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European microchip makers reporting Wednesday were more upbeat about prospects for the next quarter, joining a growing chorus of companies in the segment that have called a bottom to the slump that has blighted the segment for many months.

Still, doubts remain over whether a genuine recovery in demand is imminent, or whether restocking by distributors that have drawn down inventory rather than buying new products masks continued weak consumer demand.

Germany's Infineon Technologies AG (IFX.XE) Wednesday posted a 13% increase in third-quarter sales compared with the second quarter and narrowed its net loss significantly to EUR23 million from EUR258 million a quarter prior fueled by stronger demand from mobile handset producers like LG Electronics Inc. (066570.SE) and Apple Inc. (AAPL) and cost cutting.

Infineon said it expects to improve sales further in the current fourth quarter, underpinned by growth in its automotive, industrial and multimarket segments. Analysts cautioned that in these segments any improvement was more likely based on restocking, which could stop abruptly if consumer demand fails to pick up. Still, they said the wireless segment should continue to be supportive. Increasing demand for smartphones, mobile handsets with PC-like functions, has remained a growth area in a global handset market set to shrink by 10% this year, as Apple continues to blaze a trail with its latest iPhone, spawning a host of rival devices.

Swiss-based STMicroelectronics NV (STM), meanwhile, late Tuesday posted its sixth consecutive quarterly net loss as sales and margins continued to decline, but Chief Executive Carlo Bozotti Wednesday said he expects the chip market as a whole to decline less than previously forecast.

"Given the indicators of improvement we have observed, we expect the market to drop about 20% this year and I clearly expect STMicro to do better than the market," Bozotti told reporters in a conference call. He previously forecast the overall semiconductor market to drop about 25% in 2009.

STMicro Tuesday reported a loss of $318 million in the second quarter, including a restructuring charge of $86 million, compared with a prior-year loss of $47 million.

Revenue fell 17% to $1.99 billion. For its third quarter, the Swiss-based chip maker expects revenue of between $2.07 billion to $2.27 billion and a gross margin of about 31%.

U.K. based microchip designer ARM holdings PLC (ARM.LN) joined the rollcall of cautiously optimistic semiconductor companies Tuesday when it confirmed full year guidance and said improvements in the industry would lead to better trading in the second half of the year.

ARM reported flat second quarter sales of GBP65 million as the dollar eased against sterling, but in dollar terms sales fell 18% to $105.5 million, outperforming a 30% decline in the wider industry.

ARM's designs are manufactured into microchips by companies like Texas Instruments Inc. (TI) and Qualcomm Inc. (QCOM), and are present in a wide range of consumer electronic goods such as smartphones from Nokia Corp (NOK), handheld gaming devices such as Nintendo Co Ltd's (NTDOY) DS console, and music players such as Microsoft Corp.s (MSFT) Zune.

Dutch semiconductor equipment maker ASML Holding NV (ASML.AE) which kicked of European semiconductor earning season mid July, reported a narrower quarter-on-quarter net loss as sales jumped and said it expects to reach break-even by the end of 2009. ASML's chief financial officer Peter Wennink, however, cautioned that "doesn't mean we are seeing a full-swing recovery," as he said he hadn't seen any capacity growth in the chip market.

ASM International NV (ASMI), which also makes semiconductor equipment and assembles and packages the chips, reports later Wednesday.

-By Archibald Preuschat, Dow Jones Newswires; +49 211 13872 18; archibald.preuschat@dowjones.com

(Ruth Bender in Paris and Kathy Sandler in London contributed to this report.)