Ladies and gentlemen, welcome to the STMicroelectronics Q2 2020 Earnings Results Conference Call and live webcast. I am Alessandro, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A Session. [Operator Instructions] At this time, it’s my pleasure to hand over to Celine Berthier, Group Vice President, Head of Investor Relations. Please go ahead.

Thank you Alessandro. Good morning. Good morning to everyone. Thank you for joining our second quarter 2020 financial results conference call. Hosting the call today is Jean-Marc Chery, ST President and Chief Executive Officer. Joining Jean-Marc on the call today are Lorenzo Grandi, President 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 Relation website. A replay will be available shortly after the conclusion of this call. This call will include forward-looking statements that involve risk factors that could cause ST's results to differ materially from management's expectations and plans. We encourage you to review the Safe Harbor statement contained in the press release that was issued with the results this morning and also in ST's most recent regulatory filings for a full description of these risk factors. Also, to ensure all participants have an opportunity to ask questions during the Q&A session, please limit yourself to one question and a brief follow-up. I'd now like to turn the call over to Jean-Marc, ST's President and CEO. Jean-Marc Chery: Thank you, Celine. Good morning and thank you for joining ST on our second quarter 2020 earnings conference call. I trust that you, your families, and your colleagues are staying safe and healthy. Especially those localize in most infected regions. Now, to ST results and plans for the rest of the year, let me begin with some opening comments. Starting with Q2. During the quarter, we returned to normal operations, supporting our customers’ demand, and continuing to ensure the health and safety of our employees. Net revenues were $2.09 billion, down 6.5% on a sequential basis. As expected, this was due to a decline in Automotive, Analog and Imaging products, partially offset by growth in Microcontrollers, Digital and Power Discrete. Gross margin, at 35%, included 310 basis points of unsaturation charges. Our operating margin was 5.1% and our net income was $90 million. For the first half of 2020, net revenues grew 1.6% year-over-year to $4.32 billion, driven by higher sales in Analog, Imaging and Microcontrollers, partially offset by lower sales in Automotive and Power Discrete. Our operating margin was 7.8% for H1 2020 and our net income was $282 million. Looking at Q3 2020, at the midpoint of our guidance, we expect net revenues in the third quarter to be about $2.45 billion representing sequential growth of about 17.4%. Gross margin is expected to be about 36% at the midpoint and it includes about 200 basis points of unsaturation charges. For the full year 2020, we will drive the Company based on an updated plan for full year 2020 net revenues in the range of about $9.25 billion to $9.65 billion with growth in the second half over the first half to be in the range of $610 million to $1.01 billion. We expect this growth to be driven by engaged customer programs, new products and improved market conditions. Our CapEx plan for 2020 is now about $1.2 billion. For H1 2020, we invested $578 million. Now, let’s move to a detailed financial review of the second quarter. The quarter was impacted by the weak demand environments, especially in Automotive, as well as the operational and logistics challenges due to the governmental regulations related to the COVID-19 outbreak that started in Q1 2020. Net revenues decreased 4% year-over-year with lower sales in Imaging, Automotive and MEMS, partially offset by higher sales in microcontrollers, digital, analog and power discrete. Year-over-year sales to distribution increased 9.7% and sales to OEMs decreased 9.7%. On a sequential basis, net revenue decreased 6.5%, 380 basis points better than the midpoint of the guidance we gave at the end of April. By product group revenue increased sequentially for MDG, while ADG and AMS decreased. Our gross profit was $730 million, decreasing 12.2% year-over-year. Gross margin was 35%, decreasing 320 basis points year-over-year mainly due to unsaturation charges including the impact of COVID-19 workforce-related restrictions and participation. More specifically, unsaturation charges were 310 basis points. Our second quarter margin was 40 basis points higher than the midpoint of our guidance as unsaturation charges were better than expected. Moving on to net operating expenses. As we outlined last quarter, we are maintaining strict discipline on expense control, while protecting our energy, sales and marketing problems and transformation initiatives. Net operating expenses at $620 million were below what we anticipated when entering the quarter. Our second quarter operating margin was 5.1%, decreasing by 390 basis points on a year-over-year basis both ADG and AMS operating margins decreased, while MDG’s operating margin improved. Our net income decreased to $90 million and EPS to $0.10, compared to $167 million and $0.18 respectively a year ago. Turning now to the revenue performance of the product groups on a year-over-year basis. ADG revenues decreased 17.8% on weaker demand in legacy Automotive, while Power Discrete grew. AMS revenues decreased 10.1% with MEMS and Imaging lower while Analog sales were higher. MDG revenues increased 24.1% reflecting strong growth in