, we have seen substantially one dynamic, very clear reduction of inventory in the channel mainly in Asia. This was, let's say, evident. While for what concerns EMEA and America, we have not yet seen any significant reduction of our inventory in the channel. Let's say that today, even if we have seen some improvement in the course of last quarter, we still have some excess of inventory in the channel. This is clear. We do expect that in Q2, with this dynamic in terms of Industrial and expectation of our POS, the sales of our distributor toward the final market, to have a significant step down in terms of inventory. So for the time being, what I can say is that, yes, there is still some excess of inventory. This inventory should progressively go down, let's say, the success of inventory should progressively go down toward a normal situation already starting in the current quarter.

Thank you for that insight. Jean-Marc, could you provide your perspective on ST's ability to navigate the current global trade landscape, especially from a manufacturing viewpoint? Have your discussions with customers changed recently? While I understand you're not providing guidance on changes, I'm interested in how your customers perceive your company, particularly considering your substantial internal manufacturing capabilities and your presence in Europe. Are you seen as a neutral party in this situation? Any information you can share about the adaptability of your manufacturing operations across different locations would be appreciated. Thank you.

No, we have been actively adjusting our manufacturing footprint for several quarters now. This involves two main aspects. The most visible one is our strategy tailored for China, where we have established a joint venture with Sanan for a wafer fab that will be ready for mass production of silicon carbide by the end of the year. Additionally, we have formed a strategic agreement with Innoscience for GaN and secured a long-term agreement with HHS Grace for microcontrollers, analog technology, and other power components. It is evident that we have been working diligently to build a China for China manufacturing infrastructure and ecosystem. We've also anticipated shifts in demand from our customers and have already moved our wafer fabrication to Europe and Singapore while relocating assembly and testing operations away from China or Taiwan, utilizing our facilities in the Philippines, Malaysia, Malta, and Morocco. Honestly, the events in early April did not result in any drastic changes. We have not observed any panic or immediate reactions from our customers. It’s important to be patient as adapting the supply chain involves significant qualification and product transfer processes. No immediate or overly emotional reactions have been noted in this regard. However, I want to emphasize that we began restructuring our footprint many quarters ago. We are prepared for what lies ahead, and we believe the company is well-equipped to handle this situation.

Thank you for all the color.

Thank you, Josh. Moira, we can move to the next question, please?

The next question comes from Stephane Houri from Oddo BHF. Please go ahead.

Yes, good morning. I have a question about your comments on the automotive market. Could you maybe clarify what's your vision about your own revenues on the automotive side this year versus the market? And also, you made a difference between electrification and let's say, the bulk of the market. Could you clarify this for us? Thank you very much.

Well, indeed, in Q1, we have seen lower revenues in all geographies for Automotive, including a mild revision for the forecast of the year because the automotive industry drivers with a firm order backlog clearly, this behavior is more pronounced on electrical vehicles. Well, the positive point is that at the same moment in Q1, our book-to-bill ratio was above 1 for specifically Automotive. And in terms of dollar terms, the bookings were also up quarter-on-quarter. The other positive point for 2025 is we believe that one risk factor has been elevated. So the one in Europe because now the European Union is proposing some smooth approach on a 3-year flexibility for the carmaker to comply with CO2 standards. Of course, we will wait for the vote, but this is good news. However, we believe that the current situation on trade and tariff is creating uncertainty on the level of car production, clearly and there are still some other risk factors. So taking into account all this situation, we believe that Q1 is a low point for automotive. Excluding the capacity reservation fees, we expect our auto revenue will decline, unfortunately, in 2025 versus 2024. The capacity reservation fee will decline substantially in 2025 versus 2024 by almost $300 million. So takeaway is Q1 is the bottom. Full year revenue should decline versus 2024. We have the indication for that. Well, there are still some risks around the production of cars. We know that some analysts provide a forecast at 92.4 million cars produced in 2025. So a slight increase. But here, we prefer to remain cautious and wait to see what will happen in the next few weeks, especially related to the tariffs.

Okay. And just a quick follow-up. I know you're not guiding for 2025, obviously, but you haven't changed your CapEx budget, which in general means that basically the outlook according to you hasn't really changed. When you look at the consensus, you see a very strong increase in H2 versus H1, 20% to 25%. Does it mean that this evolution in the second half is still possible?

