GENEVA -- STMicroelectronics Inc. today (July 23) said that it plans to upgrade a large percentage of its older 6-inch fab capacity to 8-inch substrates--a move that will involve an undisclosed amount of restructuring at the chip maker.
The Geneva-based company also reported solid results in the second quarter of 2003, but noted that lower-than-expected chip pricing has delayed the long-awaited recovery.
On the manufacturing front, STMicro plans to bolster its fab capacity in Asia, Europe and the United States, although the Geneva-based chip maker provided few specifics about the plan.
"During the third quarter, we will define a plan to increase our cost competitiveness by migrating at least one-half of our European and U.S. 6-inch wafer production either to finer geometry 8-inch wafer fabs or to our 6-inch wafer fab in Singapore, while enhancing our overall manufacturing capacity," said Pasquale Pistorio, president and CEO of STMicro, in a statement.
"The plan, which will include a time table, related impairment and restructuring charges as well as manufacturing cost savings, will be announced once it is completed, which is expected to be no later than when we announce our 2003 third quarter results in October," he said.
STMicro's capital expenditures were $298.1 million in the second quarter, compared to $255.7 million in the first quarter of 2003, and $202.1 million in the year-ago second quarter.
It made the disclosure along with its second-quarter results. The company reported sales of $1.702 billion in Q2, a 5.2 percent sequential increase over first quarter 2003 revenues of $1.618 billion and 11.2 percent above the $1.531 million of last year's second quarter.
Net income equaled $79.5 million for the 2003 second quarter compared to $79.0 million in the 2003 first quarter, which included non-operating pre-tax charges of $6.4 million and $8.4 million, respectively, related to bond repurchases. In last year's second quarter, net income was $104.7 million. Earnings per diluted share were $0.09 for the 2003 second quarter, compared to $0.09 in the first quarter of this year. In last year's second quarter, earnings per diluted share were $0.12.
Looking ahead, Pistorio painted a mixed picture for STMicro. "We share the viewpoint of many industry analysts that the semiconductor market will grow within the range of 8 to 12 percent this year, probably at the midpoint of about 10 percent," he said. "The improved pricing conditions which we had expected to benefit the 2003 second half, however, have not materialized, and the global economic recovery has been delayed."
"Within this environment," Pistorio noted, "we anticipate that ST's third quarter 2003 revenues will range from $1.70 billion to $1.78 billion, equivalent to flat to mid single-digit sequential growth and year-over-year improvement of between 3 percent and 8 percent."
There are other issues. "Reducing SARS-related inventory levels will be a priority," Pistorio said, "which, along with difficult pricing conditions and the impact of a weak U.S. dollar, will penalize gross margin, which is likely to be approximately 35 percent in the third quarter."
Pistorio added that, "pricing and currency trends have led us to revise our fourth quarter gross margin target range to 36 percent to 37 percent, depending on revenue levels. The absence of an improved pricing environment and the uncertainty as to the timing and direction of a business recovery require us to adopt further measures to counter adverse industry conditions."