STMicroelectronics N.V.
Q4 2020 Earnings Call Transcript

Published: 28 Jan 2021

[Celine Berthier:]

Good morning. Thank you, everyone, for joining our fourth quarter and full year 2020 financial results conference call. Hosting the call today is Jean-Marc Chery, ST's President and Chief Executive Officer. Joining Jean-Marc on the call today are Lorenzo Grandi, President of Finance, Infrastructure and Services and Chief Financial Officer; Marco Cassis, President of Sales, Marketing, Communications and Strategy Development. This live webcast and presentation materials can be accessed on ST's Investor Relations website. A replay will be available -- sorry, 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 statements contained in the press release that was issued with the results this morning and also in ST's most recent regulatory findings for a full description of these risk factors.

[Jean-Marc Chery:]

So, thank you, Celine. Good morning, and thank you for joining ST for our Q4 and full year 2020 earnings conference call. Let me begin with some opening comments. Starting with Q4. As announced, on January 8, net revenues at $3.24 billion were up 21.3% sequentially, significantly above the high end of our guidance. Our engaged customer programs in Personal Electronics as well as continuous acceleration in demand, especially of automotive products and Microcontrollers, were the main factors that contributed to these results. Q4 '20 gross margin was 38.8%, 30 basis points above the midpoint of our guidance. Our operating margin was 20.3%, and our net income was $582 million. Moving to the full year 2020. Net revenues increased 6.9% to $10.2 billion for 2020, progressively strengthening versus the expectations we provided during the year. This was due to the stronger and faster than expected restart of demand during the second half. Full year '20 gross margin was 37.1%; operating margin was 12.9%; and net income, $1.1 billion. Free cash flow for the year was $627 million, and CapEx was $1.28 billion. Our net financial position increased to $1.1 billion at December 31, 2020, from $672 million 1 year earlier. On Q1 2021. At the midpoint, our first quarter business outlook is for net revenues of $2.93 billion, representing a year-over-year increase of about 31.2%. The gross margin is expected to be about 38.5%. For the full year 2021, we plan for solid revenue growth outperforming the markets we serve. Smart mobility, power energy management, the IoT and 5G are driving demand for semiconductor content, and these trends have accelerated during 2020. ST's strategy stems from these long-term enabler, and we are very well positioned to support our customers across them. We plan to invest about $1.8 billion to $2 billion in CapEx in order to support the strong market demand as well as our strategic initiatives. Now, let's move to a detailed review of the fourth quarter. During Q4, market demand accelerated sharply versus expectations. As we preannounced on January 8, net revenue came in 580 basis points above the high end of our outlook range. On a sequential basis, net revenues increased 21.3%, with all 3 product groups performing above expectations. AMS was up 42.4%, ADG up 12.1% and MDG up 5.3%. On a year-over-year basis, Q4 net revenues increased 17.5%, driven by whole product subgroups with only RF Communications decreasing as expected affected by the U.S.-China trade war.

[Operator:]

We will now begin the question-and-answer session. The first question is from Andrew Gardiner from Barclays.

[Andrew Gardiner:]

[Jean-Marc Chery:]

Thank you for your question. Well, clearly, what we are seeing is, let's say, an accelerated path, okay, to the -- to our trajectory to deliver $12 billion of revenue. It is clear that with the backlog we have, the current dynamic of the market we have -- I would like also to recall that in December, what I told you that, basically, by fact, we have lost one important customer due to the implication of the trade war between U.S.A. and China. And our visibility at this time was that the other vertical we address, so industrial and automotive with a data point, okay, we own at this point of time. We would not certainly offset, okay, this customer. Now it is clear that after, let's say, a very strong order booking in Q4, which has accelerated, okay, in November and in December on automotive and industrial market, yes, I confirm today that we are clearly on an accelerated path versus this trajectory. And we are working, we update every month our sales and operating plan for, let's say, rolling 12 months. So we see clearly this accelerated path. That's the reason why we have, let's say, decided to increase our CapEx plan versus the model we have in order to fulfill the strong market demand and to continue our, let's say, strategic initiative. And then another point, okay, is important to mention is Personal Electronics. While it is clear that something happened in the overall Personal Electronics, which is, let's say, in same time, okay, the 5G deployment of device and we know that our major customer is very successful in this area, we see all the accessories. The variable level are very, very successful. And this is certainly one of the effects of the work-at-home, stay-at-home, which will remain definitively whatever is the pandemic evolution during the year. So yes, I confirm to you that the mega trend we are accelerated more than expected. Certainly, this mega trend in automotive, in industrial, in Personal Electronics will offset, okay, the fact we lost, okay, this important customer due to the trade war. And today, our current view is, clearly, yes, we are on the accelerated price.

