stm-2023-12-31-en

Contents


1. MESSAGE FROM THE PRESIDENT AND CHIEF EXECUTIVE OFFICER ON THE FINANCIAL YEAR 2023 .....	4

2. CORPORATE OVERVIEW ............................................................................................................................	5

2.1. HISTORY AND DEVELOPMENT OF STMICROELECTRONICS ...............................................................	5
2.2. STRATEGY & OBJECTIVES ...................................................................................................................	6
2.3. ORGANIZATIONAL STRUCTURE .........................................................................................................	6
2.4. PRODUCTS AND ACTIVITIES ...............................................................................................................	6
2.5. SALES, MARKETING AND DISTRIBUTION ...........................................................................................	7
2.6. RESEARCH & DEVELOPMENT .............................................................................................................	8

3. REPORT OF THE MANAGING BOARD ........................................................................................................	9

3.1. STATEMENT OF THE SOLE MEMBER OF OUR MANAGING BOARD ...................................................	9
3.2. BUSINESS OVERVIEW & PERFORMANCE ...........................................................................................	10
3.2.1. Results highlights for the year 2023 ..........................................................................................	10
3.2.2. Business overview ......................................................................................................................	10
3.2.3. Key announcements ...................................................................................................................	17
3.2.4. Financial outlook: Capital investment .......................................................................................	18
3.2.5. Liquidity and financial position ..................................................................................................	19
3.2.6. Financial risk management ........................................................................................................	22
3.3. RISK MANAGEMENT AND INTERNAL CONTROL ................................................................................	23
3.3.1. Risk Management ......................................................................................................................	23
3.3.2. Internal Control ..........................................................................................................................	47
3.4. SUSTAINABILITY .................................................................................................................................	48
3.4.1. Environmental Matters ..............................................................................................................	50
3.4.2. Labor and Human rights .............................................................................................................	57
3.4.3. Anti-bribery and corruption matters ..........................................................................................	59
3.4.4. Social and employee matters .....................................................................................................	61
3.4.5. Corporate social responsibility in our supply chain ....................................................................	64
3.4.6. EU Taxonomy ..............................................................................................................................	65
3.4.7. Corporate Sustainability Reporting Directive ............................................................................	80

4. REPORT OF THE SUPERVISORY BOARD .....................................................................................................	80

4.1. COMPOSITION OF THE SUPERVISORY BOARD ..................................................................................	81
4.2. MEETINGS AND ACTIVITIES OF THE SUPERVISORY BOARD ...............................................................	85
4.2.1. Activities of the Supervisory Board .............................................................................................	85
4.2.2. Membership and Attendance .....................................................................................................	85
4.3. AUDIT COMMITTEE ...........................................................................................................................	86
4.4. COMPENSATION COMMITTEE ...........................................................................................................	86
4.5. STRATEGIC COMMITTEE ....................................................................................................................	87
4.6. NOMINATING AND CORPORATE GOVERNANCE COMMITTEE ..........................................................	87


4.7. SUSTAINABILITY COMMITTEE ............................................................................................................	87
4.8. SECRETARIAT AND CONTROLLERS .....................................................................................................	87
4.9. REMUNERATION REPORT ..................................................................................................................	88
4.9.1. Supervisory Board remuneration ...............................................................................................	88
4.9.2. Managing Board remuneration .................................................................................................	90
4.9.3. Senior Management remuneration ...........................................................................................	105
4.9.4. Remuneration comparison between the Managing Board, the Executive Committee (excluding the sole member of the Managing Board, our President and Chief Executive Officer), the Executive Vice Presidents and employees .............................................................	112
4.9.5. Share ownership ........................................................................................................................	114
4.9.6. Stock awards and options ..........................................................................................................	114

5. CORPORATE GOVERNANCE .......................................................................................................................	114

5.1. COMMITMENT TO THE PRINCIPLES OF GOOD CORPORATE GOVERNANCE .....................................	114
5.2. GENERAL MEETING OF SHAREHOLDERS ...........................................................................................	116
5.3. SUPERVISORY BOARD ........................................................................................................................	118
5.4. MANAGING BOARD ...........................................................................................................................	119
5.5. INDEMNIFICATION OF MEMBERS OF OUR MANAGING BOARD AND SUPERVISORY BOARD ...........	123
5.6. RISK MANAGEMENT AND CONTROL SYSTEMS .................................................................................	123
5.7. REQUIRED INFORMATION ARTICLE 10 TAKEOVER DIRECTIVE ..........................................................	123
5.8. SHARES WITHOUT VOTING RIGHTS AND SHARES WHICH DO NOT GIVE ANY OR ONLY A LIMITED RIGHT TO SHARE IN THE PROFITS OR RESERVES ...............................................................................	125
5.9. CODE OF CONDUCT ...........................................................................................................................	125
5.10. DEVIATIONS FROM THE DUTCH CORPORATE GOVERNANCE CODE .................................................	126
5.11. MAJOR SHAREHOLDERS ....................................................................................................................	127
5.12. SHAREHOLDERS’ AGREEMENTS ........................................................................................................	129
5.12.1. STH Shareholders’ Agreement .................................................................................................	129

