ST sees strong demand, no inventory build up

LONDON — Europe's leading chip company STMicrolectronics NV told analysts here that it sees strong demand and no signs of that demand going to inventory. With the company stating that it is running its manufacturing at full capacity utilization the comments highlighted that 2010 should be a boom year for ST.

Nonetheless, company executives were rather subdued as they presented the company's strategy. This is perhaps a result of the fact that in such a strongly rising market analysts are starting to expect ST to perform strongly. The company is also explaining the loss-making performance of ST-Ericsson, the 50:50 joint-venture between ST and Ericsson.

Gilles Delfassy, CEO of ST-Ericsson, said that despite making a $114 million loss on $606 million of revenue in the first quarter of 2010 the joint venture's restructuring plans remain on track. Delfassy said to be profitable ST-Ericsson needs to drive sales revenue up above $750 million per quarter and introducing a well targeted platform approach at the high-end was a key part of that.

"ST-NXP was a low-cost entry phone and feature phone company, and the feature phone is a disappearing segment," said Delfassy. Delfassy stressed that the U8500 smartphone platform, based on a dual-core Cortex A9 processor is doing well.

Prior to Delfassy speaking Phillipe Lambinet, general manager of the home entertainment and displays group stressed that ST is well-placed in automotive and digital television segments and Carmelo Papa, general manager of the industrial and multimarket component sector made similar claims for ST in the general analog, MEMS (excluding automotive), discrete power and the industrial digital sectors (EPROM, EEPROM and smartcard). Papa said that ST is about to do in low-cost micromachined gyroscopes what is has done in MEMS accelerometers. "2010 will be the year of the gyroscope," he said adding that despite having zero sales in the first quarter he expected to sell $100 million of gyroscope MEMS in 2010.

In the Q&A session an analyst asked if, after five quarters of above average semiconductor market growth, there were signs of build-up of inventory in the supply chain, or needed to change is growth estimates for 2010.

"We do not see any need for correction. We are practically full for loading [of our manufacturing] and demand is very strong for Q3, the backlog for Q4 is building up, as usual," said Carlo Bozotti, president and CEO. "We do not have any evidence of inventory build up at this time. Distributors and customers are working with inventories that are very low," he added.

Related links and articles:

Gartner ups IC forecast but sees growth slowing in H2

April chip sales push annual forecast up to 33 percent

April averaged chip sales beat expectations