French chipmaker STMicroelectronics expects inventory correction hampering the industry to continue into early 2012 and to return to normal business conditions in the second quarter.

The semiconductor industry has hit a slump as demand for consumer gadgets has slowed in Europe and elsewhere due to economic uncertainties at a time when vendors have invested heavily in the new production gear.

A priority for us in Q4 and I think it will be also in Q1 is inventory correction, chief executive Carlo Bozotti told an investor conference on Thursday.

There is a tale of correction in Q1 and we going back to normal business in Q2, Bozotti said, echoing research firm Gartner which said it expected the inventory correction to continue to dampen sales prospects for at least the remainder of the year before sequential growth can return in 2012.

While STMicroelectronics forecast a further slowdown in fourth-quarter sales when reporting weak results last month, Bozotti said the company had seen an uptick.

For a few weeks we have seen bookings increasing again, Bozotti said, adding the orders were still at a low level and it was not clear how sustainable the trend was.


Bozotti said both it and Swedish group Ericsson were committed to their 50:50 wireless chip venture ST-Ericsson which has never made a quarterly profit and has been cutting costs since it was formed in 2009.

ST-Ericsson, a key supplier to Nokia's Symbian platform, has been hit bad by the Finnish vendor losing out to Apple and Google on the smartphone market and earlier this year deciding to swap Symbian for Microsoft software.

Bozotti said while the venture was on a good track, it was difficult to compensate for the missing business from a big customer. The major problem is the lack of Symbian volume. The problem is Symbian, not the joint venture, he said.

Earlier this month, ST-Ericsson won a deal to supply chipsets for a future Nokia phone based on Windows Phone 8 software, breaking Qualcomm's monopoly over Microsoft's mobile platform.

The timing is the main challenge. Windows Phone 8 will be significant in 2013, he said.

While Windows Phones have had limited success so far, with Microsoft controlling only 1.5 percent of the smartphone market, analysts expect fast growth for the platform as Nokia has picked it for all its future smartphones.

Bozotti said the company's dividend policy was sustainable.

Today, we do not have any evidence that this is not sustainable, he said.

(Editing by Dan Lalor)