6. DIVIDEND POLICY ......................................................................................................................................	131

7. CONSOLIDATED FINANCIAL STATEMENTS ................................................................................................	133

7.1. CONSOLIDATED INCOME STATEMENT ..............................................................................................	133
7.2. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ...........................................................	134
7.3. CONSOLIDATED STATEMENT OF FINANCIAL POSITION ....................................................................	135
7.4. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .....................................................................	136
7.5. CONSOLIDATED STATEMENT OF CASH FLOWS .................................................................................	138
7.6. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ................................................................	139
7.6.1. Corporate information ...............................................................................................................	139
7.6.2. Basis of preparation ...................................................................................................................	139
7.6.3. Statement of compliance ...........................................................................................................	139
7.6.4. Basis of consolidation ................................................................................................................	139
7.6.5. Changes in accounting policies ..................................................................................................	140
7.6.6. Standards and amendments issued but not yet effective .........................................................	141
7.6.7. Summary of significant accounting policies ..............................................................................	141


7.6.8. Critical accounting estimates and judgments ...........................................................................	154
7.6.9. Investments in subsidiaries ........................................................................................................	159
7.6.10. Property, plant and equipment .................................................................................................	160
7.6.11. Leases ........................................................................................................................................	162
7.6.12. Intangible assets ........................................................................................................................	163
7.6.13. Goodwill .....................................................................................................................................	164
7.6.14. Other financial assets and financial liabilities ...........................................................................	165
7.6.15. Other non-current assets ...........................................................................................................	180
7.6.16. Inventories .................................................................................................................................	181
7.6.17. Trade accounts receivable .........................................................................................................	181
7.6.18. Other receivables and assets .....................................................................................................	183
7.6.19. Cash and cash equivalents .........................................................................................................	183
7.6.20. Equity .........................................................................................................................................	184
7.6.21. Other non-current liabilities ......................................................................................................	189
7.6.22. Employee benefits .....................................................................................................................	190
7.6.23. Trade accounts payable, other payables and accrued liabilities ...............................................	195
7.6.24. Significant categories of income ...............................................................................................	195
7.6.25. Revenues ....................................................................................................................................	196
7.6.26. Segment information .................................................................................................................	198
7.6.27. Expenses by nature ....................................................................................................................	200
7.6.28. Other income / Other expenses .................................................................................................	201
7.6.29. Finance income / Finance costs .................................................................................................	202
7.6.30. Components of other comprehensive income ...........................................................................	203
7.6.31. Income tax .................................................................................................................................	203
7.6.32. Earnings per share .....................................................................................................................	208
7.6.33. Related party transactions. .......................................................................................................	208
7.6.34. Commitments, contingencies, claims and legal proceedings ....................................................	211
7.6.35. Financial risk management objectives and policies ..................................................................	212
7.6.36. Subsequent events ....................................................................................................................	215

8. COMPANY’S FINANCIAL STATEMENTS .....................................................................................................	216

8.1. COMPANY’S STATEMENT OF FINANCIAL POSITION ..........................................................................	216
8.2. COMPANY’S INCOME STATEMENT ....................................................................................................	217
8.3. NOTES TO COMPANY’S FINANCIAL STATEMENTS .............................................................................	217
8.3.1. General .......................................................................................................................................	217
8.3.2. Basis of Presentation .................................................................................................................	217
8.3.3. Summary of significant accounting policies ..............................................................................	217
8.3.4. Leases .........................................................................................................................................	218
8.3.5. Intangible assets ........................................................................................................................	220
8.3.6. Investments in subsidiaries and goodwill ..................................................................................	220
8.3.7. Other financial assets and financial liabilities ...........................................................................	222
8.3.8. Short-term deposits. ..................................................................................................................	224
8.3.9. Cash ...........................................................................................................................................	225
8.3.10. Group companies interest-bearing short-term loans ................................................................	225


8.3.11. Other Group companies receivables and payables ...................................................................	225
8.3.12. Equity .........................................................................................................................................	227
8.3.13. Other payables and accrued liabilities ......................................................................................	229
8.3.14. Interest-bearing loans and borrowings .....................................................................................	229
8.3.15. Other non-current liabilities ......................................................................................................	231
8.3.16. Guarantees and contingencies ..................................................................................................	232
8.3.17. General and administrative expenses .......................................................................................	232
8.3.18. Finance income and finance costs .............................................................................................	233
8.3.19. Other income (expenses) ...........................................................................................................	233
8.3.20. Contractual obligations .............................................................................................................	234
8.3.21. Related party transactions ........................................................................................................	234
8.3.22. Auditors’ fees .............................................................................................................................	234
8.3.23. Proposed cash dividend .............................................................................................................	235

9. OTHER INFORMATION ...............................................................................................................................	236

9.1. AUDITORS’ REPORT ...........................................................................................................................	236
9.2. APPROPRIATION OF RESULTS – PROVISIONS IN COMPANY’S ARTICLES OF ASSOCIATION ..............	236
9.3. BRANCHES .........................................................................................................................................	236

10. IMPORTANT DATES .................................................................................................................................	248

STMicroelectronics N.V.'s Annual Report over 2023 consists of a message from the President and Chief Executive

Officer on the financial year 2023 (chapter 1), the management report (chapter 2 through chapter 5), the dividend

policy (chapter 6), the financial information (chapter 7 through chapter 9) and important dates (chapter 10).

