Semiconductor maker Infineon, announcing a fourth quarter loss of 292m euros, has warned that recovery is eluding the chip market.

The firm, Europe's second-largest chipmaker, said it was still suffering from "dramatic" spending cutbacks implemented by some telecoms clients.

Ulrich Schumacher: Outlook still gloomy

And Infineon's key memory chip division saw sales slide by 21% during the July to September period, compared with the quarter before, as strong competition forced price cuts.

Chief executive Dr Ulrich Schumacher warned that "pricing pressure" looked set to dog all the firm's businesses in coming months.

"The market outlook shows no clear signs of a sustained improvement in demand yet," he added.

The warning spooked investors, who sent Infineon shares down more than 10% in early trade on Friday, although they recovered later in the day to trade at 9.96 euros, a loss of nearly 3%.

The quarterly loss, while smaller than the 882m euro (£562m; $891m) figure reported a year before, was larger than most analysts had expected.

Chips down

Sales to telecoms infrastructure firms were set to remain depressed, due to "continuing weak capital expenditures by global carriers", Infineon said.

And while demand for memory chips had shown recent signs of revival, "it is too early to assume a sustained market improvement", said the firm, which is to focus on cutting manufacturing costs within the division.

But the firm said that an increasingly global focus would help it reap early gains from a recovery in the market.

Infineon saw 54% of group sales achieved outside Europe over the year to the end of September, compared with 47% the year before.

Strong performer

Infineon's automotive division, which provides devices used in engine performance monitoring and in-car gadgets, saw sales reach a record high of 321m euros in the quarter.

The figure, 14% higher than a year before, consolidated Infineon's position as the world's second largest maker of chips for the car industry.

The firm also saw the gloom easing over the mobile phone sector, with the launch of next-generation services helping sales of chips used in wireless devices surge by 39%.

"We see a stabilisation of demand in the mobile market," Dr Schumacher said.