Good morning. Thank you everyone for joining our First 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 result 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 conference call. First of all, I hope you, your families and your colleagues are all safe and healthy. Also, beginning this call, I would like to highlight the extraordinary efforts of our employees and to thank them again for their dedication and professionalism to overcome the challenges this pandemic has created. Now to ST results and plans let me begin with some opening comments. Starting with Q1 year-over-year net revenues grew 7.5% to $2.23 billion. Our operating margin increased to 10.4% and our net income rose 7.9% to $192 million. On a sequential basis, net revenues came in about 5% below the midpoint of our outlook, when entering the quarter. The COVID-19 outbreak and subsequent containment measures by governments around the world, brought challenges in our manufacturing operations and especially in the last few days of the quarter logistics. Our Q1 gross margin of 37.9% was largely in line with our midpoint target. Our free cash flow during the first quarter was $113 million, including CapEx of $266 million. We exited the first quarter with a stable net cash position of $668 million available liquidity of $2.7 billion and available credit facilities of $1.1 billion. On Q2 2020, at the midpoint of our guidance we expect net revenues in the second quarter to be about $2 billion leading to a gross margin of about 34.6% that includes about 400 basis point of unsaturation charges. Our guidance is taking into account the declining demand environment, especially in automotive as well as the operational and logistics challenges due to the current regulations. For the full year 2020, we will drive the company based on a plan for full year 2020 revenues between $8.8 billion and $9.5 billion. We plan for growth in the second half over the first half of the year to be in the range of $340 million to $1.040 billion at the midpoint of our Q2 guidance based on the evolution of the market. As a consequence, we have reduced our CapEx expectation for 2020 from $1.5 billion to between $1 billion and $1.2 billion. Now let's move to a detailed review of the first quarter. Net revenues increased 7.5% year-over-year with higher sales of imaging, analog and microcontrollers in part offset by lower sales in automotive Power Discrete and digital. Year-over-year sales to OEMs increased 22.5% and to distribution decreased 21.4%. On a sequential basis, net revenues decreased 19% about 5% below the midpoint of our guidance. The COVID-19 outbreak and subsequent containment measures by governments around the world bore challenges in our manufacturing operations and especially in the last few days of the quarter, logistics. All product group revenue declined on a sequential basis. Our gross profit totaled $846 million, representing a year-over-year increase of 3.5%. The gross margin of 37.9% decreased 150 basis points year-over-year, mainly impacted by price pressure and unsaturation charges, including the one associated with the COVID-19 workforce-related restrictions. More specifically, unsaturation charges were 150 basis point in Q1 2020, compared to zero in Q1 2019 and to our estimate of 80 basis point in our Q1 2020 guidance. Our first quarter gross margin was 10 basis points below the mid-point of our guidance as product mix and price evolution were better than expected. Our first quarter operating margin was 10.4%, increasing 20 basis point on a year-over-year basis, with the improvement of AMS operating margin compensating the decrease in MDG and ADG. Net operating expenses at $610 million, were below what we anticipated when entering the quarter. Our net income increased 7.9% to $192 million on a year-over-year basis and our diluted earnings per share were $0.21. Looking at the product group revenue performance on a year-over-year basis; ADG revenues decreased 16.6%, mostly due to the supply constraints and particularly in automotive to a weaker-than-expected demand; AMS revenue increased 54.3%, on higher imaging and analog sales mainly for Personal Electronics Applications, while MEMS sales were essentially flat; MDG revenue increased 1%, with growth in microcontrollers mainly driven by distribution in Asia partially offset by lower digital IC sales. By product group on a year-over-year basis: ADG operating margin decreased to 3% from 10.6%; AMS operating margin increased to 20.8% from 7.8%; and MDG operating margin decreased to 11.5% from 13.4%. Net cash from operating activities increased 17% to $399 million in Q1, compared to $341 million in the year-ago period. Free cash flow was positive $130 million, including $266 million of CapEx compared to negative $67 million in the year ago quarter. During the first quarter we paid $53 million of cash dividends and we repurchased shares in the total amount of $62 million as part of our existing programs. Our net financial position was $668 million at March 28, 2020, stable compared to $672 million at December 31, 2019. It reflected total core liquidity of $2.71 billion and total financial debt of $2.04 billion. We also have committed credit facilities for $1.1 billion equivalent which are current undrawn, including a new €500 million long-term line with the European Investment Bank. So let me now address the supply chain situation during the first quarter. During Q1, all countries where we operate decided to apply lockdown measures. In coordination with local authorities we have been able to limit the temporary assembly and test site closures to 14 days in Shenzhen, seven day above what was already planned; two days in Muar, Malaysia; and one day in Calamba, Philippines. We did not close any wafer fab. During this period we managed to keep all our manufacturing sites operational, at reduced workforce levels, keeping the most stringent health and safety measures. Our business continuity plans enabled us to continue to support our customers and to continue to execute our R&D programs. However, this unprecedented situation created logistic challenges as well impacted revenues and resulted in higher unsaturation charges. Let's now discuss the market and business dynamics. In automotive, during March, we started to see sign of slowdown in demand, especially for legacy automotive in Europe and in the U.S. as a consequence of the shutting down of many carmakers and Tier 1 production line around the world. However, we are starting now to see some sign -- some early signs of recovery in China. I have to classify quite sharp. In the meantime, we continue to support the electrification and digitalization trends of our customers' design for smart mobility applications. In car electrification during the quarter we won several sockets for automotive-grade diodes for onboard chargers at major Tier 1s and OEMs, as well as a project with high-voltage silicon MOSFETs for inverters and charging stations. We also announced wins for two programs for battery management systems. We had an important development in our wide-band gap technology strategy key for our automotive business and also for other end markets. For silicon carbide, we are progressing with our technology manufacturing and portfolio road map and with customer programs. As of today, we are engaged with 56 customers in 62 ongoing key programs. These programs are split around 50/50 between automotive customers and industrial customers. The silicon carbide awarded projects accounts for a total of $2.8 billion in the 2024 period. The next wide-band gap technology we are investing in is gallium nitride. On April 7 we