CERTAIN TERMS


ASIC		application-specific integrated circuit
ASSP		application-specific standard product
BCD		bipolar, CMOS and DMOS process technology
Bi-CMOS		bipolar and CMOS process technology
CMOS		complementary metal-on silicon oxide semiconductor
DMOS		diffused metal-on silicon oxide semiconductor
DRAM		dynamic random access memory
EEPROM		electrically erasable programmable read-only memory
EMAS		Eco-Management and Audit Scheme, the voluntary European Community scheme for companies performing industrial activities for the evaluation and improvement of environmental performance
FD-SOI		fully depleted silicon-on-insulator
GaN		gallium nitride
IC		integrated circuit
IFRS		International Financial Reporting Standards
IP		intellectual property
ISO		International Organization for Standardization
MASK WORK		the two- or three-dimensional layout of an integrated circuit
MEMS		micro-electro-mechanical system
MOSFET		metal-on silicon oxide semiconductor field effect transistor
NFC		near field communication
OEM		original equipment manufacturer
PFC		perfluorinated compounds
RF		radio frequency
RF-SOI		radio frequency silicon-on-insulator
SAM		serviceable available market
SiC		silicon carbide
STi2GaN		intelligent integrated gallium nitride
TAM		total available market
VIPower		vertically integrated power

1. Message from the President and Chief Executive Officer on the financial

year 2023

Dear Shareholder,

2023 was another year of growth, driven by strong demand in Automotive and, to a lesser extent, Industrial,

partially offset by lower revenues in Personal Electronics. This was reflected in our financial performance, with net

revenues increasing 7.2% to $17.29 billion. We continued to strengthen our net financial position while increasing

free cash flow and investing in the transformation of our manufacturing base. In this respect, 2023 was another

year of steady execution in our manufacturing initiatives as we continued to transform our manufacturing base to

enable future growth and drive enhanced profitability, with the expansion of our 300mm capacity and a strong

focus on wide bandgap semiconductors.

2023: a year of continued strong demand in automotive

Our strategy is to be a broad-range supplier in the automotive and industrial markets and adopt a selective

approach in personal electronics and computer peripherals. This strategy delivered strong results in 2023, with

year-over-year revenue growth of 33.5% in automotive and 11.4% in industrial. Communications equipment,

computer and peripherals revenue decreased 4.2% and personal electronics was down 25.1%, including the impact

of a change in product mix in an engaged customer program. For the year, automotive and industrial combined

represented 71% of total revenues, and personal electronics and communications equipment, computers and

peripherals represented 29%.

In Automotive, we again saw strong demand across all geographies, driven by increasing semiconductor pervasion

and structural transformation. The year was also positively impacted by inventory replenishment and a high level

of capacity reservation fees. In 2023 we continued to execute our strategy supporting car electrification, in

particular in our silicon carbide business, and car digitalization, supporting the shift to software-defined vehicle

architectures and the pervasion of advanced driver assistance systems.

In Industrial, demand was still strong during most of the year, especially in power and energy, factory automation

and robotics, and in industrial infrastructure. Toward the end of Q3 we saw a progressive weakening of demand,

accelerating during Q4. Electrification and digitalization are the main trends driving semiconductor content

increase here as well. During the year we had a strong focus on Edge AI, with updates on multiple hardware

products including microcontrollers, microprocessors, and smart sensors as well as related software tools to

empower developers.

In Personal Electronics and Computer Peripherals, market demand remained weak in 2023, while Communications

Equipment demand remained solid in our focus areas.

In this environment, we delivered net revenues of $17.29 billion, up 7.2% from 2022, with a gross margin

increasing from 45.5% to 45.9% and an operating margin decreasing from 28.1% to 26.7%. After investing $4.11

billion in net capital expenditures compared to $3.52 billion in 2022, our free cash flow increased to $1.77 billion

compared to $1.59 billion in 2022. This was reflected in our net financial position of $3.16 billion compared to

$1.80 billion one year earlier.

Long-term trends continue to underpin our strategy

In 2023 we continued to execute on our strategy, which stems from three long-term enablers: smart mobility,

power and energy management, and cloud-connected autonomous things. These trends continue to drive our

investments and roadmap decisions.