microcontrollers. In terms of operating margin by product group on a year-over-year basis, MDG operating margin increased to 15.9% from 7.6%, while ADG operating margin decreased to 2.3% from 8.2%; and AMS operating margin decreased to 9% from 10.7%. Net cash from operating activities increased 19.4% to $387 million in Q2, compared to $324 million in the year-ago period. Free cash flow was a positive $28 million, including CapEx of $312 million, compared to a negative $67 million in the year-ago quarter. During Q2, we paid cash dividends totaling $37 million and executed a $63 million share buyback as start of the company’s previously announced share repurchase program. Moving now to our business and end-markets review, let me start with the comments. During the second quarter, we returned to normal operations, supporting our customers’ demand and continuing to ensure the health and safety of our employees. These have been our priorities since the start of the pandemic. In preparation for the return of all our employees to our sites worldwide, we put in place very strict safety protocols. Today we are back to full operation of our manufacturing activities worldwide. Our non-manufacturing employees located in areas still under specific restrictions are progressively returning to our offices in line with local regulations. Our back to site plan, coupled with the engagement of our employees enable us to keep all our committed programs on track and to maintain a high level of customer interactions. So, let’s now discuss the markets and business dynamics. The Automotive market was hit by closures as car makers and Tier 1s at different times across the globe. First, China in Q1, followed later by Europe and the U.S. Q2 is considered to be the bottom and the market was worse than expected. With lockdowns extended in some regions, China confirmed a recovery, partially compensating for the worst situation in Europe and in U.S. We have started to see benefits from Automotive incentives in France from June and South Korea for the full year, supporting the anticipated recovery in Q3 and Q4. The legacy Automotive market is clearly suffering amplified by the pandemic situation. We did not see and do not see any substantial slowdown of customer activity as far as the long-term megatrends and ST strategic growth drivers in smart mobility are concerned. Electrification and digitalization. In car electrification, we had again a number of new design wins for silicon carbide MOSFETs - in a traction inverter and in an on-board charger and DC/DC converter for electric vehicles. We are also seeing opportunities for silicon carbide in electrical vehicles beyond these areas. An example is climate compressors, where the characteristics of Silicon Carbide allow it to address the efficiency and size challenges in this specific application. Beyond cars, we also had an important design win for a battery management system for e-bikes, a real growing area. Overall, our Silicon Carbide engagement with customers has increased during the quarter. There was no slowdown in already awarded projects and, as of today, we are engaged with 58 customers in 64 ongoing programs. These programs are split around 50/50 between Automotive customers and Industrial customers. Moving to car digitalization, where we are focused on technologies and solutions for driver assistance and autonomous driving, V2X communications, and embedded processing solutions supporting new car architectures. During Q2, we saw a continuous flow of awards for our 28 nanometer Phase Change Memory microcontrollers, Stellar driven by the evolution of car architectures. On ADAS, we saw a strong level 2 and level 3 adoption in mid and entry-level cars. We expect that during 2021 one-third of cars produced will have a vision-based system using ST technology. We are also growing our share in automotive microcontrollers, including those for 77GHz radar applications. During the quarter, we also won sockets for our Global Shutter Automotive Imaging Solution for driver monitoring systems from two major OEMs. And this is an important step in our diversification strategy related to optical sensing solutions. Moving now to Industrial. The dynamics of the industrial market remain mixed. Some applications like home appliances and lighting are still weak, but during the quarter, we started to see some positive signs in key application areas for ST, such as renewable energy and factory automation. Distribution is an important element of our go-to-market strategy in Industrial. Here, the overall situation in the channel has improved. In Asia, and mainly in China, Point-of-Sales trends were strong sequentially and now also up year-over-year, with a healthy level of inventory in our distribution channel especially for microcontrollers and MEMS. From April, we also started to see positive signs for Analog and Power and Discrete. America and Europe are still weak. Point-of-sales on a year-over-year basis is not improving and inventory levels are still somewhat high in general purpose analog and industrial power conversion. We address the industrial markets with our general purpose and secure microcontrollers, analog and sensors, power and energy management solutions. One of our objectives in Industrial is leadership in embedded processing solutions. We recently made two acquisitions to further strengthen the wireless connectivity capabilities of our STM32 microcontroller family. These acquisitions cover, Narrow Band Cellular and Ultra-wide band