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

1.

MESSAGE FROM THE PRESIDENT AND CHIEF EXECUTIVE OFFICER ON THE FINANCIAL YEAR 2023

4

2.

CORPORATE OVERVIEW

5

2.1.

HISTORY AND DEVELOPMENT OF STMICROELECTRONICS

5

2.2.

STRATEGY & OBJECTIVES

6

2.3.

ORGANIZATIONAL STRUCTURE

6

2.4.

PRODUCTS AND ACTIVITIES

6

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

4

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

5

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

6

Attachments

  • Original Link
  • Original Document
  • Permalink

Disclaimer

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 23:10:11 UTC.