We are transforming our manufacturing base, with a significant expansion of our 300mm capacity and a strong

focus on wide bandgap semiconductors. In Silicon Carbide, we continued to ramp our front-end device production

in our Catania and Singapore facilities, and we increased back-end manufacturing capacity in our sites in Morocco

and China. We also started production in our new integrated silicon carbide substrate manufacturing facility in

Catania as a significant step in our silicon carbide vertical integration strategy. We furthermore announced a Joint

Venture with Sanan Optoelectronics for high-volume 200mm SiC device manufacturing in China. These are

important moves to further scale our global SiC manufacturing operations. We advanced also with our 300mm

capacity expansion plans. In Agrate, Italy, our new 300mm wafer fab was qualified for production and capacity of

slightly more than 1,000 wafers per week was installed as planned. In June we announced the conclusion of the

three-party agreement for a new 300mm semiconductor manufacturing facility in Crolles among the State of

France, GlobalFoundries, and our company, as approved by the European Commission. In 2024, we plan to invest

about $2.5 billion in net capital expenditures.

These initiatives are aligned with our sustainability strategy and our sustainable manufacturing commitment in

terms of energy consumption and greenhouse gas emissions, air, and water quality. We are on track to achieve our

carbon neutrality goal on scope 1 & 2 and partially scope 3, and our 100% renewable energy goal by 2027. To

further these goals we announced, in November, the signature of a fifteen-year Power Purchase Agreement for

renewable energy for our operations in Italy with ERG, a leading European independent energy producer. We also

continued to work closely with external bodies and to maintain our strong presence in the major sustainability

indices.

We recently announced a new organization to deliver enhanced product development innovation and efficiency,

time-to-market as well as customer focus by end market. ST will be re-organized into two Product Groups, split

into four Reportable Segments and the existing sales and marketing organization will be complemented by a new

application marketing organization focused by end markets across all Regions.

Focused on sustainable, profitable growth

Our value proposition remains based on sustainable and profitable growth, returning value to our shareholders in

line with our objectives, providing differentiating enablers to our customers, and supporting them with an

independent, reliable and secure supply chain. And we are committed to sustainability for the benefit of all our

stakeholders.

Following several years of revenue growth and increased profitability, we see 2024 as a transition year. We are

adapting our plans according to market dynamics while continuing to execute on our established strategy and

operating model. We will continue to capture new opportunities, with our 50,000+ engaged employees working

alongside our customers on innovations that make a positive impact on people’s lives.

2. Corporate overview

In this annual report, references to "we", "us", "the Company", "our Company" and "ST" are to STMicroelectronics

N.V., references to "ST Group Company" are to any of STMicroelectronics N.V.'s direct or indirect subsidiaries, and

references to the "Group" are to STMicroelectronics N.V. and its direct and indirect subsidiaries.

Certain terms used in this annual report are defined in "Certain Terms".

2.1. History and development of STMicroelectronics

STMicroelectronics N.V. was formed and incorporated in 1987 as a result of the combination of the semiconductor

business of SGS Microelettronica (then owned by Società Finanziaria Telefonica (S.T.E.T.), an Italian corporation)

and the non-military business of Thomson Semiconducteurs (then owned by the former Thomson-CSF, now Thales,

a French corporation). We completed our initial public offering in December 1994 with simultaneous listings on the

Bourse de Paris (now known as “Euronext Paris”) and the New York Stock Exchange. In 1998, we also listed our

shares on the Borsa Italiana (the Italian stock exchange).

We operated as SGS-Thomson Microelectronics N.V. until May 1998, when we changed our name to

STMicroelectronics N.V. We are organized under the laws of The Netherlands, with our corporate legal seat in

Amsterdam, The Netherlands, and our head offices at WTC Schiphol Airport, Schiphol Boulevard 265, 1118 BH

Schiphol, The Netherlands. Our telephone number there is +31-20-654-3210. Our headquarters and operational

offices are managed through our wholly owned subsidiary, STMicroelectronics International N.V., and are located

at 39 Chemin du Champ des Filles, 1228 Plan-les-Ouates, Geneva, Switzerland. Our main telephone number there

is +41-22-929-2929. Our agent for service of process in the United States related to our registration under the U.S.

Securities Exchange Act of 1934, as amended, is Corporation Service Company (CSC), 80 State Street, Albany, New

York, 12207. Our operations are also conducted through our various ST Group Companies, which are organized and

operated according to the laws of their country of incorporation, and consolidated by STMicroelectronics N.V.

2.2. Strategy & objectives

We have over 50,000 creators and makers of semiconductor technologies mastering the semiconductor supply

chain with state-of-the-art manufacturing facilities. As an integrated device manufacturer, we work with more than

200,000 customers and thousands of partners to design and build products, solutions, and ecosystems that

address their challenges and opportunities, and the need to support a more sustainable world. Our technologies

enable smarter mobility, more efficient power and energy management, and the wide-scale deployment of cloud-

connected autonomous things. We are committed to achieving our goal to become carbon neutral on scope 1 and

scope 2 and partially on scope 3 by 2027.

