INTERVIEW-ST confident recovery has begun
By Catherine Bremer
PARIS, April 23 (Reuters) - Europe's biggest chipmaker, STMicroelectronics, is heading for ``more than 10 percent'' growth in second quarter revenues versus the first, and sales should grow steadily all year, CEO Pasquale Pistorio said on Tuesday. Expanding on forecasts made by the Franco-Italian company overnight, Pistorio said ST would hike output at its chip plants, or fabs, in the second quarter which would help gross and operating margins to improve despite still-sluggish prices.
``Q1 was the bottom of the slump for us, and we expect double-digit revenue growth in Q2. Growth will be at the low end of double-digit, but it will be more than 10 percent, and both gross and operating margins will improve,'' Pistorio told Reuters in a telephone interview.
``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,'' he said.
Reporting a 6.4 percent quarter-on-quarter decline in first quarter revenue to $1.36 billion, ST said late on Monday that revenues should increase by 10 percent in the second quarter versus the first, spurred by improved demand in all its markets.
ST shares rose as much as 4.7 percent euros on Tuesday, on the group's upbeat outlook and quarterly results that matched or beat expectations. At 0853 GMT, the stock was up 3.29 percent at 35.76 euros, the strongest gainer on the Paris CAC-40 (^FCHI - news).
The positive mood was enhanced after Germany's Infineon (IFXGn.DE), Europe's second largest chipmaker, posted a narrower than forecast quarterly loss. Infineon shares added 1.5 percent.
HIGHER OUTPUT TO MATCH ORDERS
Geneva-headquartered ST plans to jack up capacity utilisation rates at its plants to above 80 percent in the current quarter, and towards 90 percent in its most advanced, 200mm wafer fabs, up from an average rate of 65 percent in the first quarter, reflecting a long-awaited pick-up in orders.
``This is very important because it means that we will first improve margins by continuing to improve yield, and once we have done that we will see a firming up of prices,'' Pistorio said.
``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,'' he said.
ST is still standing by its January forecast that the overall chip market will shrink two percent this year, but its own markets will grow by one percent. ST expects to update that outlook before the end of the quarter, Pistorio said.
``We don't see any deterioration in this outlook, so if there is any change, it will be an improvement,'' he said.
Global semiconductor sales plunged 32 percent in 2001 in the worst industry slump ever, after growing 37 percent in 2000.
Hardest-hit have been sales of memory chips to the telecoms industry, to consumer electronics makers and sales of DRAM computer memory chips. ST, ranked third in the industry by Gartner/Dataquest, has been cushioned to some degree by the fact it is not present in the DRAM market, unlike most rivals.
Infineon, ranked as ninth, also beat expectations on Tuesday as its narrower quarterly loss confirmed an improving trend in the semiconductor industry.
Other chipmakers, Intel (NasdaqNM:INTC - news), Texas Instruments (NYSE:TXN - news) and Philips (PHG.AS) signalled recently that the semiconductor market may be returning to growth, albeit gradually.
However, Infineon also predicted ongoing pricing pressure in most of its business units as competition remains tough.
Rife competition in what has become a crowded industry is fanning speculation that lower tier players ought to merge.
Earlier this month, ST announced a strategic tie-up in research and development with Philips and U.S. Motorola (NYSE:MOT - news), but brushed off the idea this could lead to a closer alliance. |
