For STMicro, wireless business may be hidden key to reach margin goal

By Eric Auchard BARCELONA (Reuters) - STMicroelectronics said on Tuesday it expected a second year of growth in its wireless business in 2015, following years of losses, a resurgence that eventually could help Europe's largest semiconductor maker hit overall profit margin improvement goals. Speaking to financial analysts at the annual Mobile World Congress, executives of the Franco-Italian chipmaker spelled out its strategy for taking its wireless business to the same level of profitability as its other, healthier businesses. The company's wireless products are used in thousands of devices ranging from top smartphone brands to wearable devices like fitness monitors and even power chargers. Overall, ST's main business drivers include sensors and power management chips, automotive components and embedded processors. Those three lines, where ST has leading market positions, account for 70 percent of total revenue and each already delivers operating margins at or above 10 percent. But wireless, a fragmented business unloved by investors since ST's exit from its ST-Ericsson wireless joint venture in 2013, could prove decisive for the company's medium-range target of reaching 10 percent operating margins for ST as a whole. "Wireless remains a key element of our strategy," Chief Financial Officer Carlo Ferro told the gathering of analysts and journalists. "We expect the ST wireless business to grow in 2015." Based on overall results, ST has some work to do: operating margin grew to 3.2 percent in 2014 from a negative 2.1 percent in 2013. It turned a tiny net profit of $128 million, reversing a loss of $500 million in 2013, when ST Ericsson was wound down. Although ST executives did not give figures, they said the wireless business was profitable after years of product trimming. It has been diversifying into a broader range of parts used not just in phones and wearable devices but also contactless payments. Major customers include the biggest device makers: Apple, Microsoft and Samsung. The wireless businesses, which include sensors, microcontrollers, power management and imaging products, had about $1 billion in sales in 2014. But since wireless is spread across multiple divisions, it is hard for investors to measure progress on profit or sales targets. Its best known wireless products are motion sensors used in phones and wearable devices to detect speed or orientation, but ST is now enjoying surging growth in newer areas such as mini microphones and touch sensors used in smartphones. "We are going to accelerate again in order to gain (market)share," Benedetto Vigna, general manager of ST's Analog and Sensors division told the analyst meeting. "I think we have put a lot of things together in order to run faster." ST shipped 260 million microphone sensors in 2014, more than doubling that business over the prior year, executives said. (Reporting By Eric Auchard. Editing by Jane Merriman)