Our strategy focuses on long-term value creation for the Company and its affiliated enterprises and takes into

account the short-, medium- and longer-term evolution of the markets we serve and the environment and

opportunities we see. It stems from key long-term enablers: Smart Mobility, where we provide innovative solutions

to help car manufacturers make driving safer, greener and more connected; Power & Energy: our technology and

solutions enable industries to increase energy efficiency and support the use of renewable energy and cloud-

connected autonomous things; which transform our lives and the objects we use with smart, connected devices for

personal, business and industrial applications.

We are focused on application areas which are expected to experience solid growth rates driven by broad, long-

term trends in electronic systems. These trends require enablers such as autonomous systems, robotics, securely

connected machines and personal devices, digitalization and electrification of automobiles and infrastructure,

advanced communications equipment and networks and more power efficient systems. These enablers drive in

turn the demand for the electronic components we develop and manufacture.

We are a global semiconductor company that designs, develops, manufactures and markets a broad range of

products used in a wide variety of applications for the four end-markets we address: automotive, industrial,

personal electronics and communications equipment, computers and peripherals. For the automotive and

industrial markets we address a wide customer base, particularly in industrial, with a broad and deep product

portfolio. In personal electronics and communications equipment, computers and peripherals we have a selective

approach both in terms of the customers we serve, as well as in the technologies and products we offer, while

leveraging our broad portfolio to address high-volume applications.

2.3. Organizational structure

We are organized in a matrix structure with geographic regions interacting with product lines, both supported by

shared technology and manufacturing operations and by central functions, designed to enable us to be closer to

our customers and to facilitate communication among the research and development (“R&D”), production,

marketing and sales organizations.

While STMicroelectronics N.V. is our parent company, we conduct our global business through STMicroelectronics

International N.V. and also conduct our operations through service activities from our subsidiaries. We provide

certain administrative, human resources, legal, treasury, strategy, manufacturing, marketing, insurance and other

overhead services to our consolidated subsidiaries pursuant to service agreements for which we recover the cost.

2.4. Products and activities

Our diverse product portfolio includes discrete and general purpose components, application-specific integrated

circuits (“ASICs”), full-custom devices and semi-custom devices and application-specific standard products

(“ASSPs”) for analog, digital and mixed-signal applications. It benefits from a unique, strong foundation of

proprietary and differentiated leading-edge technologies.

We use all of the prevalent function-oriented process technologies, including complementary metal-on silicon

oxide semiconductors (“CMOS”), bipolar and non-volatile memory technologies. In addition, by combining basic

processes, we have developed advanced systems-oriented technologies that enable us to produce differentiated

and application-specific products, including fully depleted silicon-on-insulator (“FD-SOI”) technology offering

superior performance and power efficiency compared to bulk CMOS, bipolar CMOS (“Bi-CMOS”) and radio

frequency silicon-on-insulator (“RF-SOI”) for mixed-signal and high-frequency applications, as well as a

combination of Bipolar, CMOS and DMOS, vertically integrated power (“VIPower”), and intelligent integrated

gallium nitride (STi2GaN) technologies for smart power applications, Power MOSFET, silicon carbide (“SiC”) and

gallium-nitride (“GaN”) for high-efficiency systems, Micro-Electro-Mechanical Systems (“MEMS”) technologies for

sensors and actuators, embedded memory technologies for our microcontrollers and differentiated optical sensing

technologies for our optical sensing solutions.

As of December 31, 2023, our product groups are as follows:

• Automotive and Discrete Group ("ADG"), comprised of dedicated automotive integrated circuits (“ICs”),

and discrete and power transistor products.

• Analog, MEMS and Sensors Group ("AMS"), comprised of analog, smart power, MEMS sensors and

actuators, and optical sensing solutions.

• Microcontrollers and Digital ICs Group ("MDG"), comprised of general-purpose microcontrollers and

microprocessors, connected security products (e.g. embedded secured elements and NFC readers),

memories (e.g. serial and page EEPROM) and RF and Communications products.

In the first quarter of 2024, we announced that we are re-organizing our product groups and reportable segments

to further accelerate our time-to-market and speed of product development innovation and efficiency. Effective as

of February 5, 2024, we have moved from three product groups and three reportable segments (ADG, AMS and

MDG), to two product groups and four reportable segments (the “Product Group Reorganization”), as follows:

• Analog, Power & Discrete, MEMS and Sensors, led by Marco Cassis, ST President and member of the

Executive Committee, including two reportable segments (Analog Products, MEMS and Sensors and

Power and Discrete Products); and

• Microcontrollers, Digital ICs and RF products, led by Remi El-Ouazzane, ST President and member of the

Executive Committee, including two reportable segments (Microcontrollers, and Digital ICs and RF

Products).

