This document is the PDF/printed version of the 2023 Annual Report of STMicroelectronics N.V. and has been prepared for ease of use. The 2023 Annual Report was made publicly available as specified in the Regulatory Technical Standards on European single electronic reporting format (the ESEF package) (Delegated Regulation (EU) 2019/815). The ESEF package is available on the company's website at https://investors.st.com/financial-information/annual-and-semi-annual-reportsand includes a human-readable XHTML version of the 2023 Annual Report. In any case of discrepancies between this PDF version and the ESEF package, the latter prevails.
Contents
MESSAGE FROM THE PRESIDENT AND CHIEF EXECUTIVE OFFICER ON THE FINANCIAL YEAR 2023 | |||||||||||||||||||||||||||||||||
2.5. | SALES, MARKETING AND DISTRIBUTION | 7 | |||||||||||||||||||||||||||||||
2.6. | RESEARCH & DEVELOPMENT | 8 | |||||||||||||||||||||||||||||||
3. | REPORT OF THE MANAGING BOARD | 9 | |||||||||||||||||||||||||||||||
3.1. | STATEMENT OF THE SOLE MEMBER OF OUR MANAGING BOARD | 9 | |||||||||||||||||||||||||||||||
3.2. | BUSINESS OVERVIEW & PERFORMANCE | 10 | |||||||||||||||||||||||||||||||
3.2.1. | Results highlights for the year 2023 | 10 | |||||||||||||||||||||||||||||||
3.2.2. | Business overview | 10 | |||||||||||||||||||||||||||||||
3.2.3. | Key announcements | 17 | |||||||||||||||||||||||||||||||
3.2.4. | Financial outlook: Capital investment | 18 | |||||||||||||||||||||||||||||||
3.2.5. | Liquidity and financial position | 19 | |||||||||||||||||||||||||||||||
3.2.6. | Financial risk management | 22 | |||||||||||||||||||||||||||||||
3.3. | RISK MANAGEMENT AND INTERNAL CONTROL | 23 | |||||||||||||||||||||||||||||||
3.3.1. | Risk Management | 23 | |||||||||||||||||||||||||||||||
3.3.2. | Internal Control | 47 | |||||||||||||||||||||||||||||||
3.4. | SUSTAINABILITY | 48 | |||||||||||||||||||||||||||||||
3.4.1. | Environmental Matters | 50 | |||||||||||||||||||||||||||||||
3.4.2. | Labor and Human rights | 57 | |||||||||||||||||||||||||||||||
3.4.3. | Anti-briberyand corruption matters | 59 | |||||||||||||||||||||||||||||||
3.4.4. | Social and employee matters | 61 | |||||||||||||||||||||||||||||||
3.4.5. | Corporate social responsibility in our supply chain | 64 | |||||||||||||||||||||||||||||||
3.4.6. | EU Taxonomy | 65 | |||||||||||||||||||||||||||||||
3.4.7. | Corporate Sustainability Reporting Directive | 80 | |||||||||||||||||||||||||||||||
4. | REPORT OF THE SUPERVISORY BOARD | 80 | |||||||||||||||||||||||||||||||
4.1. | COMPOSITION OF THE SUPERVISORY BOARD | 81 | |||||||||||||||||||||||||||||||
4.2. | MEETINGS AND ACTIVITIES OF THE SUPERVISORY BOARD | 85 | |||||||||||||||||||||||||||||||
4.2.1. | Activities of the Supervisory Board | 85 | |||||||||||||||||||||||||||||||
4.2.2. | Membership and Attendance | 85 | |||||||||||||||||||||||||||||||
4.3. | AUDIT COMMITTEE | 86 | |||||||||||||||||||||||||||||||
4.4. | COMPENSATION COMMITTEE | 86 | |||||||||||||||||||||||||||||||
4.5. | STRATEGIC COMMITTEE | 87 | |||||||||||||||||||||||||||||||
4.6. | NOMINATING AND CORPORATE GOVERNANCE COMMITTEE | 87 | |||||||||||||||||||||||||||||||
4.7. | SUSTAINABILITY COMMITTEE | 87 | ||||||||||||||||||||||||||||
4.8. | SECRETARIAT AND CONTROLLERS | 87 | ||||||||||||||||||||||||||||
4.9. | REMUNERATION REPORT | 88 | ||||||||||||||||||||||||||||
4.9.1. | Supervisory Board remuneration | 88 | ||||||||||||||||||||||||||||
4.9.2. | Managing Board remuneration | 90 | ||||||||||||||||||||||||||||