wireless technology from Riot Micro and BeSpoon. These technologies are key wireless connectivity solutions that will enable a new wave of IoT connected objects and innovative applications, especially in Industrial. They complement our existing wireless connectivity offering. We have now shipped over six billion parts from our STM32 family. In parallel, we are continuously strengthening our offer in terms of hardware, software and ecosystem. Some examples from the quarter include the launch of the STM32 Digital Power Ecosystem for power supply control, tools from partners that complement our Artificial Intelligence capabilities, and software packages that simplify development of safety-critical products. Another strategic objective is to accelerate our growth in analog and sensors for industrial. In Q2, we won several new designs with our analog products for industrial applications. For example, we received awards for motor drivers and smart power products from industrial equipment, lighting, and home appliance makers, as well as metering customers. And in industrial sensors, our new industrial grade inclinometer was adopted by multiple large customers. We are targeting expansion in industrial power and energy management. And, with our power discrete products for industrial applications, we landed design wins for High Voltage MOSFETs in power supplies, solar, lighting, adapters and home appliances. We also captured several awards with Silicon Carbide, IGBT and Intelligent Power Modules for motor control, charging stations and renewable energy. We also had design wins with our power management IC combined with an STM32 standard microprocessor. Moving now to the Personal Electronics market, despite the slowdown in consumer demand for smartphones during the quarter, we saw increasing demand for anything related to accessories, wearables, gaming, and continued innovation-driven semiconductor demand for smartphones. We serve this market with our sensors, secure solutions, power management, analog and Front-End Modules. We lead in a number of very specific high-volume smartphone applications, as well as in wearables such as smart watches, True Wireless Stereo hearables, and gaming devices. We also aim at capturing opportunities in 5G with RF mixed signals. During the quarter, we won numerous new designs and ramped production of our products in flagship devices including an increasing number of 5G models. Some examples of our products include: motion sensors, Time of Flight ranging sensors, secure solutions such as eSIM and secure elements with NFC, touch display, and wireless charging products. We ramped production of our new multi-pixel /direct time-of-flight sensor for world-facing camera applications in a new flagship device for a global smartphone leader. In Communications Equipment and Computer Peripherals, during Q2, we saw solid market demand for hard-disk drives for servers, as well as continued demand for 5G-related products. Our strategic approach to this end-market is focused on cellular and satellite communication. We were awarded a design based on ST proprietary technologies for a processor for a satellite application, as well as several RF projects for telecommunications infrastructure. Now, let’s move to a discussion of the third quarter and brief comments on the full year of 2020. For the third quarter, we expect net revenues to be about $2.45 billion. This sequential growth of about 17.4% will be driven by engaged customer programs, new products and improved market conditions. Gross margin is expected to be about 36.0% at the midpoint and includes unsaturation charges of about 200 basis points fully related to demand. For the full year, I outlined earlier our sales and operating plan to drive ST to 2020 net revenues now in the range of about $9.25 billion to $9.65 billion and for growth in H2 over H1 between $610 million and $1.01 billion. This plan reflects an improvement compared to the previous range of $8.8 billion to $9.5 billion we expected entering Q2. Our CapEx plan for 2020 is now about $1.2 billion. Before concluding, I would like to share with you our updated plans and timeline for our Capital Markets Day. Due to the ongoing pandemic, we will be conducting a Virtual Capital Markets Day, as it is not prudent to host a physical event and we are aware that some of you are not yet in a condition to travel. With this decision, we decided to break the event into four separate modules: three of them covering ST’s product group strategy and roadmap, the fourth one focused on the overall company strategy, including our financial model. The preliminary schedule is as follows: MDG, September 15th; ADG, November 6th; AMS, November 20; and overall Strategic Update, December 9th. To conclude, I would like to reinforce two key points. First, while we continue to ensure the ongoing health and safety of all our employees in response to the global pandemic, during last quarter we have returned to normal operations. Our Q2 results along with our Q3 guidance are a clear reflection of that. Second, ST fundamentals are solid. The strategic decisions which we made years ago have enabled us to successfully serve secular, growing market trends addressing key societal needs. We work alongside our customers both for the short and the long-term. We are determined to continue to make ST stronger, by consistently executing our strategy, quarter after quarter, with a clear sales and operating plan. Thank you. And we are now ready to answer your questions.

