(Reuters) -European chipmaker STMicroelectronics on Thursday forecast higher third-quarter sales as demand from automakers helped it beat revenue forecasts in the second quarter, even as it flagged higher inventories in a sign of a weaker chip market.
Chipmakers have been reporting sluggish demand, with rival Texas Instruments (NASDAQ:TXN) saying earlier this week that some clients were cancelling orders, while Taiwan's TSMC said last week that even booming AI chips had not offset broader market weakness.
"You know that smartphones this year overall will decrease," STM's Chief Executive Jean-Marc Chery said in a call with analysts. "The inventory correction in personal electronics is going on, will still continue in Q3 as well."
The company expects third-quarter net revenue of $4.38 billion, up 1.2% from a year earlier, which JPMorgan (NYSE:JPM) analysts said was slightly above consensus estimates.
However, the brokerage noted end-quarter inventories were 20.7% above the three-year seasonal average.
STM's shares were up around 4% as of 0944 GMT, after they fell 3.5% initially.
Automakers' push to make electric vehicles and develop driving assistance technology have eased challenges in the semiconductor sector also grappling with U.S.-China trade spats.
STM, whose clients include Tesla and Apple (NASDAQ:AAPL) , credited automotive demand for the 12.7% rise in its second-quarter net revenue to $4.33 billion, slightly above analysts' consensus based on Refinitiv Eikon data.
"We will build more capacity for our European and global customers in advanced technologies and their transition to digitalisation and decarbonisation," Chery said.
STM and Global Foundries are investing some 7.5 billion euros ($8.35 billion), including French state aid, to build a major chip factory in Crolles, southeastern France.
The group also sharpened its full-year outlook, expecting revenue of $17.4 billion, give or take $150 million, against its April guidance range of $17.0 billion to $17.8 billion.
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