4.9.3. | Senior Management remuneration | 105 | ||||||||||||||||||||||||||||
4.9.4. | Remuneration comparison between the Managing Board, the Executive Committee | 112 | ||||||||||||||||||||||||||||
(excluding the sole member of the Managing Board, our President and Chief Executive | ||||||||||||||||||||||||||||||
Officer), the Executive Vice Presidents and employees | ||||||||||||||||||||||||||||||
4.9.5. | Share ownership | 114 | ||||||||||||||||||||||||||||
4.9.6. | Stock awards and options | 114 | ||||||||||||||||||||||||||||
5. | CORPORATE GOVERNANCE | 114 | ||||||||||||||||||||||||||||
5.1. | COMMITMENT TO THE PRINCIPLES OF GOOD CORPORATE GOVERNANCE | 114 | ||||||||||||||||||||||||||||
5.2. | GENERAL MEETING OF SHAREHOLDERS | 116 | ||||||||||||||||||||||||||||
5.3. | SUPERVISORY BOARD | 118 | ||||||||||||||||||||||||||||
5.4. | MANAGING BOARD | 119 | ||||||||||||||||||||||||||||
5.5. | INDEMNIFICATION OF MEMBERS OF OUR MANAGING BOARD AND SUPERVISORY BOARD | 123 | ||||||||||||||||||||||||||||
5.6. | RISK MANAGEMENT AND CONTROL SYSTEMS | 123 | ||||||||||||||||||||||||||||
5.7. | REQUIRED INFORMATION ARTICLE 10 TAKEOVER DIRECTIVE | 123 | ||||||||||||||||||||||||||||
5.8. | SHARES WITHOUT VOTING RIGHTS AND SHARES WHICH DO NOT GIVE ANY OR ONLY A LIMITED | 125 | ||||||||||||||||||||||||||||
RIGHT TO SHARE IN THE PROFITS OR RESERVES | ||||||||||||||||||||||||||||||
5.9. | CODE OF CONDUCT | 125 | ||||||||||||||||||||||||||||
5.10. DEVIATIONS FROM THE DUTCH CORPORATE GOVERNANCE CODE | 126 | |||||||||||||||||||||||||||||
5.11. | MAJOR SHAREHOLDERS | 127 | ||||||||||||||||||||||||||||
5.12. | SHAREHOLDERS' AGREEMENTS | 129 | ||||||||||||||||||||||||||||
5.12.1. | STH Shareholders' Agreement | 129 | ||||||||||||||||||||||||||||
6. | DIVIDEND POLICY | 131 | ||||||||||||||||||||||||||||
7. | CONSOLIDATED FINANCIAL STATEMENTS | 133 | ||||||||||||||||||||||||||||
7.1. | CONSOLIDATED INCOME STATEMENT | 133 | ||||||||||||||||||||||||||||
7.2. | CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | 134 | ||||||||||||||||||||||||||||
7.3. | CONSOLIDATED STATEMENT OF FINANCIAL POSITION | 135 | ||||||||||||||||||||||||||||
7.4. | CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | 136 | ||||||||||||||||||||||||||||
7.5. | CONSOLIDATED STATEMENT OF CASH FLOWS | 138 | ||||||||||||||||||||||||||||
7.6. | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 139 | ||||||||||||||||||||||||||||
7.6.1. | Corporate information | 139 | ||||||||||||||||||||||||||||
7.6.2. | Basis of preparation | 139 | ||||||||||||||||||||||||||||
7.6.3. | Statement of compliance | 139 | ||||||||||||||||||||||||||||
7.6.4. | Basis of consolidation | 139 | ||||||||||||||||||||||||||||
7.6.5. | Changes in accounting policies | 140 | ||||||||||||||||||||||||||||
7.6.6. | Standards and amendments issued but not yet effective | 141 | ||||||||||||||||||||||||||||
7.6.7. | Summary of significant accounting policies | 141 | ||||||||||||||||||||||||||||
7.6.8. | Critical accounting estimates and judgments | 154 | ||||||||||||||||
7.6.9. | Investments in subsidiaries | 159 | ||||||||||||||||
7.6.10. | Property, plant and equipment | 160 | ||||||||||||||||
7.6.11. | Leases | 162 | ||||||||||||||||
7.6.12. | Intangible assets | 163 | ||||||||||||||||
7.6.13. | Goodwill | 164 | ||||||||||||||||
7.6.14. | Other financial assets and financial liabilities | 165 | ||||||||||||||||
7.6.15. | Other non-currentassets | 180 | ||||||||||||||||