closed the acquisition of a majority stake in French GaN Innovator Exagan. Exagan's expertise is in epitaxy product development and application know-how will broaden and accelerate our wide-band and business for automotive industrial and consumer applications. We also announced that we are collaborating with TSMC to accelerate the development of gallium nitride process technology and the supply of both discrete and integrated GaN device to the market. Moving to car digitalization, here we had wins in a variety of applications. This include our 32-bit automotive MCUs in car access switching, braking, and steer-by-wire applications, a major win for power management IC in an ADAS system and an award through our partner AutoTalks for a V2X communications application. Moving now to industrial, the dynamics in the quarter were mixed with some application already showing signs of demand slowdown appliance, lighting, while others, such as healthcare, as could be expected, but also automation, remain healthy. The situation in the distribution channel is showing some recovery in China, after a restart of operations, but a slowdown in Europe and in the U.S. On a year-over-year basis, point of sales at distributors remained stable, with an improvement in Asia offset by the Europe and the U.S. One of our objectives in Industrial is leadership in embedded processing solutions. To support this, we are continuously strengthening our offer in terms of hardware, software and ecosystem, around our microcontroller and microprocessor families. During the quarter we announced many additions to the STM32 microcontroller portfolio. New products in our low power and high performance MCU families and the world's first LoRa System-on-Chip. With our power discrete products for industrial applications we had wins with high- and low-voltage silicon MOSFETs and Intelligent Power Modules for power supplies, solar-power converters, home appliances and power tools from many manufacturers. We also won several new designs with our analog products for industrial applications. For example, we received awards from multiple metering customers for smart power and ASIC products, by home appliance makers for power conversion and motion-control products, and by machine manufacturers for vibration and environmental monitoring with industrial-grade MEMS sensors. Moving now to Personal Electronics, while short-term smartphone consumer demand is clearly impacted by retail lockdowns and the inability to purchase devices, we observed sustained semiconductor demand during the quarter. This is also driven by increased demand for tablets and gaming devices, as well as accessories. Importantly, customer demand for innovation-driven content is still solid. In this end market, we are leading in very specific high-volume smartphone applications as well as in wearables, accessories and gaming devices. During the first quarter, we continued to win designs and ramp production in flagship customer devices. Some examples include: a variety of sensors, - time-of-flight, ranging sensors, ambient-licensing, motion and water-proof pressure sensors. Secure solutions such as, eSIM and secure elements, and analog solutions such as, smart-power, touch, display, and charging products. A number of the smartphones in which we won designs were 5G models. We were awarded several 5G designs with our RF mixed signal technologies this is in line with another of our stated market objectives. In our last end market, Communications Equipment and Computer Peripherals, we had many design wins ranging from time-of-flight and motion sensors for PCs to industrial inertial sensors in mobile infrastructure, with multiple leading manufacturers. In this market during the quarter, we saw a stable situation for hard-disk drives and enterprise servers, as well as demand for 5Grelated products in China. Now, let’s move to a discussion of the second quarter and some comments on the full year 2020. Now, let's move to a discussion of the second quarter and some comments on the full year 2020. For the second quarter, we expect net revenues to be about $2.0 billion. And a gross margin at about 34.6%. This outlook is taking into account the declining demand environment especially in automotive as well as ongoing operational and logistics challenges due to current governmental regulations. We anticipate that all our manufacturing sites will continue to be operational. However some of them will run at reduced capacity leading to about 400 basis points of unsaturation charges embedded in the gross margin guidance. For the full year, we are driving our company with a clear plan. It is a sales and operating plan based on our current view of the market, as well as on continuous customer interaction. It is also a plan that in the framework of an already solid financial situation and to further increasing our financial flexibility acknowledging the short-term global challenges, while also supporting our unchanged long-term strategy and its objectives. We will drive the company based on the plan for 2020 full year revenues between $8.8 billion and $9.5 billion. With Q2 expected to be the most challenging quarter, our plan anticipates growth in the second half over the first half to be in the range of $340 million to $1.040 billion. This growth will be driven by already engaged customer programs and by the removal of supply constraints. The growth range is linked to the evolution of the market. As a consequence we have reduced our CapEx plan from $1.5 billion to a range of between $1 billion to $1.2 billion related to additional -- reduced additional capacity needs. Our strategic initiatives are all confirmed although with some short-term schedule adjustments. While we are protecting our R&D sales and marketing programs and transformation initiative we will keep a strict discipline on controlling operating expenses. However, as the company is taking up nonrecurring expenses for solidarity initiative donation both in cash and equipment/materials or for exceptional incentives for our employees at work. We have also launched an internal initiative whereby the management team will reduce their base salary for the next two quarters as their own contribution. In order to further increase our financial flexibility we will not execute any transaction on our current share buyback program in the second half of the year. To conclude, in response to the global COVID-19 pandemic, we will continue to ensure the health and safety of all our employees and to execute our business continuity plans working with our customers partners and the communities where we operate. We have a sales and operational plan for this challenging year targeting growth in the second half over the first half. ST is in a solid position from a capital liquidity and balance sheet perspective. We will maintain our financial strength. We will also continue to advance our long-term strategy and objectives together with our employees for the benefits of our customers partners communities and for our shareholders. Now before starting the Q&A session, I would like also to mention the other press release we have issued this morning. Taking to account the increasing global societal and economic turmoil caused by the COVID-19 outbreak ST Supervisory Board is now proposing a decrease in the 2019 dividend from $0.24 to $0.168 per share with authorization to consider during September 2020 to increase such dividend resolution up to a maximum of $0.24 per share. The updated dividend resolution will be proposed at the 2020 AGM, which is now postponed to June 17 2020. Thank you. And we are now ready to answer your questions.

