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STMicro CEO Cautious Despite Strong Demand

Bloomberg I Bloomberg | Getty Images

The chief executive of European chipmaker STMicroelectronics told CNBC that the company had to be careful as it winds down a loss-making venture with telecoms operator Ericsson.

Despite seeing an increase in demand from customers in Europe and the U.S., Carlo Bozotti said the company had to "remain prudent."

"[Feeling] positive is a stretch," he told CNBC on Thursday. "We are encouraged because what we see from the start of the year is a good booking trend across the world and including Europe and we also have some positive indicators from the point of sales of our distributors serving a very large range of customers and the trend is good," he said.

"Now, is this sustainable? Of course, we do not know so we must remain prudent. We all understand the uncertainty at the macro-economic level but we are encouraged to see this trend."

STMicroelectronics and Ericsson announced in March that they were closing their loss-making mobile chip joint venture ST-Ericsson by dividing parts of the business between them and shutting the rest with the loss of about 1,600 jobs.

STMicro's six consecutive quarters of losses has been partly attributed to the joint venture. STMicro said in March that it expected $350 million-$450 million in cash costs from the shutdowns and restructuring.

Bozotti said he expected the joint venture to be wound down later this year. "We expect to close [St Ericsson], from a legal point of view, in the third quarter this year…The result is that we are splitting it up into three parts. One part to us with certain products and technologies, one part to Ericsson and one part is unfortunately being wound down."

Bozotti said the strong euro had been a headwind for the company.

"The overall divergence that we're seeing in terms of monetary policy from three or four major systems in the world is not helping us. The euro-dollar exchange [for example], the euro needs to be stable but not too strong. This is disadvantage for us."

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