Well, there are two points in your question. Well, first of all, I would like to clearly repeat that the main purpose of the CapEx this year is to enable our reshaping plan. We will disengage from 150-millimeter fab, and we will disengage from 200-millimeter fabs. That's the reason why we need to increase our capacity on 300-millimeter fab silicon, respectively, 200-millimeter fab silicon carbide is point number one. And to help them at the right scale because it will be a booster for our gross margin. Respectively, the 300-millimeter fab in silicon is much more efficient than a 200-millimeter one, and the same for a 200-millimeter silicon carbide. So the first objective of our capital expenditures this year is to enable our reshaping plan. But definitively, some part of the CapEx has been dedicated to, as an example, an exchange, the device that will be introduced as one of the main Engage customer programs for H2 in Personal Electronics, which is increasing dollar and silicon content in the application, as requested some CapEx will be spent in Q1. So one part of the CapEx, of course, is mix adaptation, but it is also valid in test and finishing as well. So I repeat, for 2025, the CapEx is mainly some mix adaptation, which are awarded to us and ensure the main part of the CapEx is to prepare our plan to grow in 2026, 2027 in a different reshape manufacturing footprint. This is really the objective of the CapEx so that's the reason why we still give this $2 billion to $2.3 billion range. But you see that in Q1, we are basically slightly above $2 billion run rate. More about H2. No, again, we don't give any indication. We have some visibility. We have a backlog. But now, our backlog except the normal terms and conditions of our sales contract, the backlog is not particularly protected, so it could be canceled. In case something happens at the economy for the end of the year or 2026. So that's the reason why we have been cautious. However, what we can say is that taking into account our engaged customer program, what I said on automotive that Q1 is the bottom, even if the full year will not show growth, taking into account the trend of the inventory on industrial, we should expect to have H2 better than H1.

Okay, thank you. Okay guys, thank you very much.

Moira, can we move to the next question, please?

The next question comes from Sandeep Deshpande from JPMorgan. Please go ahead.

Yes, hi thanks for letting me on. My first question is about tariffs. There have been some retaliatory tariffs from China on U.S. products as such. Does ST have seen any impact because of the retaliatory tariffs on their demand for your product from China at all and whether there have been any changes in the environment because of this? And I have a quick follow-up.

Sandeep, can you repeat the question, please?

Yes. My question is about the Chinese retaliatory tariffs on products from the U.S. as such, really. Given that the retaliatory tariffs, there could be potential for tariffs on U.S. semiconductor companies shipping into China. So does this have any potential impacts on ST Micro?

As I told you, it is clear that with the current situation on tariffs, our peers that are the fabs in U.S. will be penalized. We serve customers, but again, our American peers generally speaking, are supplying to Chinese customers, product with value and with some stickiness. So again, I repeat what I have said a few minutes ago; we don't see immediate panic reaction or emotional reaction versus the situation. Why? Because indeed, the situation is frozen for some days now. I do believe that customers and partners are waiting for the situation to move forward. But definitively, let's remain pragmatic. If some customers came to us and have taken a decision in the past to allocate to our competitor for various reasons. And if today, our products comply with the specifications and comply in terms of performance and price and so on, yes, certainly, we will acknowledge some trend that ST could be a new vendor solution taking into account this tariff increase for American peers in China.

Thank you. And my quick follow-up is on your automotive business. Can you talk about how your share has evolved at your major silicon carbide customer in the first quarter? And if we can assume that any share loss that has occurred has already been factored into the numbers, or whether we will see further share loss at that customer through the rest of this year?

I will comment and Marco Cassis will complement. What we say we have repeated since a few quarters, the way we have established the business relation with our main customer for silicon carbide was a warranty about some share. And it is automotive industry, and for automotive industry, it is a normal process to have built at least two sources. So for us, it was super well known that at a certain moment, when the second source would be qualified and efficient, our main customer will manage manufacturing and supply chain with two sources. We are in this situation. So we have absolutely not lost market share because any reason; we are simply coming back to a normal share consistently with what we contractually signed with our customer. Well, then after, where we pay attention is more about volume of cars sold by our main customer, inventory and so on and so forth. But here, we cannot comment. So Marco, you want to add something?

I just confirm what you just said that we moved towards the contract or our market share that we have with major customers, and there will be no erosion of market share going forward. And on the longer trend, we confirm that we will be present in the silicon carbide market, at least with a 30% or above market share overall.

Thank you.

Thank you, Sandeep. Unfortunately, we don't have any time for more questions. So thanks for attending our call for this quarter. Thank you very much, all of you for being there, and we remain here at your disposal should you need any follow-up questions. Sorry for the ones that you don't have time to ask. Thank you very much. Bye, bye.

Thank you. 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.