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

Thank you very much. Good morning, and thanks for the messages of health to everybody. Same to everyone in ST. I think Jean-Marc my first question is regards to the automotive business. I appreciate what some of the drivers you have is with smartphones, et cetera that the second half will be better than the first half. But maybe you could talk about the second quarter and through the summer your expectations in your automotive business. Obviously there's lots of macro commentary and things out there about auto factories being closed globally. So maybe you could talk a little bit about that and your visibility to your previous silicon carbide targets through the remainder of the year. Thank you. Jean-Marc Chery: Thank you for your question. So I will let Marco first to make the first comment about the automotive market and I will complement if needed.

Yes. Thank you. As you had said clearly the automotive market having a complicated supply chain has been hit by closures at carmakers and TS-1. This is happening let's say with different time schedule around the world. The first that was hit in Q1 was clearly China and now it's happening in Europe and U.S. We have seen in this moment a sharp recovery as Jean-Marc was saying during his address. China now is moving back so automotive seems to be recovering in China while during Q2 Europe and U.S. will be hit at the most. Our view for the full year our modeling is for the automotive to be down between 25% to 15% in terms of car production, which means a range between 67 million unit light vehicles and 77 million units light vehicles. So, we do believe again that Q2 is going to be the most difficult quarter and from Q3 and Q4 to see a recovery in the automotive. Thank you.

Thank you very much for that commentary there. I really appreciate it. Just as my follow-up question. No surprise that the heightened underutilization charges in the second quarter. Lorenzo maybe if you could talk a little bit about how -- if you guys execute to the plan in the second half guidance how do you feel like those underutilization charges will come off the P&L and what that trajectory looks like into next year? I appreciate the color. Thank you.

Good morning to everybody. If I well understand your question is about the evolution of our unloading charges for Q2. Yes, as you have, let's say, listened from the remark of Jean-Marc, our guidance for Q2 is impacted by a significantly level of unloading charges. We have unloading charges that are in the range of -- impacting our gross margin in the range of 400 basis point. When we look to the second quarter, second quarter we guide the 34.6. Our gross margin is impacted by this 400 basis point of unloading charges. These unloading charge we estimate are around 130 basis point due to the reduced demand, but there is still a significant impact coming from the unavailability of the workforce not only in our front end plants but also in back end. This is estimated to impact our gross margin for around 270 basis point. On top of that, we are modeling a negative impact coming from price and the negative impact also coming from mix. So at the end, we have this decline in term of gross margins.

Did it answer your question Matt?

Did I answer your question?

Yes partly. I appreciate the details there. In addition like – I guess the next part of the question Lorenzo was, if you execute the plan and you guys have laid out a guidance range for the second half of the year, any kind of understanding as to the trajectory of the underutilization charges coming off of the P&L would be really helpful. Thank you.

Yes. Also in the second part of the year will be impacted by unloading charges. Second part of the year, we do expect to not have any longer unloading charge related to – not to have any longer unloading charge related to workforce because we do expect to come back in more a normal situation. Currently based on our plan, we estimate to have in the year something in the range of between 180, 190 basis point on our gross margin for the year, impacted by the unloading charges. So it means that that will remain also in the second part of the year while in – and this is at the high end of our – let's say plan so it means at €9.5 billion. Based off the €8 million that is unloading charges will impact in the year for more than 300 basis point our gross margin. So anticipating maybe the other question, what you let's say model your gross margin for the year? At this moment our visibility for the gross margin including this impact of unloading charges in the year is to be at the high end of the plan at €9.5 billion in the range of 37% and the low end in the range of 35% in term of gross margin.

Thank you very much. All the best.

Thank you, Matt. Next

The next question comes from Aleksander Peterc from Societe General. Please go ahead.

Yes, good morning and thank you for taking my question. Can I just ask? On silicon carbide do you stick to your current guidance? And secondly on the logistics issues that you experienced towards the end of the quarter, how do these issues look right now? Are they the same worse or are they being sorted out? And then just finally on OpEx, how should we think of modeling OpEx going into the remainder of the year? I know you do have the puts and takes here. But if you could just give us a figure of the average OpEx for the remaining quarters. Thank you so much.

Maybe Jean-Marc I will take the logistic and the OpEx. And then starting from the logistic the logistic is our Q1 result significantly, especially toward at the end of the quarter, toward the end of the quarter when many countries start with the lockdown and the closing of the borders, we experienced many flights grounded, difficult terrestrial transportations with border closed. We estimate that in the quarter and in especially the very last days of the quarter this was impacting our result for around $20 million, $25 million due to the fact that it was difficult to manage the logistic. As well as in the last week of the quarter we had also the closure of two important site was mentioned in the remark of Jean-Marc that were in Malaysia, Muar; and Calamba in the Philippines. Overall, this was impacting logistic plus lost manufacturing in the very day – in the very last days in the range of $40 million. What will happen in Q2 moving forward? For sure for logistic situation is getting better also because we are starting to find let's say alternative routes, alternative ways to serve our customers, so it's getting a little bit better. We will for sure still be a little bit impacted. And overall, we do estimate that we will have still something ranging between $80 million, $100 million between loss of manufacturing and let's say some problem in logistic impacting our quarter, Q2. In term of expenses. In term of expenses, when we met last time at Q4 earnings release, I was giving you an indication that expenses for the year is on average in the quarter would have been in the range of $640 million $650 million more or less as an average per quarter. For sure, as anticipated during the presentation of Jean-Marc we have revised down a little bit these numbers as of course we will take some action in order to be more disciplined let's say to refrain on discretionary to be more selective on some of our programs. So today, what we are modeling for the year is more something in the range of $635 million $645 million as a level of expenses per quarter in average. Jean-Marc Chery: So about silicon carbide okay, can you repeat your question please?

