Chip market has bottomed out – STMicro

That's what it thinks

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ComputerWire: IT Industry Intelligence

STMicroelectronics NV believes that its revenue bottomed out in the first three months of the current year and is looking for revenue growth of more than 10% in the current quarter. President and CEO Pasquale Pistorio said this expected growth in sales is expected to reflect strengthened demand from virtually all its end markets, which would significantly increase company-wide fab utilization rates.

In the first quarter to March 31, net income was $32.9m, down from income of $340.8m on revenue of $1.35bn, down from $1.9bn. This bullish assessment from the world's third largest chipmaker, on the same day that German rival Infineon reported growing demand in all of its business segments (see separate story), provide evidence that the industry is at the beginning of an upturn.

"We still don't see much change in prices right now, but the first quarter was much more robust in terms of orders - we haven't seen such sparkling order flow for several quarters - and the first thing to do is to fill capacity," said Pistorio.

"Barring any unexpected circumstances, we expect continuous and progressive growth in the market in 2002 so that the year as a whole will be broadly flat for the industry. We are starting from the very bottom, so the outlook is pretty good." The recovery began in March when Pistroio said the order flow accelerated significantly and there was also "a degree of price stabilization."

STMicro's strength has been to move away from the commodity sector of the market, and differentiated products now account for more than 70% of revenue. However, the telecoms market accounted for 29.3% of sales and showed a sequential decline of 19.8% to $396.7m.

Pistorio sees the company's strength as its favorable competitive position in those targeted applications that are likely to lead the market recovery in unit growth. So while the performance of the semiconductor industry as a whole will depend on global economic and business conditions, he believes it will continue to gain share in the markets it services.

STMicro forecast in January that the overall chip market would shrink 2% this year, but its own markets would grow by 1%, and it has yet to revise that assessment.

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