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October 25, 2011 1:31 am
Profits at STMicroelectronics, Europe’s largest chipmaker by sales, fell 64 per cent in the third quarter after several manufacturers cut orders of semiconductors in the face of economic uncertainty.
The Franco-Italian company warned that it had seen further deterioration of the semiconductor market in the three months to October. Carlo Bozotti, chief executive, warned that revenues in the fourth quarter would fall 8 per cent to as low as $2.15bn. This is a steeper decline than analysts had expected.
“We are now experiencing a much weaker demand across a broader range of products,” Mr Bozotti said.
The warning led STMicro shares to fall 7.87 per cent to €5.03.
The company is temporarily shutting down some of its factories and cutting some staff in response to the slowdown, although it would not specify how many positions would go.
STMicro had already warned in July that sales could fall because Nokia, one of its biggest customers, was ordering fewer wireless microchips than expected.
At that time, however, sales of chips used in other sectors such as cars, computers, cameras and other machines were still growing robustly, helping offset the mobile decline. Now, while sales of wireless chips have picked up, the other categories are in decline.
“It looks like STMicro might have had some market share loss in areas like set-top boxes and TVs, and it has lost some share in autos as the local Japanese chip manufacturers have recovered from the earthquake earlier this year,” said Lee Simpson, an analyst at Jefferies.
“It just doesn’t have enough big customers to fill the fabs. This is a company with the engineering base the same size as Intel, it should really be producing knock-out products but that is not happening.”
Overall, sales fell 4.9 per cent to $2.44bn in the three months to October 1, and net income fell to $71m from $198m in the year-ago quarter. Earnings per share fell to $0.08 from $0.22 a year ago.
Sales of wireless chips increased 18.8 per cent as ST Ericsson, STMicro’s troubled joint venture business with Ericsson, the Swedish telecoms equipment maker, finally began to ship new products designed for handling the high-speed internet connections in smartphones. HTC’s Sensation phone, launched last month, is one of the first to have these chips inside it.
ST Ericsson is undergoing a difficult transition from old to new products and has made losses since it was founded in 2009.
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