[Operator Instructions] The first comes from Achal Sultania from Credit Suisse. Please go ahead.

Hi, good morning. Maybe can you provide some color on the inventory side. I guess, you are still running at a very high inventory on your own books. I think last quarter, you mentioned that you have a plan to get it down to about 100 days by the end of this year. So, are we still looking to achieve that target by the end of 2020? And secondly on this Huawei impact, like, just want to understand how much of that Huawei impact is in your guidance for the second half of this year? Or is it something that you still assessing how that situation unfolds? And at this point it’s very difficult for you to assume some of that impacting your second half guidance? Thank you Jean-Marc Chery: Thank you. So, Lorenzo will answer the first question and I will answer the second one.

Good morning to everybody. It’s Lorenzo speaking. Thank you for the question. During the second quarter, actually our inventory increased during the second quarter for sure one of our priorities was let’s say, better to manufacturing of our people and indeed, we ran a little bit better than expected. As you know, our saturation charges came lower than what was our original expectation entering the quarter. So, at the end, the inventory, at the end of the second quarter was in the range of 129 days of inventory. In the second half of the year, we will continue to monitor our inventory and indeed, with the level of unsaturation in the second part of the year, we will continue to be presented with around 200 basis points both in Q3 and in Q4. And I do expect, let’s say that in Q3, our level of inventory and the number days will go down in a range of between 115 and 120 days. And I do expect that for Q4 to go back to the level that I was mentioning already during the first quarter and already is the range of 95 to 100 days. Jean-Marc Chery: Thank you, Lorenzo. So, about Huawei, I would like to highlight again that we address this customer following our strategy of selective approach on Personal Electronics and communication infrastructure. Okay, the products that we sell them are all within our strategy clearly and among the products that we ship to them, there are custom solutions, application-specifics on our products and general purpose products. But clearly, again, we acknowledge at the May 15, 2020 announcement by the U.S. Bureau of Industry and Security. ST will simply comply with the laws and applicable regulation as we continue to support our customers. We have no impact in Q2. We do not have any impact in Q3. And we will have some impact in Q4, which is already embedded in the indication we have given for the full year 2020 plan. I hope it answer your questions.

Yes. Thanks a lot Marc. Good luck.

The next question comes from Andrew Gardiner from Barclays. Please go ahead.

