Chip companies warn on Japan effect

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Some of Europe’s largest semiconductor companies on Wednesday warned that disruption following the Japanese earthquake would mean lower growth for the global chip sector this year.

“We had predicted growth of around 5 to 8 per cent for the sector but I expect it will be less than this due to Japan,” said Carlo Bozotti, chief executive of STMicroelectronics, Europe’s largest chip company.

Arm Holdings, the UK chip designer whose products help power smartphones such as Apple’s iPhone, said it was still difficult to estimate the extent of the disruption.

“Value chains are so complicated, it is hard to tell where the impact will be. Our customers might make a product that needs a screw from a Japanese factory which is experiencing production problems, and because of that the whole product may be put on hold,” said Warren East, chief executive of Arm.

Mr East said supply chain problems could dent royalty revenues by up to 10 per cent in the third quarter.

Earlier this month, Texas Instruments warned the earthquake would hit its second-quarter results.

The impact of the March 11 earthquake was not yet reflected in first-quarter results, with STMicro reporting a 9 per cent increase in sales to $2.53bn in the three months to April 2.

Net profit tripled to $170m from $57m as demand increased for STMicro’s chips for cars and the miniature gyroscopes they make for smartphones such as the Apple iPhone.

The only drag on results was the ST Ericsson joint venture, which makes chips mainly for simpler, so-called “feature phones”. Demand for these older-style mobile handsets has fallen faster than expected, leaving STMicro’s wireless revenues down 34 per cent from the same quarter last year. A transition to making chips for popular smartphones will not be felt in results until the end of the year.

Earnings per share were $0.19 compared with $0.06 in the same quarter a year ago.

Arm Holdings, meanwhile, saw first-quarter sales increase 26 per cent to $116m on strong demand for smartphones and tablets. The company, which provides technology for over 90 per cent of all the world’s mobile phones is now hoping to create a similar position of dominance in set-top boxes and digital television, after winning deals with a number of key suppliers to the sector.

Earnings per share were up 34 per cent at 2.73p.

Wolfson Microelectronics, the audio chipmaker, meanwhile announced a 44 per cent revenue rise for the first quarter, on increased demand for its products from mobile phone makers.

However, It reported a pre-tax loss of $3.5m, compared with $6.9m in the first quarter of 2010. The company has struggled to turn a profit since it lost a contract to supply Apple’s iPhone in 2008.

Shares in Arm, which have more than doubled over the last year, fell 1 per cent to 619p in early trading on Wednesday. Wolfson shares rose more than 6 per cent to 231.5p while shares in STMicro fell more than 3 per cent to €8.16.

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