7.6.16. | Inventories | 181 | ||||||||||||||||
7.6.17. | Trade accounts receivable | 181 | ||||||||||||||||
7.6.18. | Other receivables and assets | 183 | ||||||||||||||||
7.6.19. | Cash and cash equivalents | 183 | ||||||||||||||||
7.6.20. | Equity | 184 | ||||||||||||||||
7.6.21. | Other non-currentliabilities | 189 | ||||||||||||||||
7.6.22. | Employee benefits | 190 | ||||||||||||||||
7.6.23. | Trade accounts payable, other payables and accrued liabilities | 195 | ||||||||||||||||
7.6.24. | Significant categories of income | 195 | ||||||||||||||||
7.6.25. | Revenues | 196 | ||||||||||||||||
7.6.26. | Segment information | 198 | ||||||||||||||||
7.6.27. | Expenses by nature | 200 | ||||||||||||||||
7.6.28. | Other income / Other expenses | 201 | ||||||||||||||||
7.6.29. | Finance income / Finance costs | 202 | ||||||||||||||||
7.6.30. | Components of other comprehensive income | 203 | ||||||||||||||||
7.6.31. | Income tax | 203 | ||||||||||||||||
7.6.32. | Earnings per share | 208 | ||||||||||||||||
7.6.33. | Related party transactions | 208 | ||||||||||||||||
7.6.34. | Commitments, contingencies, claims and legal proceedings | 211 | ||||||||||||||||
7.6.35. | Financial risk management objectives and policies | 212 | ||||||||||||||||
7.6.36. | Subsequent events | 215 | ||||||||||||||||
8. | COMPANY'S FINANCIAL STATEMENTS | 216 | ||||||||||||||||
8.1. | COMPANY'S STATEMENT OF FINANCIAL POSITION | 216 | ||||||||||||||||
8.2. | COMPANY'S INCOME STATEMENT | 217 | ||||||||||||||||
8.3. | NOTES TO COMPANY'S FINANCIAL STATEMENTS | 217 | ||||||||||||||||
8.3.1. | General | 217 | ||||||||||||||||
8.3.2. | Basis of Presentation | 217 | ||||||||||||||||
8.3.3. | Summary of significant accounting policies | 217 | ||||||||||||||||
8.3.4. | Leases | 218 | ||||||||||||||||
8.3.5. | Intangible assets | 220 | ||||||||||||||||
8.3.6. | Investments in subsidiaries and goodwill | 220 | ||||||||||||||||
8.3.7. | Other financial assets and financial liabilities | 222 | ||||||||||||||||
8.3.8. | Short-termdeposits | 224 | ||||||||||||||||
8.3.9. | Cash | 225 | ||||||||||||||||
8.3.10. | Group companies interest-bearing short-termloans | 225 |
8.3.11. | Other Group companies receivables and payables | 225 | |||||||
8.3.12. | Equity | 227 | |||||||
8.3.13. | Other payables and accrued liabilities | 229 | |||||||
8.3.14. | Interest-bearingloans and borrowings | 229 | |||||||
8.3.15. | Other non-currentliabilities | 231 | |||||||
8.3.16. | Guarantees and contingencies | 232 | |||||||
8.3.17. | General and administrative expenses | 232 | |||||||
8.3.18. | Finance income and finance costs | 233 | |||||||
8.3.19. | Other income (expenses) | 233 | |||||||
8.3.20. | Contractual obligations | 234 | |||||||
8.3.21. | Related party transactions | 234 | |||||||
8.3.22. | Auditors' fees | 234 | |||||||
8.3.23. | Proposed cash dividend | 235 | |||||||
9. | OTHER INFORMATION | 236 | |||||||
9.1. | AUDITORS' REPORT | 236 | |||||||
9.2. | APPROPRIATION OF RESULTS - PROVISIONS IN COMPANY'S ARTICLES OF ASSOCIATION | 236 | |||||||
9.3. | BRANCHES | 236 | |||||||
10. | IMPORTANT DATES | 248 | |||||||
STMicroelectronics N.V.'s Annual Report over 2023 consists of a message from the President and Chief Executive Officer on the financial year 2023 (chapter 1), the management report (chapter 2 through chapter 5), the dividend policy (chapter 6), the financial information (chapter 7 through chapter 9) and important dates (chapter 10).
