If you are considering buying or selling STMicroelectronics stock, there are several factors to consider before making your decision. STMicroelectronics is one of the world's major semiconductor manufacturers and provides innovative solutions for a variety of applications such as automotive, consumer electronics and industrial. However, before making a buy or sell decision, it is important to consider the company's financial performance, market trends, recent developments and the potential risks associated with investing in STMicroelectronics shares.
First of all, it should be remembered that the STMicroelectronics group operates in a particularly cyclical sector. The company's activities are therefore highly dependent on the health of the automotive, IT and industrial sectors, as well as on products for the general public, which are the group's main targets and whose needs vary to a greater or lesser extent depending on the period.
We also know that the level of volatility of this stock is directly linked to the figures on world semiconductor stocks. The stock also reacts strongly to announcements and publications by its main competitors, notably Intel and AMD, and generally to all news about mergers in this sector.
STMicroelectronics' stock is also dependent on the euro/dollar exchange rate given the international nature of its sales and its European production.
Naturally, the annual publication of the Group's results and their compliance with the objectives set beforehand, particularly with regard to investments, invoicing and gross margin, will also be monitored with the utmost attention.
Finally, we will of course keep an eye on the competition in this sector and in particular on Chinese companies with the evolution of the market shares of each of the major players in this field.
In order to lay the groundwork for our analysis of STMicroelectronics shares, we will first take a closer look at the company and its activities. Indeed, a good knowledge of the products and services offered by this group will enable you to better understand its current economic environment.
The STMicroelectronics group is a French company specializing in the field of electronics, and more specifically in semiconductors. It is also known that this group is currently one of the leaders of this market in the world.
Customers using the group's products include manufacturers of sensing and power products, components for the automotive industry and embedded processing and solutions. The group's products can be found in many industries and in our daily lives with energy management and conservation, data privacy and security, health and wellness, smart consumer devices and many others.
Among the products offered by this group are: Circuits for video encoders and decoders, circuits for mobile phones, circuits for wireless applications, circuits for computer peripherals such as for hard disks or printers, circuits for automotive, microcontrollers, non-volatile memories such as EEPROM or Flash memories or analog or power circuits.
As regards the organization of the group, it is divided into four distinct divisions with the product groups, the sales forces which are organized into 4 regions, the chip manufacturing and assembly units and the research and development division.
STMicroelectronics' share price is currently listed on the French market of Euronext Paris. Its share price is also included in the calculation of the European Euronext 100 index.
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Now that you are familiar with the industry in which the STMicroelectronics group operates, we suggest you take a closer look at its competitive environment. Although STMicroelectronics is one of the world's leading semiconductor companies, it is not the only one in this field, and you should therefore be aware of the main rivals it faces. Here is a quick overview of the main companies in this sector.
First of all, the leader of this field of activity is undoubtedly the Intel Corporation group which is an American company specialized in the manufacture and marketing of semiconductors since 1968. The Intel group manufactures microprocessors and was the first company to create this product with the x86 microprocessor. It also manufactures motherboards, flash memory and graphics processors. The Intel Group is also listed on the Nasdaq market and has a market capitalization of over $254 billion in 2018.
Of course, you will also have to take into account the competition from the Korean group Samsung Electronics, which is a company specialized in the production of electronic products. It is also a subsidiary of the Samsung Group. This group is large as it employs over 308,745 people worldwide and is currently the 13th largest company in the world according to a Forbes Global ranking. With a turnover of more than 200 billion dollars, it is the second largest company in the world in the high-tech sector just after the Apple group but before IBM or Microsoft. Although the company has recently shifted its focus to consumer electronics, it has long been a leading manufacturer of electronic components for industries such as lithium-ion batteries, semiconductors, integrated circuits, flash memories and hard drives, with Apple, Sony, HTC and Nokia as its main customers.
The third serious competitor to STMicroelectronics is Taiwan Semiconductor Manufacturing Company or TSCM, which is currently one of the largest semiconductor foundries in the world. The company was established in 1987 and is currently based in Hsinchu, Taiwan. Among other things, it produces graphics chips for the NVidia and ATI brands, which became AMD in 2010.
Still among the main competitors of the group we also find the American group Qualcomm which is specialized in the field of the mobile technology and which proposes in particular of the design and installation of solutions of communications. More precisely, Qualcomm has become over time one of the first companies in the world to offer the design and marketing of processors for mobile phones. But that's not all
Finally, the last competitor of STMicroelectronics that you should consider when analyzing this stock is the Broadcom Corporation group, which is more commonly known as Broadcom and is listed on the Nasdaq. It is an American company operating in the field of electronics industry and which develops mainly semiconductors which are then used in various telecommunications equipment.
