Why STMicroelectronics’s Moves Are Closely Watched
Going for smart driving spends
STMicroelectronics (STM) has posted a string of earnings disappointments in recent quarters, rattled by tough competition and price erosion in the semiconductor industry. However, the company is making moves that could settle its troubles and give investors more reasons to love the stock.
In a recent strategic move, STMicroelectronics announced a partnership with Allystar, another leading chip designer. The companies said they will cooperate to develop and commercialize GNSS (global navigation satellite system) solutions for the smart driving market. GNSSs are becoming vital components in autonomous driving, a promising market for chipmakers looking to expand beyond their traditional markets.
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Autonomous driving predictions
According to The Boston Consulting Group, 12.0 million fully autonomous and 18.0 million partially autonomous vehicles will be sold annually by 2035. China (FXI), the market in focus in the STMicroelectronics-Allystar partnership, is expected to be one of the largest smart driving markets. Autonomous vehicles developed by companies such as Ford (F), Tesla (TSLA), and General Motors (GM) hold some promise in tackling traffic congestion in cities. China has a traffic congestion problem.
A new organization to pursue the Internet of Things market
Besides partnership with Allystar to pursue smart driving dollars in Chinese and other Asian markets, STMicroelectronics also recently announced a new organization to focus on the broader IoT (Internet of Things) market.
Investors can only hope STMicroelectronics’s strategy will avoid earnings disappointments. STMicroelectronics reported bad news in 1Q17. With EPS (earnings per share) of $0.12, it missed the consensus EPS estimate of $0.14, and its revenue of $1.8 billion also missed expectations.