Ladies and gentlemen, welcome to the STMicroelectronics Q3, 2021 earnings release conference call, and live webcast. I am Moira, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Celine Berthier, Group, Vice President investor relations. Please go ahead, madam.

Thank you, Moira. Good morning, everyone, and thank you for joining our Third Quarter 2021 financial results conference call. Hosting the call today is Jean-Marc Chery, ST's President and Chief Executive Officer. Joining John-Marc on the call today are Lorenzo Grandi, President of Finance, Infrastructure and Services and Chief Financial Officer. And Marco Cassis, President of sales, marketing, communication, and strategy development. These last webcast and presentation materials can be accessed on ST Investor Relation website. The 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 are doing this these 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 yourselves to one question and a brief follow-up. With this, I'd now like to turn the call over to Jean-Marc as Chief President in queue.

Good morning, everybody, and thank you for joining ST for Q3 2021 Earnings Conference Call. Let me begin with some opening comments, starting with Q3. Net revenues increased 6.9% on a sequential basis to $3.2 billion. Some study in line with the midpoint of our business outlook launch. The revenue performance was driven by strong global demand and by overall, engaged customer programs in STMicroelectronics. This was partially offset by lower-than-expected revenues in automotive caused by mostly aware than anticipated reduced operation at the well-managed and manufacturing facility due to the pandemic. Our gross margin at 41.6% came in 60 basis points over both the midpoint of our launch. Looking at our year-over-year performance, net revenues increased 19.9%. Our gross margin is 41.6% and operating margin of 18.9%, improved from 36% and 12.3% respectively. Our net income nearly doubled to $474 million. On the year-to-date basis, net revenue increased 30. -- 31.8% to $9.2 billion, driven by growth in whole product growth except radio frequency communications subgroup. Of the 9 months period, we reported a gross margin of 40.4%, operative margin of 16.7%, and net income of $1.25 billion. On Q4 2021. At the midpoint of our outlook, we expect net revenues in the first quarter to be about $3.4 billion, representing an increase of 6.3% sequentially. Gross margin is expected to be about 43% at the midpoint, representing a sequential increase of 140 basis points. For the full-year 2021, based on the midpoint of our Q4 21 guidance, we now expect full-year revenues of about $12.6 billion. Representing a year-over-year increase of 23.3% at the end of the launch, we provided in July. This growth is expected to be driven by continuing strong dynamics in all the end markets we addressed, and a well-engaged customer program. Our 2021 Capex investment plan of about $2.1 billion remained unchanged. Now, let's move to a detailed review of the third quarter. The revenue performance was driven by poor global demand and by our engaged customer programs in personal electronics, partially offset by the impact of the pandemic in Malaysia. Net revenues increased 19.9% year-over-year, with higher sales in our 3 product groups, three protocols. And also, subgroups, except as expected, the radio frequency communications sub-group. Year-over-year offsets to OEMs increased 9.9% and 48.6% to distribution. Of the sequential basis, net revenues increased 6.9% sequentially in line with the midpoint of our outlook. This growth was mainly driven by IMS up 25.2% to a lesser extent MDG, up to 2.6%. While ADG decreased by 6.7% goes by most avail than anticipated reduced operations at our Malaysian manufacturing facility due to the pandemic. Specifically, the income available revenue impact in Q3, related to [Indiscernible] is about $100 million above our initial assessment, mainly for the automotive subgroup. Gross profit was $1.33 billion, increasing 38.7% on a year-over-year basis. Both margins increased your value off to 41.6% from 36%, mainly driven by manufacturing both efficiency and better loading, as well as product mix and more favorable pricing. These positive drivers were partially offset by negative joint effects, net of joint effector, net of aging. Our third quarter total gross margin was 60 basis points above the midpoint of our guidance, driven by policies. Third quarter operating margin was 18.9% from 12.3% in Q3 '20. With improvements in all 3 product groups. Both net income and diluted earnings per share nearly doubled year-over-year, respectively reaching $474 million and $0.51 from $242 million and $0.26 per share in Q3 '20. Looking at the year-over-year