So, I just wanted to finally see, if your outlook for silicon carbide sales in the current year are modified in any way by the current recession? Jean-Marc Chery: Okay. Well so if you remember well okay when we answered this question. Entering in the year, our plan was supposed okay to reach revenue of about $300 million linked to silicon carbide diodes and MOSFET. But clearly with the current plan okay, I have shared with you a few minutes ago this year okay silicon carbide revenue will be below the $300 million but will be well above the $200 million we have executed last year.

Excellent. Thank you, very much.

Thank you. Next please?

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

Just a couple of questions. Firstly, obviously things were changing pretty rapidly through the end of the quarter. But I just wonder if you could give us some color on how you've seen bookings trend? Have you seen much in the way of cancellations from customers? How's that been trending over the last couple of weeks as I guess things have settled down? And particularly in automotive, I think you made a few comments that things have stabilized and started to improve but I assume that's just the China comment at this stage. Or have you seen any stabilization in Europe as well? And I'll maybe come back with a follow-up afterwards. Jean-Marc Chery: So here okay Marco I guess okay you take the question?

Yes. So your question is about bookings. So, during Q1, our book-to-bill have been above parity. So the trend in that -- from that point of view is overall positive. We have seen in automotive some alignment of the backlog with the existing situation as you have highlighted mainly in Europe. And the backlog in this moment seems to be stabilizing and we are looking forward the recovery to come during the Q3.

That's great. And then just in terms of -- there's been a couple of comments on pricing. I think one, where you said it had been a bit of a help to margins in Q1 but then some headwinds to margins in Q2. So just -- there's obviously a lot going on between supply challenges you're facing, but also demand disruption. Now is that having much an effect on a more generalized basis on pricing in the market? Or are people generally remaining quite disciplined?

Maybe I take the question as I was introducing this point. First of all, let's put in this way. In the first quarter, in respect to what we were modeling in our gross margin pricing came a little bit lighter than what was expected. But this was not driven by any opportunistic let's say situation driven by lack of supply chain. At the end, there is -- this was mainly driven by the fact that in respect to the pressure on pricing that we were expecting, we actually -- we managed to be a little bit less impacted. In respect to our second quarter and then maybe Marco will for sure complement. What we are expecting is the normal price pressure. For the time being, we don't see any significant impact both in the let's say price decline or let's say maybe price increase due to the fact that we are for some products and for some situation in supply constraint. I don't know if Marco you wanted to add some more color in respect to the price dynamic that you see in the market?

Yeah. Lorenzo, yes. Thank you. Yeah, I confirm what Lorenzo is saying. We are not seeing any special let's say price pressure. The dynamics are quite normal and are also driven from the fact that the market is looking in some way also to get parts in this moment with -- we have the logistics and the supply chain is a little bit constrained. So, nothing special in terms of price pressure in this moment just the normal pattern. Thank you.

Okay. Thanks very much.

Thank you, David. Next please?

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

Yeah, good morning. Question Jean-Marc with the visibility you have for the second half of this year how much is coming from your view on the market and your specific programs/new products, new clients? And maybe if you could give us a hint of where you see demand to be the strongest among your division for the second half versus the first half? Thank you. Jean-Marc Chery: Well, okay, if we put ourself at the high end of our plan, it is clear that the second half growth that we have sized at $1 billion basically. I would like to say that half is related to our top 10 OEM in, which -- for which we develop some custom design product. And -- but not only custom design product, we have also more application-specific standard product. And the visibility is of course better than the other 1,000 [ph] customer we address. So half will be the contribution from this top 10 customer and the other half will be more linked to the overall market, automotive and industrial. So this is basically what we are seeing today and what we have planned today. And the second question was?

Which segment do you see being the strongest in the second half of this year, which end market? Jean-Marc Chery: Okay. Well, clearly I think -- okay I have to say that if you let's say look, you make an assessment between a product line and a market clearly -- and which product line are a key contributor to the fact that ST plan assume we will over-perform our plan. So the product line, which contribute positively to the over-performance of ST are clearly microcontroller, so general purpose and secure; and imaging sensors and MEMS. They are the key contributor. Detractor clearly, of course, our ASIC, our application standard product in analog linked to the automotive legacy market. If you look on this angle of market, clearly, personal electronics thanks to our assumption both in term of overall volume, volume related to the key customer and the fact that the new program we have the design win are linked to the 5G phone, clearly, the overall personal electronic application segment will be a key contributor to the overperformance of ST. Then after we have some specific part of our portfolio and market which will contribute I would like to speak about Power. It is clear that our Power Solutions covering silicon carbide, but IGBT but low voltage power MOS will also contribute to the overperformance of ST in the automotive market. And I guess here it is thanks to our focus on electrification of the car as well our ASIC in digital linked to the digitalization of the car and our application-specific MCUs for automotive linked to the digitalization will contribute to the overperformance of ST. Well last, but not the least okay one detractor will be pure digital ASIC linked to a, let's say, legacy communication equipment which will be a detractor to the company. So this is overall, let's say, picture I can share with you about which product line market contribute to the overperformance of the company which product line market are detractor of the performance of the company.

Thank you very much.

Thank you, Jerome. Next please, Alessandro.

The next question comes from Stephane Houri from ODDO. Please go ahead.

