Chips are down? Mixed signs for industry: STMicro

Uncertainty over the wider economic outlook, particularly in China, could affect the semiconductor industry, the chief financial officer of STMicroelectronics, Europe's largest chipmaker, told CNBC on Thursday.

CFO Carlo Ferro said that the biggest external risk factors for his business were waning demand from emerging markets and uncertainty of the macro-economic situation, particularly in China, and its potential effect on the global electronics market.

He believed that central bank action around the world- ranging from massive bond buying programs to negative interest rates - was "helping economies." "Some prudence like that shown by the Fed yesterday is important to economies and clearly the U.S. economy is in a better shape than the euro zone economies on key indicators," he told CNBC on Thursday.

An electronic/semiconductor.
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Ferro is a member of CNBC's global CFO council which is surveyed quarterly for its outlook on the global economy. In the latest survey, global CFOs were sanguine about the economic prospects within the U.S., U.K., and euro zone, but were less confident about Russia and Brazil which were predominantly seen as "strongly declining."

Looking more closely at the smartphone industry, to which STMicro supplies handset technology, Ferro said the outlook was mixed.

"First of all, on the overall evolution of the semiconductor industry we see mixed signs, it's true that perhaps smartphones will have a potentially weaker 2016 than we were expecting a couple of months ago."

"On the other hand, automotive (applications, such as infotainment and car audio systems) is already recovering and the outlook for automotive is more positive today as opposed to a couple of months ago. Overall though, smartphones will continue to be the hub for the "Internet of Things" (IoT) applications…and this will be a trend from which StMicro can benefit," he said.

STMicro is headquartered in Geneva, Switzerland and looking at the competitiveness of being based in Europe, Ferro said that his company benefitted despite slow labor market reform in the region.

"In the end, every global corporation reflects the strengths and weaknesses of the countries where the operations are located. STMicro is a global company as we have a significant route of our technology and people know-how in Europe and Europe certainly has the advantage of higher loyalty, lower turnover (of staff) and this allows the company to build a unique set of competencies and know-how."

"When you turn to the cost factor, it's not a secret that Europe is more expensive than Asia," he said. However, "this is an area where the fiscal policy and tax wedge (which is increasing the labor costs in respect to the salary) could be addressed but it's good that the European countries are passing reforms in Italy and are under discussion in France."

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