[Andrew Gardiner:]

Just one quick follow-up, if I may. As we look forward throughout this year, based on what you just said, can we expect sort of somewhat normal seasonality? I know it's a -- things are, as you said, unprecedented in some end markets, but would you still say that second half should be up on the first half?

[Jean-Marc Chery:]

Well, okay, we try to be quite disciplined, okay, in the way we drive, and we give indication to you, the best indication, okay? So in January, okay, we give our Q4 earnings, the guidance of Q1. We give important information about the CapEx, okay, which is, of course, linked to the expectation we have on the full year revenue for 2021. And then in April, okay, we will provide to you, let's say, the full visibility of 2021. Yes. Most likely, we will have a different, let's say, breakdown between H1 and H2 in 2021, more simply because today, we have a very strong demand in automotive. I think everybody well aware about the automotive, let's say, supply chain situation. So the demand is very strong, which will boost definitively the first half of the year. And this is valid as well for Personal Electronics and industrial markets.

[Operator:]

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

[Jerome Ramel:]

Yes. Two quick questions. The first one, how should we model the OpEx for Q1 and maybe for the full year? And a follow-up question on automotive. Jean-Marc, you mentioned the disruption in the industry. Could you shed some light on what's going on, where the bottleneck and what is STMicro doing to address this issue?

[Jean-Marc Chery:]

So, the OpEx, Lorenzo, you start with OpEx.

[Lorenzo Grandi:]

I will start to talk about our OpEx. What we do expect for Q1 in terms of OpEx. You have seen -- usually, when we guide, we guide including other income and expenses. And as you remember in guiding, as you have seen, clearly, in this quarter, the number of other income and expenses has been quite significant. Here, we have a key chapter. It was expected on our R&D grants in 1 jurisdiction due to the change of 1 low, and we were in the position to recognize. This is for around $100 million. So Q4, for sure, we benefit of this in our overall expenses. What we do expect for the next quarter? For the next quarter, for sure, there will be some headwind for our expenses. One is definitely the exchange rate. The guidance we are going to give -- we gave for Q1 is 1 -- euro-dollar exchange rate at 1.20, 1 in Q4, 1.16, and the level of other income and expenses are much more normalized in respect to what we see in Q4. So the expectation is to have expenses that will range in the quarter Q1 between $705 million and $715 million, something in this range. This is our expectation. There no should be significant change moving forward, let's say, some up and down in the year, let's say, but the expectation will be substantially to be in this range moving forward.

[Jean-Marc Chery:]

So then, Jerome, it's a question about industrial, automotive, okay, what we are doing to support the current demand. Well, it is clear that the demand for automotive has been quite sudden. I don't want to repeat myself each time, but it is clear that coming after summer with this strong acceleration definitively has put under stretch the supply chain. Well, as far as this is concerned, more clearly, we are supporting our customers very closely in a daily contact with them, okay, in order to be sure that each single piece we produce, okay, go directly, okay, to a production line. So we are under emergency tasks force mode with close relationship between the Tier 1, our self and carmaker. And then, okay, the second action is the capability of the company to synchronize, okay, for Q1, Q2 and H2 all our manufacturing asset, supply chain and the foundry to make the best of triangulation between all the manufacturing source we have in order, okay, to really maximize the amount of wafer we can deliver to our assembly plant and all that to support all this demand. While it is clear that this is what we are doing, there is no too much flexibility because all the foundry are basically fully saturated, whatever they are, 8-inch or 12-inch. There is no more, let's say, equipment available on 8-inch. So impossible basically to increase an 8-inch capacity now. The situation is quite similar on OSAT, so assembly and test. Here and there, there is also some start of shortage of material like a substrate. Well, this is a situation which is very strange. As usual, the recipe is following all the as to increase, let's say, timely and steadily their capacity to support their customer with best visibility, okay, we can discuss with them and cooperate in order to fairly balance the capacity across all the verticals we address. It means automotive, industrial, Personal Electronics and communication equipment. So it's a pure, let's say, operating job and process, but we are, let's say, pretty well, let's say, equipped to do.

[Operator:]

The next question is from Matt Ramsay from Cowen.