performance, all product groups recorded double-digit growth. As revenues increased, 18.1% on growth in automotive and foreign industry, EMS revenue increased 27.1% on IR analog MEMs and imaging product sales. MDG revenue has increased 12.9% on growth in microcontrollers, partially offset by the expected decline in audio frequency communication. Byproduct group on a year-over-year basis. All product groups showed improvements in operating margin. AVG operating margin increased to 10.8% from 5.8%. IMF operating margin increased to 24% from 17.5%, and MDG operating margin increased to 23.9% from 17.4%. Net cash from operating activities more than doubled to $895 million in Q3, versus $385 million in the year ago quarter. Capex in third quarter was $437 million compared to $390 million in the year-ago quarter. Free cash flow improved to $420 million compared to a negative $25 million in Q3 '20. We exercise the call option on the early redemption of our 2024 Tranche B convertible bond issued in 2017. As a consequence, bond holders exercise their conversion rights on the total of $750 million, a cheaper amount of the bond. In the Third Quarter, we fully settled these bonds, delivering about 5.8 million treasury shares, and paying $1.26 billion in cash, which includes the $750 million principal amount. During the Third Quarter, we paid $55 million of cash dividends to shareholders, and we executed $87 million of share buyback. In connection with our new share repurchase program initiated on July 1st of this year. Our net financial position was $798 million at October alone 2021, making total liquidity of $3.46 billion and total financial depth of $2.66 billion. Let's now discuss the market and business dynamics. Similar to the second quarter, the backdrop of strong global demand continued, with supply chain remain stretch -- remaining straight, sorry. In automotive, bookings, remain at 40 to 3, and the backlog still covers about 18 months of demand. Demand continued to be well above our accruals and planted manufacturing capacity. One of the biggest challenges in the quarter for the whole automotive industry has been the pandemic situation in Malaysia. A country accounting for 13% of the worldwide ship assembly testing production. This had an impact also on us. First of all, to our deepest regret, it impacted our employees and their families at our site in Milan. Then there was the operational impact. With the worsening of the situation in July and August, the impact of reduced operation in our facilities in Milan became mostly rare than anticipated when providing our Q3 2021 business outlook. Our site went through a period of partial or complete closure, with a positive return to 100% production capacity during Q3. Moving now to [Indiscernible] and digitalization. In [Indiscernible], we added those to our list of projects for [Indiscernible]. Overall, our engagement increases again during the quarter. Now, with 85 ongoing programs and 70 customers equally split between industrial and automotive. I am pleased to announce that based on our strong pipeline of design wins and market dynamics, we now anticipate to reach our target of $1 billion [Indiscernible] combine renews in 2024. One year earlier than intended. New design winds in Q3 include our Generation-3 silicon carbide MOSFET for the electrical vehicle climate control compressor. There were also a number of other electrical vehicle applications where we had success, which complement our technology. These includes sockets for high and -- for high and low-voltage silicon MOSFET, and microcontroller in battery management system, and traction inverters, MOSFET inverter, on-board chargers, and DC-to-DC converters, and VI power in electrical vehicle battery packs. In [Indiscernible] digitalization during the quarter, we had a number of design wins with our 32-bit automotive microcontroller family. The applications like body domain, smart getaways, as well as a way for our, BDOGNFS chipsets in an audio view navigation system. Also, in our automotive sounds cell business, we will showcase with automotive grade initial asymmetry across multiple applications, such as telematics, dock control and navigation. Moving now to Industrial, we continue to see very strong demand, both in high-end and consumer in the field, and with distribution as well as whole yet in line with our broad approach, in the ID fragmented industry on market. Inventories of our products at distributors continue to be lean across all products family with high inventory sales. We addressed the industrial end-markets with marginal purpose and secure business processing solutions. Power in energy management products, and our sensor and another portfolio. A number in processing, we're