2.5. Sales, Marketing and Distribution

Our sales and marketing organization is organized by a combination of regional and key account coverage with the

primary objective of accelerating sales growth and gaining market share. Emphasis is placed on strengthening the

development of our global and major local accounts; boosting demand creation through an enhanced focus on

geographical and key account coverage with strong technical and application expertise, supported in the mass

market by our distribution channel and local initiatives; and establishing regional sales and marketing teams that

are fully aligned with our strategic end-markets: automotive, industrial, personal electronics and communications

equipment, computers and peripherals.

We have four regional sales organizations reporting to a global head of Sales & Marketing: Americas, APeC (Asia

Pacific excluding China), China and EMEA (Europe, Middle-East and Africa). Our regional sales organizations have a

similar structure to enhance global coordination and go-to-market activities. The sales and marketing teams are

strongly focused on profitable revenue growth and business performance as well as on fostering demand creation,

expanding the customer base, maximizing market share, developing new product-roadmaps and providing the best

technical and application support in the field for our customers. The sales and marketing activities are supported

by sales engineers, system marketing, product marketing, application labs, competence centers, field application

engineers and quality engineers.

In the first quarter of 2024, we announced that we will complement the existing Sales & Marketing organization by

implementing a new application-specific marketing organization by segment, offering customers end-to-end

system solutions based on our product and technology portfolio, covering the following four end markets:

• Automotive;

• Industrial Power and Energy;

• Industrial Automation, IoT and AI; and

• Personal Electronics, Communication Equipment and Computer Peripherals.

The current regional Sales & Marketing organization will remain unchanged.

We engage distributors and sales representatives to distribute and promote our products around the world.

Typically, distributors handle a wide variety of products, including those that compete with ours. Our distributors

have a dual role, in that they assist in fulfilling the demand of our customers by servicing their orders, while also

supporting the creation of product demand and business development. Most of our sales to distributors are made

under specific agreements allowing for price protection and stock rotation for unsold merchandise. Sales

representatives, on the other hand, generally do not offer products that compete directly with our products, but

may carry complementary items manufactured by others.

2.6. Research & Development

We believe that market driven R&D based on leading-edge products and technologies is critical to our success. We

devote significant effort to R&D because we believe such investment can be leveraged into competitive

advantages: about 18% of our employees work in R&D on product design/development and technology and, in

2023, we spent approximately 10.1% of our total revenues on R&D expenses.

New developments in semiconductor technology can make end products significantly cheaper, smaller, faster,

more reliable and embedded than their predecessors, with differentiated functionalities. They can enable

significant value creation opportunities with their timely appearance on the market. Our innovations in

semiconductor technology as well as in hardware and software contribute to the creation of successful products

that generate value for us and our customers. Our complete design platforms, including a large selection of

intellectual property (“IP”) and silicon-proven models and design rules, enable the fast development of products

designed to meet customer expectations in terms of reliability, quality, competitiveness in price and time-to-

market. Through our R&D efforts, we contribute to making our customers’ products more efficient, more

appealing, more reliable and safer.

Our technology R&D strategy is based on the development of differentiated technologies, allowing for a unique

offer in terms of new products and enabling new applications opportunities. We draw on a rich pool of chip

fabrication technologies, including advanced CMOS, FD-SOI, RF-SOI, optical sensing, embedded nonvolatile

memories, mixed-signal, analog, MEMS, smart power, SiC and GaN processes. This is well embedded in our strong

packaging technologies portfolio such as high pin count BGA, wafer level packaging, highly integrated sensor

packages and leadframe package power products. We combine both front-end and back-end manufacturing and

technology R&D under the same organization to ensure a smooth flow of information between our R&D and

manufacturing organizations. We leverage significant synergies and shared activities between our product groups

to cross-fertilize them. We also use silicon foundries, especially for advanced CMOS beyond the 18 nm node that

we do not plan to manufacture nor develop internally.

We have advanced R&D and innovation centers which offer us a significant advantage in quickly and cost

effectively introducing products. Furthermore, we have established a strong culture of partnerships and through

the years have created a network of strategic collaborations with key customers, suppliers, competitors, and

leading universities and research institutes around the world. We also play leadership roles in numerous projects

running under the Information Society Technologies programs of the European Union (“EU”). We also participate

in certain R&D programs established by the EU, individual countries and local authorities in Europe (primarily in

France and Italy).

We currently own approximately 20,000 patents and pending patent applications.

3. Report of the Managing Board

In accordance with Dutch law, our management is entrusted to our Managing Board under the supervision of our

Supervisory Board. Under our articles of association (“Articles of Association”), the sole member of our Managing

Board is appointed for a three-year term at our annual general meeting of shareholders (“AGM”), by a simple

majority of the votes cast, provided quorum conditions are met, upon a non-binding proposal by our Supervisory

Board, which term may be renewed one or more times. Mr. Jean-Marc Chery was reappointed on May 27, 2021, as

sole member of our Managing Board with the function of President and Chief Executive Officer, for a three-year

term expiring at our 2024 AGM. Our Supervisory Board announced on September 19, 2023, that it will propose the

reappointment of Mr. Jean-Marc Chery as sole member of the Managing Board, President and Chief Executive

Officer for another three-year term for shareholder approval at the 2024 AGM. We continue to review and

strengthen the succession planning for the Managing Board to ensure business continuity, taking into account,

amongst others, the rapidly changing technological, social, economic and regulatory developments in our industry.