Yes. Good morning, everyone. Thank you for taking the question. I have a question about the utilization rate. Can you remind us what was the utilization rate in Q1? Where you think it will go in Q2? And also where you think your inventory can go at the end of Q2? And linked to that about the CapEx what project did you put on hold to reduce the CapEx level? Thank you.

Maybe I take this question. Thank you for the question. Okay. Utilization rate I start from here. In Q1 our -- I'm talking about front-end. Of course, you know, in back end you usually -- we don't have this metric. Of course we had also problem in front-end -- in back-end, sorry this quarter and we will have also in Q2 for utilization rate. But talking about our facts our utilization rate averaging in the first quarter in the range of 79%. Q2 will be worse. Q2 we are modeling something more in the range of 70%. This utilization rate will increase in the second part of the year. Our expectation that will increase, but in the second part of the -- as I was commenting before we will still have unloading charges. So we will not get a full utilization rate in the second part of the year. Moving to the second point was about the dynamic of the inventory. You'll see that the inventory grew substantially as expected in Q4 in -- sorry in Q1 during the past quarter. Q1 a little bit higher than what I was anticipating. I was anticipating something in the range of 110-111 days of inventory. This is mainly driven by the fact that we have the lower level of revenues. In the second quarter the inventory will have two-folds. On one side we will have the finished product inventory that will decline. And you can easily understand why because we have these constraints on our back-end plant and so we will have really declining in our inventory as a finished product. But on the other side we will have an increase in inventory for what concern the semi-finished what we produce in our fab because we are preparing also the growth for the second half. So overall, the expectation for Q2 is to have an increase in our inventory. This increase will be fully reabsorbed in the second half. And we do expect to end the year with an inventory ranging between 95 to 100 days by the end of the year. There was another question or not?

On CapEx. Jean-Marc Chery: On CapEx.

On CapEx. So sorry. Jean-Marc Chery: Which program we cut and...

Which program? On CapEx of course the reduced level of revenues that we are now envisaging for the year are bringing us to reduce what was supposed to be our capacity increase for the year. So this is a portion of CapEx that has been definitely reduced and this is impacting both front end and back end. On top of that there is some natural rescheduling of some of our strategic initiatives mainly driven by the fact that in such a condition as you can easily figure out some of them have accumulated some delay during for instance Q1 in some of our activity like for instance the building up of our facilities that will be in the north of Italy. This has been strongly related let's say, it was much slower in terms of activity than what was originally expected.

Okay. Thank you very much.

Okay, Stephane. Alessandro, another question please

The next question comes from Adithya Metuku from Bank of America. Please go ahead.

Yes. Good morning, gents. So two questions. Firstly just on the Huawei issue. Recently there's been a lot of news flow around the U.S. requiring licenses from global semiconductor companies to shift to Huawei. I just wondered if you could give us some color on how you may be affected by this. I believe 2% to 4% of your revenues come from Huawei at the moment. And secondly, I just wondered if Lorenzo could give us an overview of the growth rate by division in the second quarter and also at the midpoint of your view for the full year 2020? Thank you. Jean-Marc Chery: It's difficult okay to comment about the impact of this potential decision versus Huawei. I can only comment what is intrinsic ST and then okay what will happen linked to the global situation so far? Okay, this is a scenario that today we do not consider. What is intrinsic ST? It's important. Okay. If you read carefully the possible, okay impact, it is linked to technology with a metal pitch below 80-nanometer, which it is – it will affect potentially technology like a 14-nanometer FinFET and below. And you know ST strategy on personal electronics is to focus on subsystem like sensor, specialized imaging sensor, secure solution analog RF mixed signal and power management and all this technology are enabled by technology with a metal pitch well above 80-nanometer. So intrinsically ST will not be impacted. But I cannot, let's say forecast, gamble okay what will be the overall impact, if such a measure will occur.

I can move to the second part of your question. If I...

You have your answer? We can move.

Yes. Very clear. Very clear. Thank you.

Thank you very much.

So I move to the second part of your question talking a little bit about the dynamic of the revenues moving from Q1 to Q2. Moving from Q1 to Q2, as we said we have, let's say revenues declining by around 10%. Looking by group, I would say that there are different dynamics inside the various groups. On one side, we have MDG Group that will grow the revenues. And this growth is estimated to be in the mid single-digit growth, let's say in that range. Then we will have let's say ADG. ADG will decline in the low -single-digit. But this inside on ADG, there are two different dynamic. On one side, we have automotive that will decline significantly. And on the other side, we will have recovery in power and discrete. You have to keep in mind that the power and discrete has been one of the most hitted product line by the constraint that we have in China during Q1. So, portion of this recovery is also related to the fact that now in China our manufacturing site in Shenzhen is working at full steam. Then we have a significant decline in revenue in AMS. In AMS, this is mainly driven by seasonality in personal electronics. So AMS will decline significantly revenue on a sequential basis moving from Q1 to Q2. There was another question or this is covering...

Yes. It's same question for the full year if I recall well.

For the full year?

For the plan if you can give a sense of color.

The full year I would say that when we look at the evolution of the revenue, looking -- of course, we have a big range. We talk between $8.8 billion and $9.5 billion. Let's suppose that we talk about the $9.5 billion just to give you some color on this. On the $9.5 billion, I would say that looking to the -- we will have a decline in revenues compared to 2019 when we look at ADG. And this decline you can easily understand it is related to automotive. Looking, let's say, in AMS, we will have some slight increase in our view. And MDG should increase also in this case low-single-digit. So, at the end we will have a decline on the ADG; and the other two group a little bit stable a little bit increasing. This is the plan -- how we have framed the plan for 2020 by group -- the evolution of the revenues by group.

Understood. Very clear. Thank you very much.

Next question?

The next question comes from Sandeep Deshpande from JPMorgan. Please go ahead.

