SGS-Thomson Microelectronics NV hopes that the worst for the year is out of the way with a slump in first quarter profits of 49% to $90m. It blamed price erosion for the decline but forecasts improvement for the remainder of the year. SGS-Thomson has so far been shielded from strong price erosion in chips because it does not produce dynamics, where prices have been ravaged, but the combination of a stronger dollar and lower demand for products destined for digital consumer applications reduced first quarter demand, chief executive Pasquale Pistorio said. We are certainly encouraged by our ability to maintain gross margin levels, which were bolstered by better operating conditions in the last months of the quarter, he added. Pistorio was in Catania, Sicily yesterday for the official opening of the new 8 wafer fab by Italian Prime Minister Romano Prodi who said he wanted to favor high-technology investments in the region. Pistorio said that sales in the second quarter were expected to be around $1bn. Somewhat firmer pricing and continued manufacturing efficiencies should result in a gross margin for the second quarter above that of the first, he said.