continuing to transfer our leadership with the STM32 Family, offering an ecosystem. As I have mentioned before, we have a particular focus on wireless connectivity, security, and artificial intelligence. We are seeing increasing success with the world, STM32 wireless product line, achieving design wins across a broad customer base. We strengthen support from wireless designs with additional software tools, as well as the new modules that we've had developers go faster. In artificial intelligence, we released tools that add new artificial intelligence methods to our STM32 Q year. Info and energy management, we achieved a number of wins with our Power Discrete Portfolio. For example, with silicon carbide transistors and modules, with high and low voltage silicon MOSFETs, with IGBTs, and with diodes. Applications include solar inverters, energy storage systems, power adapters, home appliances, air conditioning and lighting, welding, and industrial power supplies. We also won a 1,200 Sic based power module for an electrical vehicle charging station. In 3rd quarter, we also had many new designs with our industrial analogue products. With our application like motion control, smart grid, factory automation and own appliances. We continue to win business in some sort of industrial application such as power tools and with our specialized devices like inclinometers. Moving now to the electronics market. In Q3, we continue to see strong demand for smartphones and for other connected devices, including wearables, tablets, earables to wireless stable, headsets, and game consoles. Our first step, strategic objective in personal electronics is to lead in selected high-volume smartphone applications with differentiated products of custom solutions. During the quarter, we worked circuit in the number of devices with motion control, ambiance light sensors, simu -flight ranging sensors [Indiscernible] , wireless charging products, touch display controllers, and secure solutions. Our second objective is to leverage our broad portfolio to address high volume application. Here, we had winds with broad range of lights, motion, and environmental sensors, as well as with analog power and microcontrollers in applications such as smart watches to iOS table headsets, and smart tools. We're still for vested on engagements with several leading players for our laser beam scanning solutions for Augmented Reality. In communication equipment and computer peripherals, we continue to see adoption of 5-year related products, as well as a system you made for PC, mainly for enterprise notebook. [Indiscernible]. Following the recent helio-satellite launches. I can prove here that our programs and [Indiscernible] are on schedule. We have 3 strategic objectives in our approach to this end market. One, is to address structured application in cellular and satellite communication infrastructure. In this area, we will have our new circuits in a radio frequency design for satellites. We also target selected high-volume applications with differentiated products of custom solutions while leveraging our broad portfolio. Our wins here include time-of-flight sensor for laptops, many general purpose in MCU designed, as well as the win in the world. [Indiscernible] family for smart charging control in an ultra slim power adaptor. Now, let's discuss the Fourth Quarter outlook. For the Fourth Quarter, we expect net revenue to be about $3.4 billion at the midpoint. Location growth of 5.1% year-over-year and 6.3% sequentially. Gross margin is expected to be about 43% at the midpoint located year-over-year and sequential increase of 420 basis points and 140 basis points respectively. Based upon our day-to-day research and Q4 midpoint, we do expect 2021 net revenues of about $12.6 billion at the high end of their launch, we provided in July. These plans will translate into year-over-year growth of 23.3% at the midpoint. Driver of this expected growth are the continuing strong dynamics in all the end markets we address and our engaged customer programs. To conclude, our research cluster and IO sales plan for the full-year reflect strong year-over-year revenue growth conflicting in higher operating profitability, net Income and free cash flow. Revenue growth stems from the expected continuation of strong dynamics in all end markets we address. And our engaged customer programs. Our focus stays on customers. We continue to adapt our supply chain to support their strong demand. We also continue to provide leading-edge technology and product innovation to enable smarter mobility, more efficient power and energy management. There's a wide-scale deployment of IOT and 5G, and a more sustainable reward. Thank you. And we are ready to answer your question.