Yeah. Hi. Thanks for letting me on. My question is back again to the guidance. When you look at Q1, I mean your Q1 was slightly weaker than what you had guided but essentially in line. And that was guided before COVID-19 impact was really and fully known. So the point I have is that you're guiding second quarter to $2 billion in sales at the midpoint 10% down, which is approximately $170 million or $180 million down year-on-year. I mean -- and you've given how that is broken up from Q1 to Q2. But given that IHS is at this point saying that auto units are down 21% year-on-year, how can you say with conviction that Q2 is going to be the bottom given that at this point, given that there are multiple -- and most of the impact as I can see in Q2 is coming in AMS and not in ADG. How is this the bottom in the automotive market for you in terms of the orders or rather in the sales, because this -- if autos are going to be down 21%, you could see continuing impact into the second half of the year?

I understand your point. I -- actually when we look at the dynamic of the second quarter -- in this dynamic you need to also factor in that is not only driven by the market, but it's also driven by the fact that in Q1 we had the impact on the availability of the parts. As I was trying to explain before, it's true that I was saying that the ADG is down on a sequential basis, let's say, on a single-digit -- low-single-digit. But it's also true that it's very different inside the ADG the caution of automotive and the portion of power discrete. The portion of power and discrete let's say is increasing significantly, mainly driven by the availability of the parts than the market, the market that you see. ADG is declining significantly. So at the end the two, the decline of ADG more than offset the increase of power and discrete. And the increase of power and discrete, as I repeat is mainly driven by the fact that, while in Q1 our factory initiation that has – on which our power discrete as quite exposed was in a shorter quarter of 88 day, 14 days closed, so you have to consider that 7 days were embedded in our guidance, but 7 days were not embedded. And then to consider that after 7 days of closing based on start production from 0 to 100 in one day because there was also the problem that the workforce was not available due to the constraint in movement, so we stopped and we had 3 four weeks of production that was not at full steam during the quarter. So actually there is also this kind of dynamic that you should embed when you look at how the revenues evolve and moving from Q1 to Q2. I hope to have clarified a little bit the -- between what is the market and what is related to intrinsic issues that we had as a company for our production.

Thank you, Lorenzo. So I mean, maybe I'll clarify somewhat. I mean, I understand the point you're making because this seems to be very much driven by what inventories are in the system and what your shutdowns and startups of your facilities. But it is not -- to me it doesn't look like a reflection of end demand because historically ST has been very good in terms of guidance. When you give a revenue guidance you achieve it. Maybe you not good in the long-term, but definitely in the short term you're very good. Do you think at this point your ability to forecast is impaired by the fact that things are changing so dramatically? Or do you think that the order decline has stopped now and that you will not see further round of decline?

Look I -- when we look at the backlog that we have for Q2, it's definitely a backlog that is significantly higher than our guidance. So through that -- at this stage we may say that visibility could be a little bit more difficult than in a normal quarter. This we acknowledge. I think everybody acknowledge that. But we do think that let's say we have taken inside our guidance the best of our let's say, assumption and then here Marco can also complement in term of dynamic of the market and what is let's say the feedback of our customers and what is also let's say the constraint that are different than what it was for instance in Q1. Just to make an example in Q1 as I was mentioning before, we had mainly problem on the Shenzhen plant while in Q2 probably this will be more on Philippines and Muar that are different product lines. We have take into consideration and we think the guidance is reflecting the combination of these two ingredients let's say the demand from customers and let's say dynamic of our capability to produce. I don't know if you want to do another... Jean-Marc Chery: I think okay we can share okay as a data point that we assess the impact of the supply chain constraints in Q2 still related to let's say the -- some lack of workforce attendance because okay, as it is clear that in Shenzhen now we are running full speed. In Philippines Calamba and in Muar this country are still under lockdown minimum up to end of April and for some of them maybe mid-May. Similar situation, we have in [indiscernible]. So all the impact okay we have assessed on revenue is in the range of $70 million to $80 million. Means, okay without okay this constraint okay our let's say guidance would have been more in the range of $2.070 billion or $2.080 billion. The rest again about the demand as Lorenzo said, we have with us a backlog. And clearly okay a part of the backlog, we can assess it very well okay because of the intimacy we have with our let's say top OEM. Part of the backlog, okay, our duty is to let's say assess it. And make some judgment to consider if the backlog is fully reliable. And maybe part of the backlog and especially for automotive is more linked for system substitution or let' say, because in Q1 people put a frame order in order to secure ourselves. This is something we have seen. And in fact will not be transformed in the real revenue. So that's the reason why we are really confident in this guidance. We are not happy with the guidance. We are very confident in the guidance. And we do believe it represents well the capability of ST to operate in Q2.

Thank you very much.

Thank you very much. And next question please?

The next question comes from Achal Sultania from Credit Suisse. Please go ahead.

Hi. Good morning. Just a couple of questions, one on RF side of things, I guess can you help us -- give some color on what is the size of the business now? And how is the customer traction? I know you had good traction with one Chinese customer last year. Are we seeing signs that the customer list is growing in that RF part of the business? And is all of that business predominantly still coming from smartphones or infrastructure is starting to become a contributor to that? And then secondly, on the GaN side of things obviously you've had partnership with TSMC. You've acquired a stake in Exagan. I guess, how should we think about the revenue ramp here? Is it more about 2021 or 2022? Any color around potential for revenue in that part of the business, would be helpful. Thank you. Jean-Marc Chery: So I will answer about GaN. And Marco will answer about for RF mixed signal for mobile phone and infrastructure. Now about GaN, it is clear that the agreement with TSMC is to accelerate the availability of power solution using a GaN MOSFET associated with analog driver to offer power solution. But we do believe that in let's say second part of 2021. We could let's say, acknowledge the first revenues. But for sure will be more for 2022 and beyond. And then, thanks to Exagan acquisition, we can specifically generate revenue sooner. But here I will communicate more at our Capital Market Day, in September. Marco, please begin.