3.1. Statement of the sole member of our Managing Board

The sole member of our Managing Board hereby declares that, to the best of his knowledge, the statutory financial

statements as of December 31, 2023, and for the year then ended, prepared under Title 9 of Book 2 of the Dutch

Civil Code and in accordance with IFRS as adopted by the EU, provide a true and fair view of the assets, liabilities,

financial position and profit or loss of STMicroelectronics N.V. and the undertakings included in the consolidation

taken as a whole. Furthermore, the sole member of our Managing Board hereby also declares that the report of

the Managing Board includes a true and fair view concerning the statement of financial position as of

December 31, 2023. The report of the Managing Board also includes the development and performance of

STMicroelectronics N.V. and the undertakings included in the consolidation taken as a whole, together with the

principal risk and uncertainties they face.

Jean-Marc Chery,

Sole member of our Managing Board,

President and Chief Executive Officer

3.2. Business overview & performance

3.2.1. Results highlights for the year 2023

Our total available market is defined as “TAM”, while our serviceable available market is defined as “SAM” and

represents the market for products sold by us (i.e., TAM excluding major devices such as microprocessors, DRAM

and flash-memories, optoelectronics devices other than optical sensors, video processing and wireless application

specific market products, such as baseband and application processors).

Based on industry data published by World Semiconductor Trade Statistics (“WSTS”), semiconductor industry

revenues in 2023 decreased on a year-over-year basis by approximately 8% for the TAM and increased by

approximately 4% for the SAM, to reach approximately $527 billion and $295 billion, respectively.

Full year 2023 total revenues increased 7.2% to $17.29 billion, as a result of an increase in average selling prices,

driven by a favorable product mix, partially offset by a decrease in volumes. Gross margin increased 40 basis

points, to 45.9%, principally driven by higher revenues, partially offset by higher manufacturing costs and unused

capacity charges. Operating margin was 26.7% in 2023.

Our 2023 gross margin increased 40 basis points to 45.9% from 45.5% in 2022, principally driven by the positive

impact of the combination of product mix and pricing, partially offset by higher input manufacturing costs and

unused capacity charges.

Our operating expenses, comprised of aggregated selling, general & administrative (“SG&A”) and research &

development expenses ("R&D"), amounted to $3,388 million in 2023, increasing from $2,913 million in the prior

year, mainly due to increased cost of labor and higher levels of activity, primarily in R&D programs, partially offset

by positive currency effects.

Other income and expenses, net, was $67 million in 2023 compared to $116 million in 2022, decreasing mainly due

to higher start-up costs primarily for our new 300mm fab in Agrate, Italy, partially offset by higher income from

public funding.

Operating profit in 2023 increased to $4,610 million compared to $4,534 million in 2022 mainly driven by the

combining effect of higher revenues and improved gross margin profitability, partially offset by higher operating

expenses.

Combined finance income and costs resulted in a net loss of $95 million, compared to a net income of $312 million

in 2022, and reflect in both years the International Financial Reporting Standards (“IFRS”) accounting of our

convertible bonds. The 2023 amount included a loss of $249 million for the fair value adjustment of the embedded

bondholders’ conversion options on outstanding convertible bonds (compared to a gain of $276 million in 2022).

Full year 2023 net profit was $3,985 million or $4.38 diluted earnings per share, compared to net profit of

$4,323 million, or $4.74 diluted earnings per share for the full year 2022.

Capital expenditure payments, net of proceeds from sales, capital grants and other contributions were $4,111

million during the full year 2023 compared to $3,524 million during the full year 2022.

During 2023, our net cash decreased by $36 million, with net cash from operating activities reaching $6.37 billion.

During 2023, we paid $346 million for the repurchase of ordinary shares, $223 million of cash dividends to our

shareholders, and $169 million for long-term debt repayment, partially offset by $329 million proceeds from the

drawdown of our credit facility with European Investment Bank (“EIB”) signed in 2022.

Our free cash flow and net financial position are described in Section 3.2.5.

3.2.2. Business overview

We are a global semiconductor company that designs, develops, manufactures and markets a broad range of

products used in a wide variety of applications for the four end-markets we address: automotive, industrial,

personal electronics and communications equipment, computers and peripherals. For the automotive and

industrial markets we address a wide customer base, particularly in industrial, with a broad and deep product

portfolio. In personal electronics and communications equipment, computers and peripherals we have a selective

approach both in terms of the customers we serve, as well as in the technologies and products we offer, while

leveraging our broad portfolio to address high-volume applications.

Further information on our business model is included in chapter 2 above and sections 3.2.2.1. et seq. below.