Hi, good morning, gentlemen. Thanks for taking the question. I just had one high-level one sort of regarding your level of visibility at the moment and if we could perhaps contrast it to this time three months ago, at that time, back in April, you talked about pushing back on your customers in terms of sort of scrubbing the orders, scrubbing the backlog to make sure it was reasonable given the kind of end-demand that we’re all seeing. How do you feel about that at the moment? Is the order book, are those good orders? Are you worried about double ordering? There has been some talk about inventory being built by one of your closest peers within the supply chain given shares over further disruption due to the pandemic. How can you – give a little bit more detail in terms of the level of visibility you have into the back half at this point. Thank you. Jean-Marc Chery: So, I will take it and Marco Cassis will complement. Yes, okay, we confirm the situation until in Q3 is completely deferred the one I am telling in Q2. In Q2, our – let’s say book-to-bill ratio has been well below because impacted by the collection too much even. And collection, okay, we have delivered, okay, yes, okay, we confirm that we have taken initiatives entering in Q2, okay, to discuss very closely with our customers, so the Tier-1 and really to clean the backlog and to align the backlog, okay, with the consumption of products they have from consignment stock. So, until in Q3, the backlog is cleaner for all of the verticals we address. So, Automotive, Industrial, Personal Electronics and Communication Infrastructure and Computer Peripherals. Saying that, okay, we have solid visibility of the backlog in Q3. Again, I made some comments about the U.S., okay going sequentially and now on a year-over-year. Yes, okay, we see Europe and America are still weak, but all the data points, the usual data points we have in our hand which are again, the backlog, the POS, okay, really clean. Inventory level and distribution in Asia is clean, okay, there is no over inventory. We start also some signs positive on Analog and on Power and Discrete on top of microcontroller and MEMS. So, we are very confident, okay in the visibility we have. That okay. Okay, top ten customers are important part of our business. Here, okay, we have very close intimacy on the supply chain and we have the adequate visibility altogether between the backlog and the customer intimacy, okay, make us confidence on the guidance we provided for Q3.

Yes, Marc. And let me just add a little bit of information in April. Our sales and operating plans based on the visibility for the full year of some of the markets we serve that was going to be between minus 5% and minus 13%. Now we have updated and upgraded our view for some that would be between minus 5% to minus 7%, in line with all the indicators that we are getting from our customers and the evolution as Jean-Mar has already said of our POS and POP for distribution. Again, distribution is key, because one market that we are focusing on in our strategy is clearly the industrial market and this market is extremely fragmented. So, the performance of the distribution channel there is a very good indicator of how things are evolving. We are in that – application that are offering like we say like lighting and home appliances but we saw good improvement and recall like having from other applications are extremely important like renewable energy and factory automation – sorry. So, there again, China is leading the back, because as you know very well in terms of timing, China was in first. So the main impact in Q2, in Q2 – in Q1, sorry. Q2 is a very good recovery, sequentially strong and also year-over-year in terms of U.S. And again, underline that the stock level is certainly under control.

Thank you, Jean-Marc. Thank you, Marco.

The next question comes from Matt Ramsay from Cowen. Please go ahead.

Yes. Good morning. Thank you very much. I wanted to dig into the ADG business a bit, because there has been some moving parts in the last couple of quarters with the manufacturing challenges in Discrete in Q1 and then maybe those recovering in the second quarter with the auto business being down pretty dramatically in Q2. Maybe you could break that business down a little bit and let us know what your expectations are for those two segments of that piece of the business into the third quarter? And then if you have any comments, I think Texas Instruments talked about the other night, the month of May in particular being the bottom for their Automotive business that they saw down I think 40% in the quarter. Are you seeing those same trends? Thank you. Jean-Marc Chery: Maybe I start answer again and Marco will complement. It is clear that in Q2 for ADG, we have – let’s say, different dynamics. First, Power Discrete recovered very, very strongly just because of the free of the supply chain constraints related to the – let’s say level of flow in the value split where we have been impacted and the main one was the closure of Shenzhen definitively and limited workforce attendance in Muar [Indiscernible] impacted strongly Q1. Q2 actually of, let’s say this shortage of capacity linked with the COVID-19. So, overall, okay, Power Discrete recovered strongly in Q2 with the supply chain coming back to normal operations. But, then again, inside Power Discrete, we have – let’s say, you know that now we are very wider portfolio, okay, from a high voltage power modes, low voltage power modes, IGBT, silicon carbide and MOSFETs and okay, some discrete, okay, and discrete, we have, okay, some let’s say integrated passive and active device as we are seeing the part on the different electronics. But all this mix of products the dynamic was very positive and for various reason that silicon carbide, I guess, you know is because of electrification of the car IGBT, as well. Low voltage power modes as well for 48 volts application. So makes, okay, Power Discrete, okay, really strong in Q2 versus Q1 and this dynamic, okay, will continue in Q3. Automotive, for ST what was running well is ADAS, with the partnership we have with Mobileye, okay, which really show, let’s say very good in Q2 and we continue in Q3. What we get you to is purely get you to what it means application-specific ICs, okay, analog or let’s say microcontroller for legacy automotive, definitively, okay, Q2 has been, let’s say a very challenging quarter. We took initiatives as I have said to push our customer to clean their portfolio in order to be sure that in Q2 we will not build at the level of inventories and our inventory in consignment stock. Well, and as a matter of results, we have a very strong which is in legacy automotive Q2 over Q1 both 20%. Now what we have seen in terms of dynamic late June and early June, okay, the low rate of consumption from the consignment stock, okay, starting to rise up. And in Q3 I can confirm to you that including the legacy automotive, we will see a growth sequentially means, we confirm and I confirm in my address that we are convinced that Q2 is a bottom, okay, of legacy automotive and we will start to see, okay, market recovery Q3 and most likely acceleration as – because, you know that generally speaking, okay, and mainly in Europe, okay, the car maker and the Tier-1 are closing for vacation – and we will certainly see, an acceleration in September and Q4 as well. So, this is the color I can give to you and the Marco can complement it.