[Matt Ramsay:]

Yes. Jean-Marc, I wanted to, I guess, dig a little deeper on the first question that Andrew asked to kick off the call. I think a lot of us in December and a lot of investors were sort of struggling to square the circle of the strength that you're seeing in the business with pushing out the long-term revenue target. And you addressed some of the things about conservatism and around the challenges at Huawei. But maybe you could just confirm for us or address if there have been any changes to your key customer program visibility with a few folks, namely the large smartphone customer, the silicon carbide programs and also what's going on with Mobileye. If you could kind of confirm that there's no changes there in your view that I think that would help a lot of us in our forward modeling. And then I have a follow-up on gross margin.

[Jean-Marc Chery:]

Well, coming back a bit to the 2021 accelerated path, okay, I would like to mention, okay, a few points. Well, clearly, the production of car in 2021 now is expected to be between 85 million to 90 million vehicles, but with also a notification related to inventory replenishment. Because it looked like, okay, the industry in Q2 and early Q3 inventory close to zero. So clearly, the run rate of what we are seeing today in terms of semiconductor demand for the automotive market is more aligned with 98 million vehicles rather than 85 million, okay, to 90 million. So there is clearly an inventory replenishment, which was not, okay, the data point we have in November. In November, we were more around 80 million vehicles to be produced and without this amplification factor about inventory replenishment. So this is point number one. Then about our, let's say, measure engage program on, let's say, on the ongoing application we address. First, smart mobility. Smart mobility, I would clearly confirm to you that our programs with Mobileye, our program on silicon carbide are running very well. And on silicon carbide, okay, our plan for 2021 is to generate the revenue between USD 450 million and USD 500 million. Mobileye, I will not comment because we never comment specifically on the customer, but we will increase our plan. Well, then about imaging and Face ID. Again, okay, you know that I never comment on customers and customer programs. But however, I can confirm to you that we do not plan any material or significant change in our revenue in 2021 with our imaging business. So I hope I am quite clear.

[Matt Ramsay:]

I really appreciate the candor there. And don't shoot the messenger, I had to ask the question. I guess the -- and my follow-up question, Lorenzo, I wanted to talk a little bit about gross margin. Obviously, there was an inventory correction in 2019 and then all of the turmoil that happened in the supply chain around COVID and demand in the automotive sector. And you've been kind of chasing underloading charges in your margins for a while. And maybe you could talk a little bit about what your expectations are for gross margin trends. Tightness in the industry seems to indicate that the underloading charges would go away. Additionally, we've heard some rumblings of potential price increases for ST and other vendors. Anyway, the puts and takes on gross margin would be really helpful.

[Lorenzo Grandi:]

Yes. Maybe I can comment on that. Yes, it's true that during 2020, the combination of lack of demand in the first half, let's say, and the lower workforce has impacted significantly our gross margin. We said that there is around 150 basis point impact on the gross margin with the combination of these two elements. What did happen now? In Q4, we already started to see some reduction in respect to the original expectation of our unloading charges. And this is one of the main factor of having exited the Q4 slightly better than was the expectation, 130 basis points and mainly driven by the fact that the unloading charges are a little bit lower. Then when we look at Q1, now Q1, I would say that unloading charges are substantially, let's say, gone. We have really no material residual unloading charge that is mainly driven by the fact that we are not yet ready to fully utilize some of our -- to change, let's say, fully the mix in some of our plants. We are talking about 10 basis points of unloading charges in Q1. So the expectation is that, definitely, for this year, unloading charge will not beany material number. Already in Q1, contrary to what was expected. On the other side, there are 2, let's say, headwinds, let's say, for us. For sure, one is the exchange rate. This doesn't play in our favor. It's negative. You see that now we are guiding in the range of 1.20, you see how is the stock rate. So it means that we are in this -- at this level of exchange rate. Last year, the average of the year was 1.13. Q1 in 2020 was 11 -- 1.11. So it means that definitely, there is a significant change in this respect for what concerned the impact of the FX. I was modeling this, if you remember during the Capital Markets Day, as impacting our cost in our COGS. And then definitely, there is also some impact related, let's say, to the cost of our materials, the cost of precious material that is another important component of our cost. True that on the other side, this is in terms of revenue pricing, fairly share somehow with, let's say, our customers. So there is, for sure -- and this is visible in the guidance of this quarter, let's say, less seasonality in terms of price in respect towards our usual situation. Indeed, when I look at the gross margin, the combination price/mix is substantially neutral. We do not have the usual negative impact, a significant negative impact that we normally have at the beginning of the year. So there are all these ingredients that are combining together. Moving forward, we will see, let's say, the evolution. I do expect some improvement, but then it's a little bit early now to really size the level of improvement.

