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Demand for semiconductors is significantly above production capacity at France’s biggest chip company, which raised its annual revenue target on Thursday after recording an improvement in its quarterly gross margins.The group, which sells chips to Apple and Tesla, forecast annual revenue of around $12.6bn on Thursday, $100m more than previously planned, representing 23.3 per cent year on year growth.“We are seeing unconstrained demand which is well above our ability to produce,” said Jean-Marc Chery, chief executive of STMicroelectronics, although he said the situation was likely to improve in 2022 as the company adds production capacity.The Franco-Italian chipmaker reported a gross margin of 41.6 per cent in the third quarter of 2021, against 40.5 per cent in the previous quarter, and 36 per cent over the same period last year. The company expects its margin to increase to 43 per cent in the fourth quarter.STMicroelectronics’s shares gained 4 per cent in morning trading on Thursday.Demand for chips has skyrocketed due to a global shortage that has forced automakers and electronics companies to cut production.“Demand for semiconductors which is strongly driven by mega trends – on top of logistics that are becoming much more constrained – will be sustained,” Chery said.He also said that the low levels of inventory and stock seen in the industry was “not sustainable”, noting that there was logistics congestion by land, sea and air. Strong demand for smartphones offset a much larger than anticipated slowdown in semiconductor production for the automotive industry, driven in part by a pandemic-related hit to capacity at its manufacturing plant in Malaysia, the company said.



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