We will now begin the question-and-answer session. Anyone who wishes to ask a question or make a comment, may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself on the question queue, you may press star and two. Participant are requested to only use handsets while asking a question. Anyone who has a question or comment may press star and one at this time. First question if from Stephane Houri from OODO, please go ahead.

Yes, good morning everyone, actually I have two questions. The first one is an update because last quarter you basically said that, demand is more than 30% above the current supply. Can you please update this statement and comment on your visibility for 2022 revenue growth. And the second question, is about the Gross Margin guidance in Q4, 43% is at a level that honestly I haven't seen for many years, if ever. So, can you comment a little bit on the elements of this Gross Margin evolution, and if this level can be seen as sustainable level going forward. Thank you very much.

Thank you for the question, I will take the one related to of the quarter 3. And Lorenzo will take the one about the gross margin. I can confirm that, for 2021, yes, we are seeing an unconfirmed demand that we are really well above manufacturing capacity and sales plan [Indiscernible] mentioned. Things will improve next year, definitively but the gap will be quite material. About 2022 what I can say adding the following element in our hand. Basically, the market, we sell them, will be supposed to increase by 8%. Looking at the backlog coverage, is above the manufacturing capacity we are planning based on the investment. We are currently doing only and will contribute for the first quarter next year. And the investment we're planning for the first time next year, we will contribute to the second half and I can say that we are very confident that ST will perform materially better than the market we sell on next year. And again, we will communicate and generally the Capex we intend to do for 2022 and we will provide the detail number for the year indication in our freedom, but I can confirm though that we are very confident to perform much better than the market we sell.

Yes, maybe, I take the second question, about the gross margin, the dynamic about the gross margin. good morning for everybody a gross margin of 43% is our guidance for the current quarter here that we will see an improvement in respect that $41.63 that cost in the last quarter in Q3. And this is mainly driven by two elements on one side that we have a still a positive price environment that is helping our gross margin as well, we also have an improved efficiency this especially will be in both in front end but especially in our back end. All our plants there including of course at the plant in Malaysia in Moar, are running at full capacity and fully efficient. Looking at the midpoint at our Q4 guidance for the gross margin for the total year, which will come in the range of 41%. Moving forward of course our gross margin has some seasonality of quarter over quarter. Anyway, that price environment they're moving in 2022, considering the back-to-back that we have in the situation of the business, I would say that they remain positive and definitely we still have room for manufacturing productivity gain and definitely also for a better product mix moving in the next year. We have also considered that however that there is an increase in our in our cost inflationary that are not yet fully reflected in our gross margin at the moment in Q4. This will progressively materialize in the next quarter, additionally you have also to consider that we are investing let's say the investment they will increase our depreciation. Of course, there is increased production and then capital there is a lack of time between when you can increase your production and have a full efficiency of your investment. Anyway, when I look at all these ingredients are all together, I think that we're happy moving in the coming quarter. So definitely we have an opportunity to improve our yearly gross margin is respect to 41 moving to 2022.

Okay. Thank you very much.

Next question please.

Next question is from Matt Ramsay from Cowen, please go ahead.

Yes. Good morning, everyone. Thank you very much. Just following on the margin question a little bit, and congratulations guys, 43 is a heck of a level. I guess, Lorenzo, could you walk us through a little bit more specifically, what kind of driver or I guess how material is the pricing increases in your gross margin that you're seeing. And maybe what you plan for the next couple of quarters. I guess the reason for the question I get asked a lot is how much of this pricing increase that you guys are seeing right now in this environment where demand is materially better than the supply. How much of that price increase do you guys think is sustainable through the cycle versus transitory and I guess my second question, is just on the ATG business obviously some headwinds in Malaysia, Jean-Marc, if you could talk about how you see that business recovering and potentially how quickly in the first half of the year and maybe even in the fourth quarter. Thanks.