[Operator:]

The next question is from Sandeep Deshpande from JP Morgan.

[Celine Berthier:]

Sandeep?

[Operator:]

Mr. Deshpande, your line is open.

[Sandeep Deshpande:]

Hi. Can you hear me? Can you hear me?

[Celine Berthier:]

Yes, yes, we can hear you.

[Sandeep Deshpande:]

My first question is regarding what we've been hearing in the automotive market that there have been shortages in the market. Maybe STM can give a view on this market? And is STM able to supply this market? Or there are other suppliers who are not able to supply to the market? And then secondly, I mean, again, reverting to that question on CapEx and revenue guidance in your CMD. I mean, if you look at your CapEx figure at the moment, or then it would -- you guide to 6.5% CAGR growth on the plan at that time. I mean, your plan now looks to be much bigger for this year, although you're not guiding to this year. I mean maybe you could help us understand what new customer programs or what kind of customer programs have been engaged. Why suddenly the CapEx has gone up to this even higher than what was guided in December at this point? And that will this be sustained because otherwise this huge spending at this point could later on hurt ST?

[Jean-Marc Chery:]

So I will take the CapEx. There is a CapEx question.

[Lorenzo Grandi:]

The CapEx...

[Jean-Marc Chery:]

And the automotive. Well, automotive, so I will answer both. And of course, Marco and Lorenzo will complement our sales. About automotive, first point I would like to mention about ST's view is that on, let's say, electrification of the car, so silicon carbide, we see a total share situation than on the legacy automotive. Despite, okay, the tremendous growth of our key customer on the silicon carbide, okay, we are supporting them steadily, okay. And as I mentioned, let's say, a few minutes ago, we plan, okay, to have this year a revenue between USD 450 million and USD 500 million with a strong growth in H2. And silicon carbide, yes, will show a strong growth, H2 versus H1. And you remember, okay, we moved out 2020 with a run rate of, let's say, USD 300 million on an annual basis. So here, I answer, okay, partially both questions, okay? So -- but here, ST do not generate at any moment shortage on silicon carbine, and we will go very strongly H2 versus H1 and full year 2021 versus full year 2020. Then coming back to the legacy. Now to the legacy, clearly, yes, there is a gap, important gap today between the short-term demand of the automotive industry, so carmakers and Tier 1 versus the capacity installed in the semiconductor industry. And so far, wafer fabs and assembly, okay, this capacity are shared with other verticals. And clearly, the other verticals, Personal Electronics, servers, computers, but industrial as well -- in industrial, especially in Asia since Q2 and now in Europe, in America, all this, let's say, this market, okay, request capacity. Unfortunately, the car industry wake up very late, and the lead time of semiconductor are what they are. And you cannot, okay, overnight, okay, increase the capacity in like a direct bus . So yes, okay, it is an industry problem. There is an overall industry problem showing an important gap between the demand and the capacity. As in the past, as always, it's pretty well managed this kind of situation, delivering and supporting our customers at best and fairly balancing our capacity in all the verticals in order to protect customers from the automotive market, from industrial, Personal Electronics and computer peripheral. Well, then I must not mention, okay, a specific bottleneck, okay, from a company or another one, okay, I think it's not my job to do it. But it is an industry problem for sure.

[Celine Berthier:]

Does it answer your question, Sandeep?

[Jean-Marc Chery:]