Yes. I will just complement with some extra datapoints. As you have underlined, clearly, during Q2 the automotive market was mainly into part of next month. But again this was linked with the closures of car makers and Tier-1. So, mechanically it was impossible to have production and also the demand was around – mobility of people was extremely low. It is also true as - during Q2 we saw different dynamics in China. China went out of the coronavirus situation during Q1 and in Q2, as you know met well the demand in terms of cars in China has rebounded more or less with this. so, again, Q2 due to these dynamics is surely the bottom and from Q3 as Jean-Marc say, we’ll start seeing a recovery. Let me underline also that we expect to see benefits coming from the incentives that the various governments are putting in place. For example in France and in South Korea, and important to underline another point is that we don’t see any substantial slowdown of the customers’ activities for what is relative with our longer market trends and what is for the strategic growth drivers in smart mobility, which are related to electrification and digitalization. So and again, Q2 was the bottom and from Q3, we start seeing a recovery.

Thank you very much gentlemen for the detail. Appreciate it.

The next question comes from Janardan Menon from Liberum. Please go ahead.

Hi. Good morning. Thanks for taking my question. I just wanted to examine the medium-term target of $12 billion of revenue that you had talked about previously and given the stronger than expected trend that you are currently seeing through the second half of the year, what your thoughts are on that right now? Can we assume that you still have a fairly unchanged time horizon for meeting that compared to your previous call including your Capital Markets Day last year or has there been any shift in it? I think you had referred to a possibility of meeting that on an annualized runrate basis by the second half of 2021, will that be still a possibility? And secondly, on your general purpose microcontroller business, the MDG revenue has grown at 24.1% and I would assume that a lot of that is from the general purpose microcontrollers. So, clearly, that is doing at least, close to the mid-20s of growth rate. Is that a market growth rate in your estimation? How much of that would be market share gains? And where – what kind of applications do you think is driving this most predominantly? Jean-Marc Chery: So, I will answer the first question and turn Lorenzo and Marco will complement. About the $12 billion, it is clearly over target, management target, okay, of our next three year sales and operating plan, we are working on because this is exercise we rework and update every year. What’s the timing? When it will be achieved inside this year, I guess, okay, you will share with me that in this year a bit some assessment and analysis to let’s say better under terms implications of the legacy automotive markets and when the production of light vehicle will come back to the 2019 level and as well, to a distance, the implication related to the USA, China trade war. But again, I confirm, yes, $12 billion will be achieved within the next three years. About micro portfolio, well, clearly, microcontroller growth is not only general purpose, it’s also secure microcontrollers bodes with embedded Sim and secured solution with NFC. If microcontroller, which is as well bodes 52 bit and 8 bit and also, I would like to highlight and again recall you, because this is something we share with you during the various communication we have altogether that last year we introduced ten new products. And from, let’s say, with high, low power our microcontroller well suitable for IoT kind of consumer applications and high performance, let’s say microcontrollers well suitable for industrial applications. On top of that, okay, we are continuously improving the ecosystem around the microcontrollers. So, between new products in production, let’s say, the ecosystem, our supply chain, okay, because also microcontrollers are using 50/50, okay, internal manufacturing facility and external, let’s say well known important fully, our supply chain has been very strong also during this period. So, it appears that ourselves, we never closed any wafer Fab and our partner or foundry never closed any wafer Fab. We have been successful to manage as well as – and our internal as probably indexed. So, all in all, this is the reason why we are growing on microcontrollers which is, let’s say the add-on of new products in production. Inventory clean at distribution channel. Very good recovery in 8 bit and very strong supply chain, which grew through this pandemic on bright challenges without any disruption. So this is all enablers making ourselves growing at this level and this is our leadership position. So maybe Marco you want to add something?