Yeah. I will take the part on the RF modules. So first of all as you know, our model is mainly SOT -- COT business. And the RF modules can cover both, the 4G and the 5G. And clearly what we are seeing now is, in China, while in the rest of the world this is not happening, an acceleration on the, 5G portion. The rest of the world is not happening because as you know there are delays now in America and Europe on the 5Gs. So portion of -- the biggest portion of our business is clearly in the mobile but can be applied also for the 5G base stations. Did, this answer your question?

Yeah. Just on the size of that business if you can provide some color. Is it like $100 million less than that more than that? Any color on that? Thanks. Jean-Marc Chery: So we cannot comment so specifically and I guess, you understand why.

Thank you very much Achal. We have another question. We take time to take a few more questions if any. We have passed the one hour, so any other question?

Okay. Make sense. Thanks a lot. Jean-Marc Chery: Thank you very much, next question. If we have another question, we take time to take two more questions, if any we have, probably one hour, so any other question?

We have a question from Amit Harchandani from Citigroup. Please go ahead.

Thank you. Good morning all. Amit Harchandani from Citi. Two questions, if I may. My first question relates to what we saw in Q1 and what you are talking about Q2. In terms of inventory in the supply chain, do you get a sense that customers over-ordered or tried to build up some buffer supplies in Q1, because they were worried about supply disruption, and that is impacting how you're thinking about Q2 and second half? Or in other words, how do you assess the inventory in the supply chain today and customer buying behavior? And then I have a second question. Jean-Marc Chery: So on the first question, I will, let say pass the answer to Lorenzo okay which will provide let's say some data point and technical comment. But I would like just to pass overall view from the CEO. It is clear that in Q1 okay what the industry face, industry face here and there, lockdown measures from various governments. And some of customers, unfortunately -- and partners as well were obliged to totally shut down their plant. And some of them, like ST has been able to operate at lower capacity than their maximum capacity. When you face such, let's say unprecedented challenge, the normal behavior is to secure your own supply chain, and means okay, you are not looking to optimize your inventories. Your first reaction behavior is to secure yourself to be sure that you will not be impacted by components okay mechanical electrical whatever which will impact you in your capability to ramp again. I think it is a total normal behavior. That's the reason why it's difficult to assess and to comment the inventory in the supply chain, because of this let's say totally normal behavior. And I have to say that for ST it has been known as well part of our inventory increase of Q1 are linked to critical material we have put on inventory in order to be sure that we will be able to keep our wafer fab up, because that if you shut down the wafer fab, the impact is really, really material. So in such a case, you are trying to warranty that your supply chain will be up. And then, after all you optimize the inventory level. So I would like to share with you this overall comment and then I pass the ball to Lorenzo.

What can I add is something that we have already commented before. What we saw in Q1 is that our book-to-bill is well above parity. And this is reflecting orders from our customer and that for sure has not been yet readjusted as a consequence of the COVID-19 outbreak. Of course, we are monitoring the level of stock at our distributors. We are monitoring the consignment stock at our large OEMs. Anyway, the situation is complex from a supply standpoint that we cannot exclude that some customers are increasing their safety stock to secure their own supply chain as was mentioned just now by Jean-Marc. In this situation, this cannot be definitely excluded.

That's helpful gentlemen. And secondly, if I may maybe this might be a bit too early, but could you share your current thoughts in terms of the various trends that you see out there driving your business? Once we exit this situation, the pandemic, do you have any early thoughts in terms of based on your discussions, where could you potentially see sustainable acceleration of demand for you? And where do you think you could see structural deterioration of demand for you? Thank you.

You mean beyond the -- when we are back to let's say normal or whatever as you say? It is -- questions.

Yes, Celine. So beyond say 2020, I mean clearly some things will change permanently. I'm just wondering, if you're in a position to share any initial views on how are you thinking about that once we exit the crisis? Jean-Marc Chery: Okay. So what I can let's say comment, the plan, we have set up with this range of revenue okay is based on the usual data point, we have backlog booking dynamics, POS POP at the distributor channel. It's based also on clear – let say, intense, we have with our top OEM for the current ongoing programs, but also for next-generation. And I commented, during my address that we still see intense R&D and innovation activity. Ballpark maybe there is one program or two here and there which has been postponed but overall the innovation and the R&D activity is really solid. And then, our plan is based also on various decision, we have with the industry analysts providing various scenario about economic impact of the COVID-19. What is important to share with you is that, we are protecting our R&D. We are protecting our sales and marketing programs, especially the initiative about industrial for a long-term sustainable and profitable growth. So all these program are protected. All these program are, let's say consistent with the view and the discussion we have with our customers. So doing that, we do believe that our long-term strategy and each objective remain. Now for sure, it's early to assess the mid/long-term impact of this COVID-19 outbreak. And that's the reason why we have postponed our Capital Market Day from May to September believing that the visibility and about the midterm will be better at this stage. My main message is whatever will be the visibility the company will move stronger from this outbreak, keeping our R&D program running, our sales marketing program running and our transformational program running. So this is, what I can tell you.

Thank you, gentlemen.

Thank you very much. We have time for two more questions. Time is running a bit now.

The next question comes from Johannes Schaller from Deutsche Bank. Please go ahead.

