Technology STMicro joins crowd of companies issuing gloomy forecasts for chip sector

STMicro joins crowd of companies issuing gloomy forecasts for chip sector

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STMicro joins crowd of companies issuing gloomy forecasts for chip sector

Franco-Italian chipmaker STMicroelectronics added to an increasingly large crowd of companies issuing downbeat forecasts for the industry after predicting a sharp fall in sales from the last quarter of 2018.

STMicro expected first-quarter sales to fall by about 21 percent from the last quarter of 2018, adding to a tone of gloom led by Taiwan Semiconductor Manufacturing Co (TSMC), which also cut quarterly sales guidance.

Another peer, Dallas-based Texas Instruments, missed estimates for quarterly revenue on Monday, forecasting first quarter revenue and profit below estimates.

Geneva-based STMicro said fourth-quarter net revenues rose by 5 percent from the previous quarter to $2.65 billion, below its targets. The gross margin for the period stood at 40 percent, slightly above targets.

Key drivers for global demand for software chips, such as iPhone maker Apple which is one of STMicro’s top clients, have signalled a slowdown in sales from China. That has fuelled concerns that the sector could spiral downwards.

Asian clients who buy STMicro’s lower margin microcontrollers, which are mass-market chips found in washing machines and microwave ovens, are also using current inventories rather than making new orders, thereby hitting sales further.

The auto industry remains a bright spot for STMicro, which notably supplies Tesla.

However, this growing demand for autonomous vehicles sensors and silicon-carbide semi-conductors, which are aimed at boosting electric vehicles autonomy, has failed to offset the slowdown of other products.

STMicro expected to invest between $1.2-$1.3 billion in capital expenditure in 2019 and post first-quarter revenues of about $2.1 billion.

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