Well, there -- for the full year, on the contribution of our revenue for the sales and operating plan of 2021 as usual will be pretty well balanced between on cash program. So I confirm to you that the silicon carbine will be one of the main ones. Ongoing one on Personal Electronics, well, definitively, let's say, Huawei will be a strong decrease 2021 versus 2020 because up to now, we have first not receive any other license, especially on custom design product and technology. And if tomorrow we receive, okay, we will be ready to support this customer. But with the lead time we have today, no more, no less. And because today, with the capacity situation, our lead time are increasing. So Huawei will be a detractor, definitively in 2021 of the revenue. And then, okay, we will have a well-balanced increase of our microcontroller, of our analog product, powering discrete on top of the silicon carbide and definitively, the legacy automotive. So ASIC based on BCD technology, on vertical integration power technology and the ADAS with Mobileye. About the CapEx, to be clear. So about the CapEx, no, you know our model, again, is well-known, okay? For $1 growth, we invest, okay, at least $0.8. We need to keep 6%, 7% of our sales for the maintenance, for the R&D, for the corporate sustainability, okay? We need to invest, okay, to go to 0 carbon neutrality and our strategic initiative. Yes, between -- our model was 1.6 to 1.7. This is what we said at the Capital Market Day, which was spread, okay, with $400 million for, let's say, the strategic initiative, around $300 million, $350 million for the month. And the rest, which was, let's say, USD 800 million for capacity increase. But we have increased the CapEx for capacity increase. So now the CapEx for capacity increase will be between $1.1 billion to $1.2 billion in order to support the automotive industry, the industrial market and the Personal Electronics. We will, let's say, continue to maintain high level of ratio of outsourced production with our main foundry partners, so TSMC, Samsung and other, let's say, specialty for this. So this is the view of the CapEx. Last year, during in the year, we announced $1.5 billion before the COVID effect. ST, as always, a capability to modulate the CapEx and capacity, adapting us very fast on the business finance, okay? What will remain is a steadily execution of our strategic program because we are convinced we need to set up a new 300-millimeter fab, and we will increase the capacity of this fab timely with our business plan. We need to set up internal capacity for our silicon carbide in order to have a partial production of our needs to support the $1 billion target we have by 2025. I guess you are well noted that in 2021, we will have achieved already half of this target. And then, okay, we have also initiative on gallium nitride for power device, which will be the next generation of technology, important to address the power and energy sector. For the rest, capacity, we adapt ourselves to the market dynamic. With market strong, we invest and we increase the production externally. When market decreased, okay, we correct immediately. This is what we have done in 2020.

[Operator:]

The next question is from Stephane Houri from ODDO.

[Stephane Houri:]

Yes. Actually, I have a clarification to ask and a question about diversification. So the clarification is, when you talk about your main customer on the engage program and you said that basically that the relationship is unchanged, does it suppose that you expect growth on this aspect? And the following question is about diversification. You've been talking during the CMD about the fact that now the game with your main customer was also to diversify your revenues. So can you highlight some of the initiatives there? And same question basically about silicon carbide because there is going to be some growth this year. But so far, it was only on one customer, basically. And is the diversity coming this year?

[Jean-Marc Chery:]

So about silicon carbide, it is clear that, as I said, okay, during the various opportunity, we have to discuss altogether, 2021 will be the year when we will start to see, let's say, enlarging our customer base, and they will start to, let's say, to contribute to the revenue or I guess, with this order of magnitude of revenue at USD 500 million. I will not communicate the breakdown because, okay, you can make after a correlation with our main customer, and I think it's not fair for me. But for sure, it will be one of the -- still one of the main driver of our revenue growth. But clearly, in 2021, we will enlarge our customer base, and they will really start to contribute to the revenue. Well, about the diversification. Yes, I confirm to you that when -- now we -- when we see what happened in 2020 and when we look at the revenue, we have generated with our main customer in Personal Electronics. ST address in a balanced way all the major platforms of this customer, means, okay, the personal computer, the pad, the phone and the accessories, the watches and our product, consistency, okay, with our strategy. Remember, okay, we want to be selective on some custom design in imaging sensor, secure solution, analog product, but we leverage our, let's say, general portfolio like microcontroller and power. Yes, now, okay, ST is very well positioned and spread in whole platform of our -- this major customer, which, by the way, was the same strategy we had with uncertainty with Huawei, which has been, let's say, destroyed by the reason you know. So this is really a good diversification and a very good leverage of our product portfolio definitively. And I would like to correct what you say, I have not said that there is significant change in the relation with our customer. So I repeat what I say a few minutes ago. I say we do not plan any significant change in revenue in 2021 for our emerging business. I love relation, I prefer revenue.

[Celine Berthier:]

Thank you. Thank you very much, Stephane. We are running now close to the end of the time. We will take two questions, two more questions. And I apologize for the ones that have any other.

[Operator:]

The next question is from David Mulholland from UBS.

[David Mulholland:]

I'll keep it short from my side. But obviously, one of the discussions we had when we were talking in the past about the headwinds of Huawei was what opportunity you might have to gain other OEMs that might benefit it volume-wise from the challenges Huawei faces. So I just wonder if you could give us an update and how you feel about your design win traction and penetration into, I guess, the range of other Chinese OEMs that are hoping to gain on the back of Huawei's challenges.

[Jean-Marc Chery:]

Well, so our strategy for the Personal Electronics with the various OEM was the following

[David Mulholland:]

That's great. And just a quick follow-up. Obviously, you've been developing custom RF power amplifier content for Huawei, and that can't be sold anymore. Have you find ways to repurpose that? Can that be seen with a bit more development from yourself in more of a standard product over time that you can still get some benefit from the investment?