Yeah. Thanks for taking my questions. Maybe firstly on microcontrollers specifically. I mean you've proven to have a pretty accurate view on what is going on here in the channel and at the POS in the past. And I think a lot of your competitors are going out with quite different conflicting messages at the moment. So could you just update us here what you see in terms of channel inventory on the microcontroller side and also the trends you're seeing at the POS? And then the strength you see in MDG kind of how much of that at the moment is really the kind of broader market as opposed to maybe some specific wins that ST has that would be helpful. And as a second question just in terms of your CapEx and also what you said in terms of strategic project delays in Italy. Can you update us on your silicon carbide investment roadmap both on the front-end manufacturing side, but also on the Norstel wafer side? How that is affected by the current situation? Thank you. Jean-Marc Chery: So, Marco will answer the microcontrollers and the-go-to-market the channel and then Lorenzo will answer the CapEx, and I will comment about the silicon carbide strategy.

Yes. So as we already say before, the situation in the channel at the end of Q1 specifically for microcontroller is I can say extremely healthy. We had growth in POS year-over-year and the level of POP was growing, but much lower – at lower level than the POS, which conclusion is we end up Q1 with a pretty clean inventory in terms of MCUs. And the backlog for the second quarter is -- I think, that's why MDG is going to show a growth quarter-over-quarter. And this is fueled not only by, let's say, the legacy product that we have but also by the new products that have been introduced during last year. Let me remember you that we introduced 10 new products during last year. And now the pipeline of opportunities is transforming. So we have the new families that are covering microcontroller extremely sophisticated, et cetera. So, overall, I think, we are gaining market share and the situation is pretty healthy. Jean-Marc Chery: So about the silicon carbide and strategic program. As Lorenzo said it's obvious that two strategic program are -- so the 300-millimeter fab in Agrate so close to Milano. And the silicon carbide -- the raw materials silicon carbine facilities we intend to set up. It is clear that since March -- early March, the workforce attendance to this construction had been reduced to zero, because clearly, we have been successful to maintain work force attendance inside our wafer fab warranting the most stringent health and safety measures to our employees. That it was not question to maintain workforce attendance in construction building and facilities and for these programs. So these programs have not yet resumed and definitively will be naturally delayed. For both of them, no impact on ST short/medium-term will happen, because I repeat for Agrate ST, actually we did believe that the contribution of ST for the growth of ST was planned in 2022 and beyond and so we will have no impact in the next two, three years. And for silicon carbide what was important for us is, first, with the acquisition of Norstel to focus on technology roadmap developments; to improve our whole technology working closely with the Norstel team and their know-how and also to work on the future wafer size conversion of further technology from 6 to 2-inch. So all these program running at full speed. But then the, let's say, mechanical delay of the future facilities of raw material for silicon carbide will have absolutely no impact, because I remind you that we signed two strategic agreement so with Cree and with SiCrystal aiming to cover our need for the period 2024, where I repeat that we have award which enabled us to make $2.8 billion of revenue. And this plan are covered by our strategic agreement. And then it will be our decision to size the internal production ratio to the total needs according the availability of this new facility. So I think as a takeaway, but the strategic program, they are delayed because lack of workforce attendance to protect people and their family. No impact short/medium-term of our business, because one side it was planned like that; and the other side we are covered by strategic supply agreement with Cree and SiCrystal.

That’s very helpful and reassuring. Thank you.

Thank you, Johannes. We're taking the very last question. We're now running out of time. As usual for the ones of you that have not been able to ask question, do not hesitate to go directly to Investor Relation team and we will seek to take your -- to answer your question after this call. So, Alessandro, please can we have the last question?

The last question comes from Dominik Olszewski from Morgan Stanley. Please go ahead.

Hi. Good morning. Thanks for taking extra time for the question. Firstly, I just want to clarify particularly whether I heard correctly. Did you mention that your full year 2020 guidance and the second half recovery assumed a relaxation of restrictions by a certain date? And if so could you perhaps clarify what time frame were you thinking? For example, were you thinking of an easing of restrictions in June? That's the first question. And then just secondly more broadly on capital allocation. Obviously, one of your global peers last night spoke about maintaining fab utilization rates at Q1 levels into I think to Q2 to take advantage of future rebounds. So could you maybe just discuss how you're thinking about? Is there an upper limit of how way you would be happy to see inventory go either in dollar terms, in days of inventory or however you are thinking about that, obviously, bearing in mind your target to getting towards the 100 days by the end of 2020? Thanks.

So Dominik, the first question is to qualify the H2 -- the H2 over H1, we have indicated as part of our plan, whether there is still a portion which is related to supplies constraints or whether this is basically how it is. And the second part, I'm not sure we capture well is about the fab utilization. Could you repeat the second part?

Sure. It's just to say, basically, is there a maximum level of inventory through the middle of the year either in dollar or relative terms where you'd be happy to run your fabs? Just thinking about where global competitors are also…

You mean, as a trend -- the trend between inventories and running the fab, et cetera, so we discuss the…

Okay. I will try to answer. In our plan, we do assume that in the second part of the year the restriction on our factories are removed. So means that the unloading charges that we are embedding in our plan is fully linked to lower demand than our capacity. So this -- we do not expect to have a restriction still in the second part of the year. This is the assumption, of course, that we have embedded here in our plan. In respect to the modeling of inventory, no, what I would say is that our view is that in a year like the one that we are experiencing, we model our inventory only based on the needs, let's say, that we see in the market. We do not, let's say are aiming to protect or to produce in excess -- in respect to what is needed. Of course, we have to do as usual due to the seasonality some smooth during Q2. But at the end for sure as I think most of our competitors and company around the world, we will be very attentive to the cash. So what we would like to do is to produce accordingly to our visibility in the market. And this is also the reason why we will be hit unfortunately during the year by unloading charges along H2 -- H1 and H2.

Thank you.

Does this answer your question?

Yes. Thank you.

Thank you, Dominik. Thank you very much. This is now the end of this call Alessandro. Jean-Marc Chery: Okay. So thank you.

Thank you.

Thank you. Thank you very much for your attendance.