CERTAIN TERMS | |
ASIC | application-specific integrated circuit |
ASSP | application-specific standard product |
BCD | bipolar, CMOS and DMOS process technology |
Bi-CMOS | bipolar and CMOS process technology |
CMOS | complementary metal-on silicon oxide semiconductor |
DMOS | diffused metal-on silicon oxide semiconductor |
DRAM | dynamic random access memory |
EEPROM | electrically erasable programmable read-only memory |
EMAS | Eco-Management and Audit Scheme, the voluntary European |
Community scheme for companies performing industrial activities for | |
the evaluation and improvement of environmental performance | |
FD-SOI | fully depleted silicon-on-insulator |
GaN | gallium nitride |
IC | integrated circuit |
IFRS | International Financial Reporting Standards |
IP | intellectual property |
ISO | International Organization for Standardization |
MASK WORK | the two- or three-dimensional layout of an integrated circuit |
MEMS | micro-electro-mechanical system |
MOSFET | metal-on silicon oxide semiconductor field effect transistor |
NFC | near field communication |
OEM | original equipment manufacturer |
PFC | perfluorinated compounds |
RF | radio frequency |
RF-SOI | radio frequency silicon-on-insulator |
SAM | serviceable available market |
SiC | silicon carbide |
STi2GaN | intelligent integrated gallium nitride |
TAM | total available market |
VIPower | vertically integrated power |
1. Message from the President and Chief Executive Officer on the financial year 2023
Dear Shareholder,
2023 was another year of growth, driven by strong demand in Automotive and, to a lesser extent, Industrial, partially offset by lower revenues in Personal Electronics. This was reflected in our financial performance, with net revenues increasing 7.2% to $17.29 billion. We continued to strengthen our net financial position while increasing free cash flow and investing in the transformation of our manufacturing base. In this respect, 2023 was another year of steady execution in our manufacturing initiatives as we continued to transform our manufacturing base to enable future growth and drive enhanced profitability, with the expansion of our 300mm capacity and a strong focus on wide bandgap semiconductors.
2023: a year of continued strong demand in automotive
Our strategy is to be a broad-range supplier in the automotive and industrial markets and adopt a selective approach in personal electronics and computer peripherals. This strategy delivered strong results in 2023, with year-over-year revenue growth of 33.5% in automotive and 11.4% in industrial. Communications equipment, computer and peripherals revenue decreased 4.2% and personal electronics was down 25.1%, including the impact of a change in product mix in an engaged customer program. For the year, automotive and industrial combined represented 71% of total revenues, and personal electronics and communications equipment, computers and peripherals represented 29%.
In Automotive, we again saw strong demand across all geographies, driven by increasing semiconductor pervasion and structural transformation. The year was also positively impacted by inventory replenishment and a high level of capacity reservation fees. In 2023 we continued to execute our strategy supporting car electrification, in particular in our silicon carbide business, and car digitalization, supporting the shift to software-defined vehicle architectures and the pervasion of advanced driver assistance systems.
In Industrial, demand was still strong during most of the year, especially in power and energy, factory automation and robotics, and in industrial infrastructure. Toward the end of Q3 we saw a progressive weakening of demand, accelerating during Q4. Electrification and digitalization are the main trends driving semiconductor content increase here as well. During the year we had a strong focus on Edge AI, with updates on multiple hardware products including microcontrollers, microprocessors, and smart sensors as well as related software tools to empower developers.