Yes, just to reply straight to one of your points, yes, we have gained market share. And in our microcontrollers and this is as Jean-Marc was saying, mainly linked with the fact that we are transforming the funnel of opportunities that we had during the last year with the new family of microcontrollers and we are leveraging on our leadership position in microcontrollers, which means our reach of customers, more customers, big customers through the distribution channel it’s clearly helping us to gain ground in the microcontroller domain.

Understood. Thank you very much.

The next question comes from Jerome Ramel from Exane BNP Paribas. Please go ahead.

Yes. Good morning. Two quick ones. The first one, how should we model the OpEx for the coming quarters? And second question Jean-Marc you mentioned tangle flight for wall safety. Could you elaborate a little bit? You bring in the timing of this ramp up, is it direct or indirect Time of Flight? Yes, thank you. Jean-Marc Chery: Yes. Thank you, Ramel. So, Lorenzo will take the first question. I will take the second.

Sure. I will take expenses and how to model the expenses. For next quarter and following the one that because, at the end, at this stage you will see that, on Q2, our expenses and when I talk about expenses, I always include also the line other income and expenses. Overall, so, net expenses came at $620 million. The $620 million was a little bit better than the expectation entering the quarter, if you remember and this was mainly driven by the fact that of course, the lockdown plays a little bit in favor on lower expenses with significantly battery and paneling and strong reduction also in discretionary expenses. Moving inside with the third quarter, my expectation is that the expenses will be more in a range that is our average range – quarterly average range for the year that I still confirming in the range of 635 to 645 per quarter. So it means that that would be some increase in expenses moving from Q2 to Q3. I do expect that that will be more or less of a midpoint of this range what I was mentioning. Why confirming the total at this range for the full year? For the full year, if you take our expenses in the full year and you divide it by four, our averages should be there between 635 to 640 per quarter. So this is confirmed notwithstanding some acquisition that we are doing, so it means that we do not expect that this will increase our level of expenses. Well, about the – we have started production. So – because, you know, this device would be in production introduced on a new flagship. So in order to be ready with the supply chain when the flagship will be introduced in the market we have started the production now. I can mention which is addressing on the volume fronts and which is based on our, let’s say, pixel still direct Time of Flight technology, what we call our SPAD technology, Single Photon Avalanche Diodes and I already mentioned the fact that any – wide array of facing applications. And even though that’s on this wide array of facing application you will have both technologies with of course the share of feature, so – we typically sell direct Time of Flight and you will have, as well indirect Time of Flight. So this is what I can disclose, Jerome, at this moment.

Thank you very much.

The next question comes from Sebastien Sztabowicz from Kepler Cheuvreux. Please go ahead.