I think the one of gross margin when we look at the gross margin, let's say for sure, that ingredient that is as I was saying before is related to the price. If you want, when we look at our progression of the gross margin, both I look sequentially, even if I look, we already of course there are many components about that. I would say the two main drivers on one side are the price how, environment and on the other side is the product mix and manufacturing efficiency. These impact, I would say that all in all, when I look, the progression is more or less in the 50/50. How much it is sustainable the pricing is? I think that in a short medium term, this situation will stay also, because as I was saying before, here is using inflationary environment both from our side, let's say to our customers but also for our costs. I repeat what I said before, let's say looking at the level of profitability in terms of gross margin of this year, I think that combining together price environment, manufacturing efficiency and also discounting all, of course on the other side had wings that may be related to the price increase from our supply. I think that there is a room for progress moving year 2022. Our gross margin compared to the year 2021, of course following some kind of seasonality that we normally have. And in which let's say the gross margin in the first half, quarter, in general it will be a little bit lower in respect as a gross margin in the second half. About the second question, I'm not even full on the statement. Yes, I can confirm that this group will be a key contributor to the growth in Q4 for ST. Just as a matter of transparency, I mentioned during my how, speech that virtues what we already embedded in the guidance, the impact have been $100 million. Mainly Impacting the automotive product group but what we already embedded in our guidance was $770 million. So you see a total impact [Indiscernible] of $170 million on mainly the automatic product and in a lesser extent on microcontroller. Now we have our operation completely resumed during September. All the people are vaccinated. We have a full agreement with the Malaysian authorities and protocols to avoid any further lockdown or enclosure of the work plant. I am very confident that the IDG will be a key contributor of the growth in Q4 and next year.

Thank you very much, guys. Appreciate it.

Thank you Matt. Thank you. Next question please Moira.

The next question is from Johannes Schaller from Deutsche Bank please go ahead.

Thanks for taking my questions. Firstly, we have seen a few semiconductor companies talking about the stocking of components even in this very strong demand environment but I think it's mostly PC and smartphone. And it relates to components that are not in tight supply but then there was restocking, but the final product the PC or this smartphone couldn't be built. Can you maybe give us a bit of an overview on your product portfolio, if you are seeing any of such dynamics in any of your businesses for marketing? You already mentioned on the distributor channel, you see very lean inventories, but maybe there are some product groups we marketing? should consider here where were inventories have recovered already. And then secondly also Jean-Marc, I think you may be scared the market a little bit when you talked about flat imaging sales about a year ago in the 2022 can you now just maybe give us a quick update to better understand the dynamics in imaging and maybe also give us an idea of how that business is growing in the second half of this year compared to the second half of last year. Thank you.

Thank you for your question. Now, first of all about personal electronics and computer. As you know our strategy is to address selective this market with basically custom design solution. You have no inventory and custom design solution as the principal, because we have a perfect connection with our customer and we are working with forecast. And let's say real time sales, we have not seen any inventory change, because we have no inventory or we will or you know as well that we are addressing this market taking opportunity of general post product portfolio, so like MCU or [Indiscernible] and clearly overall on personal electronics and computer. We have not seen adjustment in the inventory pipeline. I would like to recall even if worldwide, we have seen here and there some fluctuation in the smartphone market. All the market connected to accessories, headset, all this kind of stuff is very dynamic. We have absolutely not seen in there. I would imagine clearly in H2 this compared to last year, there is a marketing? different profile of the revenue between Q3 and Q4. Because if you remember well last year was a little bit exceptional mainly related to one of the other major customers because the program is enjoying traditional phone where little bit delayed which was not the marketing? normal signature revenue. This year is coming back to normal; we have a strong Q3 and basically that's the reason why we share with you that our IMS group contribute a lot on the Q3 revenue growth both sequentially and under year to year. In Q4, definitely this year, a different profile compared to Q4 last year. Also, the number of the day of the quarter is materially lower basically we have six days late in Q4 2021 versus Q4 20. Last but not least I guess you have seen like many communications of some [Indiscernible] of the system that I will not comment but by the way quite a well balanced between him and modification. I would simply to confirm that this imaging product group will contribute this year to the growth of the Company. We have completed as I said a few minutes ago the [Indiscernible] operating plan of the Company for next year that will target material gross better than the market we sell. Imaging will materially contribute to this growth and with the visibility we have. I am very confident that imaging will be a key contributor of the new model that ST will disclose certainly next year at [Indiscernible].

