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STMicro shares up on outlook for second half

By Mathieu Rosemain

PARIS (Reuters) - Franco-Italian chipmaker STMicroelectronics struck an upbeat tone for the second half of the year on Wednesday after a steep fall in quarterly sales of sensors compelled it to trim its investment plans.

The supplier to iPhone maker Apple and electric carmaker Tesla saw signs of recovery in the first quarter and expects higher demand for industrial sensors and silicon-carbide semiconductors, aimed at making electric cars more independent.

"This, coupled with the financial stimulus programs in China, is increasing our confidence level for improved market conditions for the second half of 2019," Chief Executive Officer Jean-March Chery told analysts on a conference call.

Chinese authorities last week pledged that they would maintain policy support for the economy to fend off any potential slowdown, following already announced tax cuts and spending on infrastructure.

STMicro's shares were up by about 3 percent at 0913 GMT, valuing the company at 14.4 billion euros ($16.15 billion).

The Geneva-based company said it had a clearer view of its full-year revenue, which it expects to be between $9.45 billion and $9.85 billion, largely unchanged from a year earlier, as it adjusts to a volatile market seeking new sophisticated chips for self-driving cars and AI-enabled devices.

On Wednesday South Korea's Samsung Electronics indicated it would join the crowded field by investing $116 billion in non-memory chips through 2030 and challenge bigger rivals such as TSMC and Qualcomm.


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That move and STMicro's positive guidance contrasted with a gloomy prediction from rival Texas Instruments, which said the deceleration in demand from microchips may last a few more quarters.


Heightened concerns over a prolonged U.S.-China trade war and weakening smartphone sales have taken a toll on the global semiconductor industry, even as the auto industry is driving demand for self-driving vehicle sensors.

STMicro lowered its 2019 capital expenditure plan to $1.1-1.2 billion from $1.3 billion.

Its first-quarter net revenue slumped by about 22 percent from the previous quarter to $2.08 billion.

That was slightly below the $2.11 billion forecast by seven analysts in estimates compiled for Reuters by Infront Data. The gross margin for the period stood at 39.4 percent.

The group's business unit that sells sensors to the smartphone industry was particularly affected, with net revenue slumping by 44 percent from the previous quarter.

STMicro expects net revenue to grow by about 2.4 percent in the second quarter, from the previous one.

It expects its gross margin to slip to about 38.5 percent in the second quarter.


(This story has been refiled to correct to read Jean-Marc, paragraph 3)


(Reporting by Mathieu Rosemain; Editing by Sudip Kar-Gupta)