Yes. Hello everyone and thanks for taking the question. On your guidance, it seems sales slightly declining for the full year. Where do you see the three divisions evolving over the full year? Which one on Q2 outperform and down-performed your main targets? And coming back on the silicon carbide, can you help us understand what was the level of revenue you have already directed in the first part of the year? And what is your view of the targets for the full year? Do you think there is – income closer to further – of revenue or little bit too optimistic taking into account the slow start of Q1 in silicon carbide? Thank you. Jean-Marc Chery: So, I take the question and again, my colleagues they will complement. On silicon carbide, you remember in April during our meeting conversation, unfortunately what we have lost in Shenzhen cannot be recovered. This is a point. But here, this is not something we will update regularly, because this is not, let’s say, a very regular KPI we monitor. But if you remember where I shared with you last quarter that we access we have a period between 2020 to 2024 of about $2.8 billion on silicon carbide. We will share between automotive and industrial. But with the design win we have during Q2 now. Okay, we have said this period to be about $3 billion, which is swinging about in a bit. But so far this year unfortunately what we lost in Q1 are definitely little. Then about the full year, Lorenzo can disclose.

Maybe I can take your question. When we look at full year and I refer in terms of the revenue, what is the midpoint of our indication that is in the range of $9.45 billion. How is the dynamic between the three segments. Well, there are two segments that will increase, one is MDG. MDG will increase revenue on the year in the range of the high-single-digit and this is mainly driven by our microcontrollers both general purpose and secured. We see also growth in AMS. In AMS, we have a growth that will be in the range of low-single-digits and this will be driven by imaging and analog. Why we see declining revenues in ADG? ADG would be definitely impacted by the situation of the market in automotive even if there will be a recovery in the second part of the year and respect to the first part of the year. Still looking at the overall year, we will have a decrease and this decrease will be in the range of the low-teens. Overall, the company will be in the range of minus 1 or 1.1 is our, let’s say, indication in the fourth quarter.

We are having short of time now. We have time for one or two more questions – two more questions. If you don’t mind, as usual for the ones that have other question investor relations team is ready to answer separately after this call.

The next question comes from Gianmarco Bonacina from Equita. Please go ahead.

Yes. Good morning. Just a clarification on the gross margin for the full year. In the previous call, you mentioned the range of 35% to 37%. Now, clearly, the midpoint of your sales range for the full year has increased. So shall we think for the full year, gross margin closer to be 37%? Thank you.

At this stage, as we said the gross margin that we see today, we have – this second half impacted by an average 200 basis point of loading charges in both quarters, Q3 and Q4. As I said, the gross margin, we see something in a range between 36 to slightly above 37. So, of course it will depend on the level of revenues that we will achieve. In terms of unsaturation, in terms of production plan, we will not change it dramatically, because of course, our lead time in order to fill our fact that will not be - is such that of course the degree of freedom that we have in order to modulate the production not so be. So, we – our expectation is to be between really 36 and slightly above 37 at the highest level of our revenues.

Okay, for the full year?

For the full year. Yes, of course

Okay. Thank you.

So the last question now please. Alessandro?

The last question comes from David Mulholland from UBS. Please go ahead.

Hi. Thanks very much. I just wanted to follow-up on the power situation. Obviously, you said there is a lot of business today that standard products manufactured by – there is some that’s custom. I just wondered is there something that there is such engagement and level of custom to that it just has to go away or is this something you can transition whilst to adhering to the rules to become a kind of standard product business with enough time to develop a more standard solution if I can put it that way? Jean-Marc Chery: No. Again, we address these customers with values, let’s say, operating model from custom design to application-specific and let’s say general purpose device. There is no, let’s say, other approach again to be compliant with what will be confirmed, because we will expect that to have clear detail and confirmation in mid-July that’s seasonal to the case and I have honestly no comments the other one I have done few minutes ago answering the question.

Thanks very much. Jean-Marc Chery: Thank you.

Okay. So that will conclude our call. Thank you very much everybody. Have a nice season for everyone of you that are engaging that and we speak to you in the next earnings call. Jean-Marc Chery: And the Capital Markets Day.

Yes. And yes, I need to remind you in the address, Jean-Marc has been talking about various appointments which was the Capital Markets Day. So the next one these are earnings period. Thank you/ It is the one with to discuss on the 15th of September. This would be our next event from us. Even if the earnings is next – so, hopefully this will be easier than to cover around the web to meet with us. Jean-Marc Chery: Okay. Bye-bye. Thank you.

Thank you.

Thank you. Good bye.

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