STMicro expects strong chip recovery in 2003

Europe's largest chipmaker STMicroelectronics NV remains considerably more bullish than most in the sector, and says it shares the view of analysts that the market will show double-digit growth next year. "The worst is in the past," said chief executive Pasquale Pistorio.

The company is confident that it will outperform the market in 2003, but warned that the traditional fourth-quarter upswing in demand will be modest this year, with growth in the mid-single-digit range, fueled by demand from the communications and automobile sector.

In the third quarter to September 30, net income was $131.2m, up from a loss of $35.8m on revenue 17.5% higher at $1.6bn. At the nine-month stage net income rose 26.7% to $268.8m on revenue of $4.5m, down from $4.9bn.

Pistorio denied strong rumors that the Geneva, Switzerland-based company was in negotiations with Motorola Corp to buy its chip operation, but said the industry is ripe for consolidation and he predicted a big merger in the next 18 months.

In the third quarter, the telecoms, peripherals and automotive markets were the most buoyant, with sales increasing by 11.7% to $816.3m. ST's strength flows from getting out of the commodity section of the market, which now accounts of just 5.8% of revenue, and its focus on differentiated products, which account for 69.5% of the total.

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