In 2010, the Japanese electronics group Sharp created the 3Sun joint venture in the field of solar panel manufacturing. For this purpose, it joined forces with the Italian electricity producer Enel and the Franco-Italian semiconductor manufacturer STMicroelectronics.
In 2012, STMicroelectronics and Ericsson signed a partnership for the development of future application processors. According to the contract set up, STMicroelectronics absorbs Ericsson's R&D activities regarding the development of application processors, and then resells its technology under license to Ericsson.
Following its collaboration agreement with Volkswagen Group's Audi in 2012, Italian company STMicroelectronics also became a partner of Hyundai in 2013. This strengthened its position in the automotive market, which is one of its main areas of development worldwide.
STMicroelectronics could also be collaborating with Apple on image sensors for the Cupertino-based company's future devices by the end of 2017. A clean room has been set up at the company's new premises in Grenoble, France, to create imaging systems for mobile phones based on technology designed by STM.
First of all, the STMicroelectronics group has a real advantage in terms of its market positioning. Indeed, the company is currently one of the ten largest companies in the sector of semiconductor manufacturing for telecoms, consumer electronics and robotics in Europe.
Shareholders and investors interested in this stock also appreciate the group's industrial organization. This is mainly oriented towards offers concerning the Internet of Things and connected pipes, two sectors that are currently booming. More precisely, the group has been able to divide its activities and revenues into three main areas, which are firstly analogue and digital systems, integrated digital circuits or MDGs and Mems. By operating in this way and thanks to this division, the group can benefit from a better protection against the risk of exposure to a single sector of activity.
STMicroelectronics' strong capacity for innovation can also be appreciated, as it remains one of the pioneering companies in its sector. The group invests heavily in R&D to develop high-tech products, particularly in the field of microcontrollers and power electronics. It is also the company with the largest patent portfolio in its sector.
To ensure its future development, STMicroelectronics has also implemented a strategy of frequent acquisitions, enabling it to strengthen its position in certain privileged sectors such as the Internet of Things and next-generation mobile phones. Thanks to these strategic acquisitions, the group has won very lucrative contracts with major groups such as Apple for image capture and SpaceX for space components.
The analysts who study this value also recall that the company has been able to put an end to the decline in revenue that was recorded for a few years, especially) because of the saturation of the smartphone and computer market. Since 2016, the group's profits and revenues have in fact been experiencing an interesting rebound with an expectation of growth at least until 2019.
To conclude with the advantages of this company, it should also be noted that the overall financial situation of the STMicroelectronics Group is particularly healthy and stable.
Firstly, it is known that the integrated circuit business for the mobile phone market has become increasingly competitive in recent years. As a result of this increased competition, the STMicroelectronics group is under significant pressure on its prices and must therefore adapt to an increasingly aggressive market.
Among the most dangerous competitors for the future of the group, we note of course the competition from China. Indeed, this country plans to increase its semiconductor sales volume by a factor of 5 by 2020. It goes without saying that this low-cost competition represents a real threat to the activities of the French company.
One of the group's greatest weaknesses is the fact that its profitability is still lower than that of other major companies in the sector. This lack of profitability is largely the result of higher production costs than those of its main competitors, since most of the group's production is still carried out in Europe, where production and labour costs remain relatively high.
Finally, it should be noted that STMicroelectronics is a stock considered relatively expensive by analysts, which can lead to a significant downward correction more or less quickly and exposes the stock to a significant risk of sanction on the charts at the slightest doubt.
As you can see, while the flaws in this company are few and far between, they are still something to watch closely before taking a position.
The group's research and development is responsible for developing new semiconductor manufacturing processes and design methods. Each of the Group's divisions has its own R&D branch for product design and industrialization, and application development that builds on central R&D. In total, STMicroelectronics has 16 advanced R&D units and 39 design and application centers.
While the STMicroelectronics Group is incorporated in the Netherlands, its administrative management is largely based in Geneva, Switzerland, as is its operational management and EMEA. The Group's US headquarters are located near Dallas, Texas, while the Asia Pacific headquarters are in Singapore and the Japan headquarters are in Tokyo. The group has also established a headquarters in China in Shanghai, which also includes Taiwan and Hong Kong.
Following the merger of SGS and Thomson Semiconducteurs, the French and Italian shareholders managed to maintain a balance. In December 1994, the company was listed on the stock exchange, first on the Paris market, then on the NYSE in New York and finally a year later on the Milan market. It should be remembered that the group's capital is held by STMicroelectronics NV.
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