By Ludwig Burger and Natalie Grover
FRANFURT/LONDON (Reuters) -Merck KGaA does not anticipate that a projected decline in smartphone sales this year will weigh on its semiconductor chemicals business any time soon, CEO Belen Garijo told Reuters on Thursday.
Sales of mobile phones, the biggest driver of the microchip market, are forecast to fall 7.1% this year as consumers put device upgrades on hold due to inflation, Russia’s invasion of Ukraine and lockdowns in China. The German conglomerate is a supplier of chemicals and materials used in making semiconductors.
There is a significant shortage of chips and Merck’s customers are building significant capacity to serve end consumers, but there is a softening in smartphone demand, said Garijo.
“We believe that this is a transitory impact,” she said, adding that chips are used across industry, from automotives to data storage and beyond which keeps the sector attractive.
“We don’t hear anything that should be questioning the attractiveness of the semiconductor market.”
Meanwhile, Merck’s investment strategy in China has not changed but the healthcare and chip materials maker is “mindful of the potential risks”, Garijo noted in the Reuters Newsmaker interview.
China is a key region for the semiconductor industry and drug companies, but geopolitical challenges are growing. While Taiwan has lived under the Chinese threat for decades, war games in early August have rattled nerves in the semiconductor industry.
There is a need for “constructive dialogue” with markets like China that are important to German industry, and Merck, said Garijo.
“We are mindful of the potential risks … but our investment policy has not changed,” she said.
(Reporting by Ludwig Burger in Frankurt Natalie Grover in London; Editing by Mark Potter, Kirsten Donovan)