That's very clear Jean-Marc, thank you. Just maybe one quick follow up on the inventory question. Is there anything in automotive even some smaller components that may be less supply constrained where you see any inventories slide around right now, is there really nothing in your view within the supply chain end at your customers?

To the day-to-day life we with our customers, first the tier one and car maker, the list of let's say component of fund, to the capability of the semiconductor to support the automotive industry is quite wide. Then the car makers and the tier one, the manager supply chain and we don't know we do not have the visibility of the way they behave facing this shortage of many components for the time being. And all they prepare, their Q4 and next year. But for our visibility of our whole consignment stuff because their business model with the automotive industry is consignment stock and then the push out to their supply chain. We have no let's say over inventory in a while, let's say supply chain. If we have a slight inventory increase in ST is simply due to the fact that in Q3, we have seen along our operation facing many closures. We have decided to not stop supply. Why? Because we strongly believe that we will recover from the issues during the course of the next few months and all this welfare will be absorbed, thanks to the strong demand we have from the automotive industry.

That's very helpful. Thank you, Jean-Marc.

Thank you very much Johannes. Next question please.

The next question is from Didier Scemama from Bank of America. Please go ahead.

Good morning and thanks for taking my question. I just wanted to come back to your gross margin percentage. I think it was quite useful I just want to understand one thing with regard to calendar 2022. You're talking about inflationary pressures which I fully understand coming from your subcontractors, materials, et cetera, but so far those costs have already started to come through? And yet you are guiding for the highest gross margins in three Q, 2020, I think you did 47% there, I recall, it's the second or third quarter I covered. My question to you is when you look at 2022 pricing is starting to move up for you guys, or long term contracts public starting to get repriced as well which was not the case, I suspect in 2021 in other words for your gross margins to not be above 43% but least well above 41%. You would have to assume that either your depreciation is going to go up massively into 2022 or that you cannot, if you want more than pass on or at least pass on inflationary pressures you get from your subcontractors and materials. I'm just trying to understand why what are the bits there but I'm missing.

I think your question is quite a vague question. Of course when long-term I look at the dynamic of our gross margin and there are different elements as you were mentioning. On one side, for sure the inflationary cost that we see are not fully reflected correctly in our Of course, expectation of the gross margin. Let's say even if there also during this year, they were progressively entering in our gross margin in 2021 already because we were protected by some long term agreement but progressively this long-term agreement was expiring. Yes, it is true, let's say a portion of these inflationary costs there will come inside the 2022. It is even true that there on the other side that we see positive impact on our gross margin moving in 2022 coming from product mix, coming from an improvement in manufacturing in our efficiency in our back end so this will only one side offset the negative impact. There will be seasonality during the year as I was mentioning before and what we think and what we see looking at the next year is that our gross margin in average for the year 2022 will be improving respected to the average that we have in 2021. We still see opportunity to progress in gross margin in the next year.

You're very well thank you for the Yes, it is details on that. I wanted to ask also a little bit about the macro environment. We've seen some reports of power cuts in China. I just wondered, if you could give us a little sense of situation on the ground over there. You said your distribution inventories were lean, have you seen any sort of negative activity or negative impact from those power cuts or any slowdown in the China economy with regards to your distribution business or direct business with OEMs in that region?

Absolutely not I think with what's happening in Malaysia, it's a little fesity, but China absolutely not.

Okay, brilliant and then one tiny one, since this one is short. You said that Q4 is short by six days is there any sort of you know number you can give us for a normal concept of Q1?

Yeah. I would say Q4 qualify as a normal quarter because it's 90 days. What's not really normal was that Q4 last year. it was a longer feisty calendar day for Q3. This quarter will be similar I think for 92 days.

Thank you very much.

