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STMicro lowers full-year gross sales steerage as chip market stays unstable – jj
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STMicro lowers full-year gross sales steerage as chip market stays unstable

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FILE PHOTO:  A logo is pictured on the factory of STMicroelectronics in Plan-les-Oautes
FILE PHOTO: A logo is pictured on the factory of STMicroelectronics in Plan-les-Oautes near Geneva, Switzerland, December 6, 2016. REUTERS/Denis Balibouse/File Photo

July 25, 2019

PARIS (Reuters) – Franco-Italian chipmaker STMicroelectronics lowered its full-year sales guidance on Thursday in spite of improved activity in the second-quarter, signaling how the sector remains volatile given trade tensions between the United States and China.

The supplier to iPhone maker Apple <AAPL.O> and electric carmaker Tesla <TSLA.O> is betting on the success of its more sophisticated chips and sensors for the smartphone and auto industries to increase sales, but weaker demand for older and mass-markets products is having a toll.

STMicro said it was now forecasting full-year net revenue in the range of $9.35-$9.65 billion, down from an earlier target presented in May of $9.45-$9.85 billion.

The Geneva-based group managed to grow, as expected, its second-quarter net revenue from the previous one, posting an increase of 4.7% growth to $2.17 billion.

Yet its gross margin was lower than it targeted, at 38.2%, compared with a guidance at 38.5%.

STMicro’s shares were down 0.7% in early session trading in Paris.

Recent statements by Chinese and U.S. leaders over a resumption of trade talks between the two powers have partially alleviated concerns that the chip industry could be at the tip of a downturn for the industry.

Strong quarterly results by bigger rival Texas Instruments <TXN.O>, considered a bellwether for the sector, as well as Dutch chipmaker ASM <ASMI.AS>, also reassured investors.

STMicro expects third-quarter net revenue to grow by 15.3% from the previous quarter and gross margin of 37.5%.

(Reporting by Mathieu Rosemain and Gwenaelle Barzic; Editing by Sudip Kar-Gupta)

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