3.2.2.1. Strategy

We have over 50,000 creators and makers of semiconductor technologies mastering the semiconductor supply

chain with state-of-the-art manufacturing facilities. As an integrated device manufacturer, we work with more than

200,000 customers and thousands of partners to design and build products, solutions, and ecosystems that

address their challenges and opportunities, and the need to support a more sustainable world. Our technologies

enable smarter mobility, more efficient power and energy management, and the wide-scale deployment of cloud-

connected autonomous things. We are committed to achieving our goal to become carbon neutral on scope 1 and

scope 2 and partially on scope 3 by 2027.

Our strategy focuses on long-term value creation for the Company and its affiliated enterprises and takes into

account the short-, medium- and longer-term evolution of the markets we serve and the environment and

opportunities we see. It stems from key long-term enablers: Smart Mobility, where we provide innovative solutions

to help car manufacturers make driving safer, greener and more connected; Power & Energy: our technology and

solutions enable industries to increase energy efficiency and support the use of renewable energy and cloud-

connected autonomous things, which transform our lives and the objects we use with smart, connected devices for

personal, business and industrial applications.

We are focused on application areas which are expected to experience solid growth rates driven by broad, long-

term trends in electronic systems. These trends require enablers such as autonomous systems, robotics, securely

connected machines and personal devices, digitalization and electrification of automobiles and infrastructure,

advanced communications equipment and networks and more power efficient systems. These enablers drive in

turn the demand for the electronic components we develop and manufacture.

3.2.2.2. Employees

The tables below set forth the breakdown of employees by geographic area and category of main activity for the

past two years.


	2023	2022
France	11,958	11,953
Italy	12,561	12,037
Rest of Europe	1,198	1,128
Americas	828	789
Mediterranean (Malta, Morocco, Tunisia)	5,923	5,634
Asia	18,855	19,829
Total	51,323	51,370


	2023	2022
Research and Development	9,426	9,036
Marketing and Sales	2,671	2,573
Manufacturing	32,822	33,690
Administration and General Services	3,038	2,787
Product Group Functions	3,366	3,284
Total	51,323	51,370

Our future success will partly depend on our ability to continue to attract, retain and motivate highly qualified

technical, marketing, engineering and management personnel, as well as on our ability to timely adapt the size

and/or profile of our personnel to changing industry needs. Unions are represented at almost all of our

manufacturing facilities and at several of our R&D sites. We use temporarily employees if required during

production spikes and, in Europe, during summer vacation. We have not experienced any significant strikes or

work stoppages in recent years.

3.2.2.3. Alliances with Customers and Industry Partnerships

We believe that customer alliances and industry partnerships are critical to our success in the semiconductor

market. Customer alliances provide us with valuable systems and application know-how and access to markets for

key products, while enabling our customers to gain access to our process technologies and manufacturing

infrastructure. We are actively working to expand the number of our customer alliances, targeting key global OEMs

as well as emerging, innovative customers and partners around the globe.

From time to time we collaborate with other semiconductor industry companies, research organizations,

universities, customers, experts and suppliers to further our R&D efforts. Such collaboration provides us with a

number of important benefits, including acquisition of technical know-how, access to additional production

capacities, sharing of costs and reductions in our own capital requirements.

3.2.2.4. Customers and Applications

We design, develop, manufacture and market thousands of products which we sell to over 200,000 customers. We

emphasize a broad and balanced product portfolio, in the applications and regional markets we serve, which helps

foster closer, strategic relationships with customers. Our major customers include Apple, Bosch, Continental, HP,

Huawei, Hyundai Motor, Mobileye, Samsung, SpaceX and Tesla. This broad product breadth provides opportunities

to enable application solutions and to supply such customers’ requirements for all their product and technology

needs. We also sell our products through our distribution channel.

In Automotive, we have identified a significant evolution of the relationship with customers. Historically,

semiconductor companies addressed the needs of carmakers mostly through tier-1 and/or tier-2 automotive

industry suppliers with whom we work closely. In recent years there has been an accelerated transformation of the

automotive industry driven by the electrification and the digitalization of vehicles, significantly increasing the

amount and complexity of semiconductor products in vehicles. As a result, and following further from the supply

chain challenges which arose during and after the COVID-19 pandemic, carmakers are taking a more direct role in

the decision making and control of both the semiconductor strategy and supply for their vehicles. Carmakers now

have a more direct relationship with companies such as ours, notably playing a more active role in defining the

specific solutions they require, as well as in certain instances engaging in direct co-operation agreements, including

multi-year agreements to secure capacity corridors. We are committed to playing a major role in these new

business models and we see multiple opportunities for co-operation with carmakers in this area, while also

continuing to build on our co-operation with tier-1 and tier-2 automotive industry suppliers.

3.2.2.5. Sales, Marketing and Distribution

Our sales and marketing is organized by a combination of regional and key account coverage with the primary

objective of accelerating sales growth and gaining market share. Emphasis is placed on strengthening the