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STMicro expects high chip demand to extend well into 2022

Franco-Italian chipmaker STMicroelectronics expects high demand for the group’s wide range of semiconductors to extend well into 2022, its chief executive said, reassuring markets after a plant closure in Malaysia hit production earmarked for the auto sector.

In a call with investors, CEO Jean-Marc Chery pledged to increase investment in the company’s plants to meet orders from clients ranging from iPhone maker Apple to carmaker Tesla .

“For 2021 we are seeing unconstrained demand, which will be well above capacity and (our) sales plan,” he said. “Things will improve next year, but the gap (between production capacity and demand) will be quite material.”

A global microchip supply crunch has forced automakers and electronics companies to cut production and bottlenecks in the chip industry are expected to affect output until 2023, several analysts have said.

Rising orders for electric cars in Europe and elsewhere is driving up demand for STMicro’s silicon carbide chips, which are designed to improve the charging capacity of batteries in electric vehicles, Chery said.

The CEO said the group now expects to $1 billion in sales from such chips in 2024, a year earlier than initially scheduled.

The bullish comments offset concerns over STMicro’s semiconductor output in Malaysia, where the COVID-19 pandemic disrupted production and translated into $100 million of lost revenue in the third quarter.

STMicro’s shares strengthened on Chery’s comments and were up 4.6% at 0923 GMT.

The company also raised its full-year sales target by $100 million to $12.6 billion after reporting an improved quarterly margin on the back of strong semiconductor demand.

The group reported a gross margin of 41.6% for the July-September period, up from 40.5% in the previous quarter.

Net sales over the period were about $3.2 billion, up 6.9% from the previous quarter and in line with its own expectations. Reuters

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