July 25, 2019 / 7:31 AM / a month ago

STMicro lowers full-year sales guidance as chip market remains volatile

FILE PHOTO: A logo is pictured on the factory of STMicroelectronics in Plan-les-Oautes near Geneva, Switzerland, December 6, 2016. REUTERS/Denis Balibouse/File Photo

PARIS (Reuters) - Franco-Italian chipmaker STMicroelectronics lowered its full-year sales guidance on Thursday in spite of improved activity in the second-quarter, signaling how the sector remains volatile given trade tensions between the United States and China.

The supplier to iPhone maker Apple (AAPL.O) and electric carmaker Tesla (TSLA.O) is betting on the success of its more sophisticated chips and sensors for the smartphone and auto industries to increase sales, but weaker demand for older and mass-markets products is having a toll.

STMicro said it was now forecasting full-year net revenue in the range of $9.35-$9.65 billion, down from an earlier target presented in May of $9.45-$9.85 billion.

The Geneva-based group managed to grow, as expected, its second-quarter net revenue from the previous one, posting an increase of 4.7% growth to $2.17 billion.

Yet its gross margin was lower than it targeted, at 38.2%, compared with a guidance at 38.5%.

STMicro’s shares were down 0.7% in early session trading in Paris.

Recent statements by Chinese and U.S. leaders over a resumption of trade talks between the two powers have partially alleviated concerns that the chip industry could be at the tip of a downturn for the industry.

Strong quarterly results by bigger rival Texas Instruments (TXN.O), considered a bellwether for the sector, as well as Dutch chipmaker ASM (ASMI.AS), also reassured investors.

STMicro expects third-quarter net revenue to grow by 15.3% from the previous quarter and gross margin of 37.5%.

Reporting by Mathieu Rosemain and Gwenaelle Barzic; Editing by Sudip Kar-Gupta

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