In Personal Electronics and Computer Peripherals, market demand remained weak in 2023, while Communications Equipment demand remained solid in our focus areas.
In this environment, we delivered net revenues of $17.29 billion, up 7.2% from 2022, with a gross margin increasing from 45.5% to 45.9% and an operating margin decreasing from 28.1% to 26.7%. After investing $4.11 billion in net capital expenditures compared to $3.52 billion in 2022, our free cash flow increased to $1.77 billion compared to $1.59 billion in 2022. This was reflected in our net financial position of $3.16 billion compared to $1.80 billion one year earlier.
Long-term trends continue to underpin our strategy
In 2023 we continued to execute on our strategy, which stems from three long-term enablers: smart mobility, power and energy management, and cloud-connected autonomous things. These trends continue to drive our investments and roadmap decisions.
We are transforming our manufacturing base, with a significant expansion of our 300mm capacity and a strong focus on wide bandgap semiconductors. In Silicon Carbide, we continued to ramp our front-end device production in our Catania and Singapore facilities, and we increased back-end manufacturing capacity in our sites in Morocco and China. We also started production in our new integrated silicon carbide substrate manufacturing facility in
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Catania as a significant step in our silicon carbide vertical integration strategy. We furthermore announced a Joint Venture with Sanan Optoelectronics for high-volume 200mm SiC device manufacturing in China. These are important moves to further scale our global SiC manufacturing operations. We advanced also with our 300mm capacity expansion plans. In Agrate, Italy, our new 300mm wafer fab was qualified for production and capacity of slightly more than 1,000 wafers per week was installed as planned. In June we announced the conclusion of the three-party agreement for a new 300mm semiconductor manufacturing facility in Crolles among the State of France, GlobalFoundries, and our company, as approved by the European Commission. In 2024, we plan to invest about $2.5 billion in net capital expenditures.
These initiatives are aligned with our sustainability strategy and our sustainable manufacturing commitment in terms of energy consumption and greenhouse gas emissions, air, and water quality. We are on track to achieve our carbon neutrality goal on scope 1 & 2 and partially scope 3, and our 100% renewable energy goal by 2027. To further these goals we announced, in November, the signature of a fifteen-year Power Purchase Agreement for renewable energy for our operations in Italy with ERG, a leading European independent energy producer. We also continued to work closely with external bodies and to maintain our strong presence in the major sustainability indices.
We recently announced a new organization to deliver enhanced product development innovation and efficiency, time-to-market as well as customer focus by end market. ST will be re-organized into two Product Groups, split into four Reportable Segments and the existing sales and marketing organization will be complemented by a new application marketing organization focused by end markets across all Regions.
Focused on sustainable, profitable growth
Our value proposition remains based on sustainable and profitable growth, returning value to our shareholders in line with our objectives, providing differentiating enablers to our customers, and supporting them with an independent, reliable and secure supply chain. And we are committed to sustainability for the benefit of all our stakeholders.
Following several years of revenue growth and increased profitability, we see 2024 as a transition year. We are adapting our plans according to market dynamics while continuing to execute on our established strategy and operating model. We will continue to capture new opportunities, with our 50,000+ engaged employees working alongside our customers on innovations that make a positive impact on people's lives.
2. Corporate overview
In this annual report, references to "we", "us", "the Company", "our Company" and "ST" are to STMicroelectronics N.V., references to "ST Group Company" are to any of STMicroelectronics N.V.'s direct or indirect subsidiaries, and references to the "Group" are to STMicroelectronics N.V. and its direct and indirect subsidiaries.
Certain terms used in this annual report are defined in "Certain Terms".
2.1. History and development of STMicroelectronics
STMicroelectronics N.V. was formed and incorporated in 1987 as a result of the combination of the semiconductor business of SGS Microelettronica (then owned by Società Finanziaria Telefonica (S.T.E.T.), an Italian corporation) and the non-military business of Thomson Semiconducteurs (then owned by the former Thomson-CSF, now Thales, a French corporation). We completed our initial public offering in December 1994 with simultaneous listings on the Bourse de Paris (now known as "Euronext Paris") and the New York Stock Exchange. In 1998, we also listed our shares on the Borsa Italiana (the Italian stock exchange).