The next question is from Jerome Romel from [Indiscernible]. Please go ahead.

Good morning. Could you update us on the capacity coming from foundries and also the ramp up of your own capacity specifically for a [Indiscernible] when are we going to see this program to become material for you Marco. Thank you.

As I said, on the non-recurring point, the support we receive from the foundry in H2 versus H1, as far as volume are concerned, is below. I already explained why because during last month, some decision had been taken about allocation to support the automotive industry and to the treatment of the industrial market. Well, I don't want to comment more than that. One good news is that part of our sales and operating plan, of course, there is our internal manufacturing capacity and foundry commitment to us. I can confirm that next year they will increase their support, especially to support a lot of growth on microcontroller. Silicon carbide. We are, let's say, continuing to increase the quarter-after-quarter our capacity first in assembly in Shenzhen and in Bouskoura, both for application-specific modules or packages. We continue to increase our capacity in Catania, and now we have double source in Singapore. We are in close connection with our supplier, so our capacity is steadily increasing with the support, the very strong demand of our customers and especially, one, with whom we are engaged. Longgang, you know that our strategy was to go fast on the market with, again, using TSMC as a foundry. So this is what we are doing. So, our revenue will start to grow next year, and in parallel, embedded in our CapEx for 2021 and 2022, there is capacity we are building in our wafer fab in Tours that will contribute to the revenue more, let's say, in 2023, 2024 and beyond.

Thank you, and maybe a follow-up just on the OpEx. How should we model OpEx for Q4? Thank you.

In terms of OpEx, let's say, in Q4, we will see some increase in respect to Q3. Of course, there is seasonality. Q3, we are benefiting of the [Indiscernible]. Anyway, when you model the expenses, I confirm what I was saying in July. When you take the full year expenses for 2021 and you split by 4, let's say, to have an average quarterly OpEx, net OpEx, including other income and expenses, our net OpEx will remain in the range of $735, $740 million per quarter.

Thank you.

Okay. Thank you very much, Jerome. Next question, please, Moira.

The next question is from Francois Bouvignies from UBS. Please go ahead.

Hi, everyone. I have two small questions. The first one is coming back on the silicon carbide. So you talk about your capacity, which is helpful. But you also said today that you expect 1 billion to reach in 2024 versus 2025. So, I wanted to have a sense, can you explain what is driving this kind of accelerated roadmap? Is it one specific customer? Is it like more automotive, industrial? Anything you can give around the drivers of this accelerated path would be helpful. The second question is the inventory, coming back to that slightly. Sorry about that. You talked about the inventory situation now, but I wanted to have your view with your experience, how you see the inventories in the next quarters basically. How should we think about the development of these inventories given the high demand? I mean, should we expect inventories to be different by product or inventories to increase slightly from here? Just to have your sense of how we should think about that going forward. That would be helpful. Thank you.