[Jean-Marc Chery:]

It is clear that, here, our strategy was, let's say, in 2 steps. Okay, step #1 was really the cooperation. Okay, we developed across the past years, okay, with Huawei on Huawei's technology. And then to diversify ourself, anticipating, okay, the expansion of IoT when the 5G infrastructure will be deployed and the capability of the network to enable millions of nodes, okay, per unit of surface to have the capability inside ST to offer the full product part of the system. It means microcontroller or microprocessor connectivity, analog power management and the radio frequency because, okay, we do not want to depend of third party to address. So all the investments we have done with Huawei in technology and know-how, yes, we will reduce while reusing it on IoT. And also, I would like to recall that we have acquired a start-up last year called SOMOS, which has a strong capability to design radio frequency device, like a power amplifier or other transceiver.

[Celine Berthier:]

Thank you. And we will now take the last question.

[Operator:]

This last question is from Aleksander Peterc from Societe Generale.

[Celine Berthier:]

Mr. Peterc, you can speak. Your line is open. Alex?

[Operator:]

We lost connection with the questioner. The next question is from Sébastien Sztabowicz from Kepler Cheuvreux.

[Sébastien Sztabowicz:]

On the market demand, the market is currently overreaching right now. What kind of visibility do you have for Q2? Do you see any potential risk of inventory correction moving into Q2 and maybe in the back half of the year? And secondly, on the time-of-flight sensors, could you make an update on your road map? And also how do you see the demand building up in this specific market? Have you seen any slowdown in the adoption of 3 different sides in the market? It seems that Samsung has stopped using time of licenses for wall-facing application in the last GF '21?

[Jean-Marc Chery:]

No. First of all, the demand is very clear on H1, and H2 is really starting to be loaded very healthy, okay? So -- and again, we don't see, let's say, any other booking because the inventory in the supply chain is very healthy. I -- again, I confirm to you that we have a total visibility on the distribution channel and the turn of inventory are incredibly high, well above 4, 5 or 6. So inventory are very low. So we don't see -- the business, okay, is very dynamic. But with this, it is very, very obvious. There is no inventory in the automotive industry, taking into account the number of calls we receive. And on the other, let's say, verticals, Personal Electronics is similar. Okay, we know very well the supply chain of our main customer, and we monitor very well the inventory level and then we did not detect any of our inventory. Now again, we confirm to you that the current situation clearly -- are clearly linked to the same demand where what is related, Personal Electronic, provide server, this kind of things are driven really by stay-at-home, the work-at-home, the lack of traveling, and this will last in a mixed way, I think, for a very long time. Then the industrial market in China, in Asia is very active, very, very healthy. It's starting to recover in Europe and in America. And then on automotive, okay, again, this industry is engaged now in a major transformation related to electrification in order to comply with the various norm and regulation like the WLTP in Europe. And this is very demanding in terms of component for, let's say, inverter, onboard charger, the battery management system, okay? So you need to have a lot of control. More and more, all the vehicles will be equipped with Level 2 or Level 3 ADAS system. So this is very leaning in terms of components. So the content is increasing. And then there is a specific, let's say, situation, where, clearly, the overall production of car worldwide will come back to the level of 2019. Certainly, 1 year ahead than expected a few months ago with a notification in 2021 related to inventory replenishment. Why? Because this industry put inventory close to 0 in Q2 and in Q3. So this is clearly a situation that the semiconductor industry has to manage, let's say, with all the capability of this industry to react to us and to control this situation. And then the other question was about the time-of-flight. Also, I will not communicate our strategy on time-of-flight. Okay, clearly, there's a need to offer the best component for, let's say, the application with target, either on the front side or the offside of the smartphone. We know that sometimes the direct time-of-flight is more adequate than the indirect time-of-flight. Then there is, let's say, the cost of ownership is very important. Then the capability to put the components as much as we can under the OLED screen display of the phone is also very important. So this is okay on all this aspect. ST is working, and we want to continue to address with custom design solution our main customer. I guess, I have already commented about that. And to address with more application specific on our solution, the other smartphone player.

[Celine Berthier:]

Okay. So, this will end our call now for this quarter. Thank you very much.

[Jean-Marc Chery:]

Thank you. Thank you very much.

[Celine Berthier:]

Thank you for your attention, and we keep in touch. Thank you very much.

[Jean-Marc Chery:]

Thank you.

[Lorenzo Grandi:]

Thank you. Bye, bye.