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Semiconductor demand is well above the manufacturing capacity of France’s largest chip company, which on Thursday raised its annual sales target after seeing an improvement in its quarterly gross margins.

The group, which sells chips to Apple and Tesla, forecasts annual sales of around $ 12.6 billion on Thursday, $ 100 million more than previously planned, representing a year-on-year growth of 23.3 percent.

“We’re seeing unrestrained demand well beyond our manufacturing capabilities,” said Jean-Marc Chery, CEO of STMicroelectronics, although he said the situation is likely to improve in 2022 as the company expands manufacturing capabilities.

The French-Italian chip manufacturer reported a gross margin of 41.6 percent in the third quarter of 2021 compared to 40.5 percent in the previous quarter and 36 percent in the same period last year. The company expects the margin to rise to 43 percent in the fourth quarter.

STMicroelectronics shares rose 4 percent in morning trading on Thursday.

Demand for chips has skyrocketed due to a global shortage that has forced automakers and electronics companies to cut production.

“The demand for semiconductors, which is strongly driven by megatrends – in addition to increasingly tight logistics – will continue,” said Chery.

He also said the low inventory and inventory levels in the industry are “unsustainable”, pointing out that there are logistics congestion by land, sea and air.

The strong demand for smartphones offset a much more than expected slowdown in semiconductor production for the automotive industry, which was partly due to a pandemic-induced capacity utilization at its manufacturing facility in Malaysia, the company said.

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