European Chip Companies See Profits Surge

STOCKHOLM (07/19/2000) - The chips are up again. Riding a global wave of increasing semiconductor demand amid tight supplies, leading European chip companies are experiencing rapid profit and revenue growth.

The strong earnings reports released this week by European chip vendors are the result of a global boom in chip demand. Led by a surge in memory chip sales, worldwide semiconductor revenue this year is expected to reach a total of US$222 billion, a 31 percent increase over 1999, according to a May forecast from market researcher Dataquest Inc., a unit of Gartner Group Inc.

STMicroelectronics NV, one of Europe's largest semiconductor manufacturers, said Tuesday that its net income for the second quarter, which ended July 1, soared to US$336.5 million, or 37 cents per diluted share, as compared to $122.5 million and 14 cents, respectively, for the same period last year.

The Geneva-based company said revenue for the quarter reached a record $1.88 billion, rising more than 10 percent sequentially over this year's first quarter and 57.7 percent higher than the $1.19 billion it reported for the comparable quarter in 1999.

Revenue gains were seen across all product lines due to continued strong demand, with the consumer and telecommunications sectors doing particularly well, STMicroelectronics said in a statement.

Netherlands-based Royal Philips Electronics NV also singled out the semiconductor sector as a major contributor to the strong second-quarter and first-half results the company reported Tuesday. [See "Philips Reports Strong Q2 Results," July 18.]Philips said operating income from its semiconductor business during the first six months of 2000 nearly doubled to 565 million euros (US$521 million), as compared to 293 million euros during the corresponding period last year.

Philips does not break out detailed results for its various business units. In a statement issued in June, however, Philips Semiconductors, the company's chip making unit, said it expected second-quarter sales to come in 10 percent higher than the 1.44 billion euros it posted for this year's first quarter, and more than 50 percent higher than in the second quarter of last year.

Another major European chip producer, Munich-based Infineon Technologies AG, has yet to announce its results for the most recent quarter, but the company has already signaled that earnings will be higher than previously expected.

In late June, Infineon raised its profit forecast for its third fiscal quarter, ended June 30. The company said in a statement it expects to report third-quarter earnings before interest and tax "significantly above" 300 million euros.

The soaring chip sales are also resulting in growing royalty revenues for semiconductor design companies such as Cambridge, U.K.-based ARM Holdings PLC.

ARM and other chip designers are benefiting as licensees ship more products based on their designs.

Buoyed by its licensing partners increasing unit shipments by 175 percent over the first quarter, ARM on Tuesday said its pre-tax profit for the second quarter ended June 30 more than doubled to 8.3 million pounds (US$12.4 million), as compared to 3.8 million pounds a year ago.

Revenue for the quarter reached 23.1 million pounds, an increase of 60 percent over the 14.5 million pounds it posted for the corresponding period in 1999, ARM said in a statement.

ARM, in Cambridge, U.K., can be reached +44-1223-400400, or via the Web at Infineon, in Munich, is at +49-89-234-0, or at Philips, in Eindhoven, Netherlands, is at +31-40-27-369-29, or at STMicroelectronics, in Geneva, is at

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