Okay. First of all, about silicon carbide. We work on the market data very recently, and now clearly, when you look at the compound average growth rate of the electrical vehicles is increasing a lot for the next three years versus what was expected one year ago. So first of all, the first input parameter is a data point we receive from various analyses about an acceleration of the adoption of the electrical vehicles in the next three years. By the way, I will not make any advertisement, but I guess you are aware that in September, the first vehicles which had been sold in Europe is an electrical vehicle. So, you see it is a clear sign of an acceleration of the electrical vehicles within the overall, let's say, plan of production forecast. So, this is point number one. So, our confidence level for the next three years of the market for electrical vehicle is really increasing. Then, [Indiscernible] for ST, it is clear that now we have a number of programs increasing, and then it's a mix. It's a mix where high volumes contributing to revenues are related to automotive, where we have already a famous, ongoing, engaged programs with one important customer. That is, let's say, running very, very well, and I guess you can assess with the various publication. Then the other opportunities will start to fly in the near term. This is clearly from volume perspective and revenue perspective, the main driver of our $1 billion revenue that we will deliver full year in 2024. For sure, we have also the other contribution from industrial market, where here it's more fragmented. However, from the industrial market, our strong expectation are on the charging station, because here we expect a strong proliferation of the charging station everywhere in the world, in Europe, in order to support this electrical vehicle increase. Then about inventories. Thank you. You asked for my experience. Now, simply, what I can tell you, the inventory situation today in many supply chains is not sustainable. When you have complex supply chain between an OEM customer, Tier 1, Tier 2, EMS, distributor, Tier 3, you cannot operate smoothly all these operations. Point number 1, if you have no inventories. Point number 2, the logistics. I guess you are really aware that there is a congestion of, let's say, the logistics by sea, by boat. All the big harbors in the world are totally congested. A part of the traffic now is going to air flights. Air flights today are basically also congested because the reduction of number of flight and plane, and it is very similar. These logistic constraints, increase of lead time related to the logistics, will also push all the manufacturing actors in the world to increase a little bit their security or safety inventory. So, for me, that's the reason why the demand of semiconductor, which is strongly driven by the mega trends, again, smart mobility, power, energy, efficiency, connectivity, 5G, IoT, on top of logistics, which is becoming much more constrained, and the situation today of inventory, which is very lean, will be really sustained and will last for material time.

Does it answer your question, Francois?

Yes. Thank you very much.

Thank you very much. So then we have time for one last question, Moira.

The last question is from Sandeep Deshpande from JPMorgan. Please go ahead.

Hi, thanks for letting me on. My question is actually regarding your view into, clearly, you've been supply-constrained this year, Malaysia issues, etc. But what's your view is into looking into '22 based on your backlog, not only on your revenue front, but also in terms of being able to continue to supply? Will you continue to be supply-constrained in '22? Then the follow-up is on costs, and the cost follow-up is related to what is your depreciation in '21? What will it be in '22? Thank you.

Lorenzo will comment on the cost question. But sorry, Sandeep, I have not captured very well your first question.

Will you have at least some supply constraints? What is the level of supply constraints you will get in 2022?

Here, it's clear that when we have completed our overall sales and operating plan constraints, I can confirm to you that the perspective, the feedback we have today, that we have constraints first in equipment delivery. So, process equipment delivery, assembly, and test. Basically, now, if you want to have a slot for a scanner, I think you have to wait by Christmas 2022. More or less, for, let's say, older process tool, it's maybe a little bit shorter in term of lead time but not so far. Assembly as well. Why? Because also, most likely, these equipment, they're also limited by semiconductor supply. So, I have managed case with my team, that equipment supplier for wafer fab, ask ST support to supply. Well then, material for back end. The situation for substrate, for frame are quite stretched, and we are in very close discussion with our supplier to provide long-term forecasts, but quite long-term engagements. It is valid as well on, let's say, process materials, so gases, chemicals. Last but not the least, the silicon. Clearly, the demand on the 300-millimeter silicone for 2022 and 2023 is quite strong. So now as a semiconductor Company, it is clear that we have to be, let's say, very accurate and attentive building our sales and operating plan to check our full supply chain because a big mistake would be to think that we operate at infinite capacity. So, it is not the case, and now semiconductor is not only the bottleneck. So, you have the full supply chain under stretch, and that will, let's say, increase capacity smoothly in 2022, and then coming back to expected situation where you will have a balanced inventory, lead time, and flexibility not before 2023.

The question about depreciation. This year or in 2021, our depreciation and amortization, mainly depreciation, I would say, we are in the range of slightly above $1 billion, $1.05 billion. I do expect that with our plan and, let's say, of investment that we have done in this year, let's say, 2021, and then we will continue to invest also next year, there will be a similar increase. In 2020, we had around $900 million of depreciation, and they will increase in 2022 in a similar way like before.

Understood. Thank you so much.

Thank you very much. I think this was the last question, and that will conclude our call for today.

Thank you.

Thank you.

Thank you very much.

Bye-bye.