We operated as SGS-Thomson Microelectronics N.V. until May 1998, when we changed our name to STMicroelectronics N.V. We are organized under the laws of The Netherlands, with our corporate legal seat in Amsterdam, The Netherlands, and our head offices at WTC Schiphol Airport, Schiphol Boulevard 265, 1118 BH Schiphol, The Netherlands. Our telephone number there is +31-20-654-3210. Our headquarters and operational offices are managed through our wholly owned subsidiary, STMicroelectronics International N.V., and are located
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at 39 Chemin du Champ des Filles, 1228 Plan-les-Ouates, Geneva, Switzerland. Our main telephone number there is +41-22-929-2929. Our agent for service of process in the United States related to our registration under the U.S. Securities Exchange Act of 1934, as amended, is Corporation Service Company (CSC), 80 State Street, Albany, New York, 12207. Our operations are also conducted through our various ST Group Companies, which are organized and operated according to the laws of their country of incorporation, and consolidated by STMicroelectronics N.V.
2.2. Strategy & objectives
We have over 50,000 creators and makers of semiconductor technologies mastering the semiconductor supply chain with state-of-the-art manufacturing facilities. As an integrated device manufacturer, we work with more than 200,000 customers and thousands of partners to design and build products, solutions, and ecosystems that address their challenges and opportunities, and the need to support a more sustainable world. Our technologies enable smarter mobility, more efficient power and energy management, and the wide-scale deployment of cloud- connected autonomous things. We are committed to achieving our goal to become carbon neutral on scope 1 and scope 2 and partially on scope 3 by 2027.
Our strategy focuses on long-term value creation for the Company and its affiliated enterprises and takes into account the short-, medium- and longer-term evolution of the markets we serve and the environment and opportunities we see. It stems from key long-term enablers: Smart Mobility, where we provide innovative solutions to help car manufacturers make driving safer, greener and more connected; Power & Energy: our technology and solutions enable industries to increase energy efficiency and support the use of renewable energy and cloud- connected autonomous things; which transform our lives and the objects we use with smart, connected devices for personal, business and industrial applications.
We are focused on application areas which are expected to experience solid growth rates driven by broad, long- term trends in electronic systems. These trends require enablers such as autonomous systems, robotics, securely connected machines and personal devices, digitalization and electrification of automobiles and infrastructure, advanced communications equipment and networks and more power efficient systems. These enablers drive in turn the demand for the electronic components we develop and manufacture.
We are a global semiconductor company that designs, develops, manufactures and markets a broad range of products used in a wide variety of applications for the four end-markets we address: automotive, industrial, personal electronics and communications equipment, computers and peripherals. For the automotive and industrial markets we address a wide customer base, particularly in industrial, with a broad and deep product portfolio. In personal electronics and communications equipment, computers and peripherals we have a selective approach both in terms of the customers we serve, as well as in the technologies and products we offer, while leveraging our broad portfolio to address high-volume applications.
2.3. Organizational structure
We are organized in a matrix structure with geographic regions interacting with product lines, both supported by shared technology and manufacturing operations and by central functions, designed to enable us to be closer to our customers and to facilitate communication among the research and development ("R&D"), production, marketing and sales organizations.
While STMicroelectronics N.V. is our parent company, we conduct our global business through STMicroelectronics International N.V. and also conduct our operations through service activities from our subsidiaries. We provide certain administrative, human resources, legal, treasury, strategy, manufacturing, marketing, insurance and other overhead services to our consolidated subsidiaries pursuant to service agreements for which we recover the cost.
2.4. Products and activities
Our diverse product portfolio includes discrete and general purpose components, application-specific integrated circuits ("ASICs"), full-custom devices and semi-custom devices and application-specific standard products ("ASSPs") for analog, digital and mixed-signal applications. It benefits from a unique, strong foundation of proprietary and differentiated leading-edge technologies.
We use all of the prevalent function-oriented process technologies, including complementary metal-on silicon oxide semiconductors ("CMOS"), bipolar and non-volatile memory technologies. In addition, by combining basic
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STMicroelectronics NV published this content on 21 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 March 2024 23:10:12 UTC.