STMicroelectronics reports strong Q4 2016 financial results, analysts speculate it will supply iPhone 8
In addition, the company is planning to significantly increase capital spending on new plant capacity of up to $1.1 billion in an effort to drive revenue later in 2017.
This investment is nearly double the $607 million the company spent last year and the $467 million in 2014.
CFO Carlo Ferro said the move was a one-off increase instead of a permanently higher level of plant investment.
ST also revealed it signed a deal with an unnamed customer that can generate “substantial revenues” in the second half of 2017.
Analysts are speculating the unnamed customer is none other than Apple, with STM providing new image sensing components for Apple’s upcoming iPhone 8 line.
According to Liberum analyst Janardan Menon, STM’s strong results can be attributed to demand from automakers and phones such as the Apple iPhone 7, which include “time of flight” proximity sensors that also measure ranges between a phone camera and objects in its view.
“This is likely to be a new product in the iPhone 8, in addition to on-going shipments of the time-of-flight sensor,” Menon said. “We expect STM’s strong revenue growth to convert into rising margins and further multiple expansion.”
In a conference call with analysts, STM CEO Carlo Bozotti declined to comment on the name of the new customer. This only fueled speculations that the customer is Apple as the company prohibits suppliers from revealing its contracts.
The company reported Q4 2016 new revenue of $1.86 billion, an 11.5 percent increase over Q4 2015 last quarter of 2015 and in line with analyst expectations. STM also forecasts “better than normal seasonality” for Q1 2017 compared to the last quarter.
Meanwhile, the company’s gross margins saw its fifth consecutive quarterly increase by increasing to 37.5 percent in Q4 2016. It also reported that its gross margins for Q1 2017 will likely be around 37 percent.
Previously reported, Valencell and STMicroelectronics recently launched a highly accurate and scalable development kit for biometric wearables.