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Demand for semiconductors is significantly higher than the production capacity of France’s largest electronic chip company, which on Thursday raised its annual revenue target after recording an improvement in its quarterly gross margins.

The group, which sells chips to Apple and Tesla, forecasts annual revenue of around $ 12.6 billion on Thursday, $ 100 million more than expected, up 23.3% year-on-year .

“We are seeing unlimited demand which is well above our production capacity,” said Jean-Marc Chery, managing director of STMicroelectronics, although he said the situation was likely to improve in 2022 as the company would increase its production capacity.

The Franco-Italian chipmaker posted a gross margin of 41.6% in the third quarter of 2021, compared to 40.5% in the previous quarter, and 36% over the same period last year. The company expects its margin to increase to 43 percent in the fourth quarter.

STMicroelectronics shares gained 4% in morning trading Thursday.

Demand for chips has exploded due to a global shortage that has forced automakers and electronics companies to cut production.

“The demand for semiconductors which is strongly driven by megatrends – in addition to logistics which are becoming increasingly constrained – will be sustained,” Chery said.

He also said the low inventory and stock levels seen in the industry were “unsustainable,” noting that there was logistical congestion by land, sea and air.

Strong demand for smartphones offset a much larger-than-expected slowdown in semiconductor production for the automotive industry, driven in part by pandemic-related capacity slump at its manufacturing facility in Malaysia, the company said. company.