STMicro suffers as signals slowing Chinese chip demand

By Mathieu Rosemain and Gwénaëlle Barzic

PARIS (Reuters) - STMicroelectronics <STM.PA> shares sank on Wednesday after the Franco-Italian chipmaker, a supplier for Apple <AAPL.O> and Tesla <TSLA.O>, signalled a slowdown in demand from China.

STMicro's stock, which has lost close to a third of its value this year, was 8.6 percent lower at 1001 GMT, making it the worst performer of France's benchmark CAC 40 <.FCHI> index.

Investors are wary of any change in guidance from semiconductor manufacturers, which are a key element in the supply chain for the automotive and smartphone industries.

"We still face soft market conditions in China and some inventory corrections," Chief Executive Officer Jean-Marc Chery told analysts in a conference call, with reference to the sale of microcontrollers, one of STMicro's three main activities.

Geneva-based STMicro is rebounding from earlier setbacks this decade after narrowing its product portfolio, cutting costs and reorganising production at its factories.

STMicro, which competes in Europe against Infineon Technologies <IFXGn.DE> and Dialog Semiconductor <DLGS.DE>, has fallen in industry rankings over the years, knocking its shares and raising questions over its ability to remain independent.

Chery's cautious comments follow disappointing outlooks issued by some of STMicro's peers, including bigger U.S. rival Texas Instruments <TXN.O> on Tuesday.

"Markets are rather nervous," Frederic Yoboue, an analyst at Bryan, Garnier & Co said. "The slightest of deviations is penalized."

Although STMicro gave a weaker-than-expected revenue growth forecast for the fourth quarter, it maintained its bullish growth target for 2018, bolstered by strong demand for sensors from carmakers and smartphone manufacturers.

Chery said he expected full-year revenues to grow by about 16 percent, after STMicro said its third-quarter net revenue rose 11.2 percent from the second-quarter to $2.52 billion.

STMicro said its operating income rose by 38 percent over the period to $398 million, while its gross margin stood at 39.8 percent. It said it expects fourth-quarter revenues to grow by about 5.7 percent, with a gross margin of 39.8 percent.

(Reporting by Mathieu Rosemain and Gwenaelle Barzic; Editing by Sudip Kar-Gupta and Alexander Smith)