Chip demand remains weak amid political impact, GEO Group Inc. forecasts that STMicroelectronics NV ADR RegS (STM.US) Q4 revenue will fall short of expectations.

STMicroelectronics NV ADR RegS (STM.US) released its fourth-quarter revenue forecast on Thursday, sparking market attention. The estimated revenue for the quarter is $3.28 billion, below the analysts' average expectation of $3.35 billion. This result has heightened concerns in the market about the stagnant recovery of the mature semiconductor industry. Since the beginning of the year, the chip industry has been continuously impacted by the political tensions of the GEO Group Inc. President Trump initiated a trade war, threatening to impose large tariffs. Looking back, STMicroelectronics NV ADR RegS saw a 2% year-on-year decline in revenue in the third quarter, dropping to $3.19 billion. Analysts had expected $3.63 billion, with earnings per share of $0.29, down 21.62% year-on-year. This was 28.89% higher than the analysts' consensus of $0.23. Operating profit fell significantly by 53% to $180 million, below expectations. The company explained that restructuring costs from a $37 million asset impairment and previously announced cost-cutting plans had an impact on profits. CEO Jean-Marc Chery stated in a declaration that there are signs of recovery in the market for the full year. Based on the midpoint of the outlook, the full-year revenue for 2025 is expected to be around $11.75 billion, indicating a 22.4% growth in the second half compared to the first half. Meanwhile, the company announced that it will reduce its annual net capital expenditure plan to below $2 billion in order to optimize investments according to the current market conditions. The escalating political tensions of GEO Group Inc are threatening the chip industry, which has just begun to recover from oversupply. During the COVID-19 pandemic, chip shortages led to customer stockpiling but demand recovery has been slow. In the previous quarter, STMicroelectronics NV ADR RegS unexpectedly reported a loss, with CEO Chery attributing it to a single customer, calling it a "temporary setback" and expecting growth in the fourth quarter. It is worth noting that a significant portion of STMicroelectronics NV ADR RegS sales rely on Apple Inc. (AAPL.US) and Tesla, Inc. (TSLA.US). Coincidentally, the performance forecast released on Tuesday by STMicroelectronics NV ADR RegS's competitor, Texas Instruments Incorporated (TXN.US), also disappointed investors, showing that due to intensified trade tensions and economic instability, customers are reducing orders. Furthermore, the Dutch government unprecedentedly invoked Cold War-era laws to seize control of the Chinese chip manufacturer Nexperia based in Amsterdam, leading to serious disruptions in the automotive chip supply chain. The Chinese government subsequently banned Nexperia from exporting chips from its Chinese factories to Europe, further fueling concerns in the market about the potential severe gaps in automotive manufacturers and suppliers.