By Mauro Orru

Semiconductor companies in Europe face a longer path to recovery than previously expected amid U.S. President Trump's erratic tariff policies. Trump unveiled tariffs on much of the world earlier this month, but subsequently paused levies on trading partners like the European Union in a bid to negotiate a deal. However, the U.S. is doubling down on taxing imports from China. Analysts expect companies to cut their guidance for the year when they report earnings for the first three months of the year to reflect any disruption and uncertainty from tariffs. Here is what you need to know:

WHAT TO WATCH:

--TARIFF EFFECTS: The industry has been riding a wave of appetite for artificial-intelligence semiconductors in recent months, but companies have also faced sluggish demand for legacy chips found in electric vehicles and industrial machinery. That weighed on sales for several European chip makers like Infineon Technologies and STMicroelectronics that have high exposure to automotive, personal-electronics and industrial customers.

Any disruption and uncertainty from tariffs could usher in even weaker demand for legacy chips, weigh on the AI supply chain and push the sector into a sharper decline, Jefferies wrote in a note to clients. Tariffs could lead to higher prices for products that rely on semiconductors like cars, smartphones, laptops, AI servers and industrial products, and give way to softening demand in the U.S., the analysts said.

--GUIDANCE: "We expect semiconductor demand and sales to decelerate faster than previously expected from April," they said, adding that the strengthening of the euro is also a headwind, especially for Infineon. The analysts expect Infineon to slightly cut is guidance for its fiscal year to the end of September, while STMicroelectronics and Ams-Osram are likely to show greater uncertainty in their outlook and caution on a recovery in the second half.

STMicroelectronics said Thursday that it would cut nearly 3,000 jobs through 2027 as the European chip maker seeks to revamp its fortunes after months of lackluster sales. The company embarked on a program to reshape its manufacturing footprint and cut costs. Chief Executive Jean-Marc Chery said then that the move would bring annual cost savings in the high triple-digit million-dollar range at the end of 2027.

WHEN COMPANIES ARE SCHEDULED TO REPORT:

--ASML: April 16

--BE Semiconductor Industries: April 23

--STMicroelectronics: April 24

--ASM International: April 29

--Siltronic: April 30

--Ams-Osram: April 30

--Infineon: May 8

Write to Mauro Orru at mauro.orru@wsj.com

(END) Dow Jones Newswires

April 11, 2025 04:17 ET (08:17 GMT)

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