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STMicro expects high chip demand to extend well into 2022

PARIS : Franco-Italian chipmaker STMicroelectronics expects high demand for the group's wide range of semiconductors to extend well into 2022, its chief executive said, reassuring markets after a plant closure in Malaysia hit production earmarked for the auto sector.

In a call with investors, CEO Jean-Marc Chery pledged to increase investment in the company's plants to meet orders from clients ranging from iPhone maker Apple to carmaker Tesla.

"For 2021 we are seeing unconstrained demand, which will be well above capacity and (our) sales plan," he said. "Things will improve next year, but the gap (between production capacity and demand) will be quite material."

A global microchip supply crunch has forced automakers and electronics companies to cut production and bottlenecks in the chip industry are expected to affect output until 2023, several analysts have said.

Rising orders for electric cars in Europe and elsewhere is driving up demand for STMicro's silicon carbide chips, which are designed to improve the charging capacity of batteries in electric vehicles, Chery said.

The CEO said the group now expects to US$1 billion in sales from such chips in 2024, a year earlier than initially scheduled.

The bullish comments offset concerns over STMicro's semiconductor output in Malaysia, where the COVID-19 pandemic disrupted production and translated into US$100 million of lost revenue in the third quarter.

STMicro's shares strengthened on Chery's comments and were up 4.6per cent at 0923 GMT.

The company also raised its full-year sales target by US$100 million to US$12.6 billion after reporting an improved quarterly margin on the back of strong semiconductor demand.

The group reported a gross margin of 41.6per cent for the July-September period, up from 40.5per cent in the previous quarter.

Net sales over the period were about US$3.2 billion, up 6.9per cent from the previous quarter and in line with its own expectations.

(Reporting by Mathieu Rosemain; Editing by Subhranshu Sahu and David Goodman)

Source: Reuters

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