* Q1 results beat market expectations * But rising costs weigh on profits * Stock top CAC 40 performer (Recasts story, adds share reaction) PARIS, April 29 (Reuters) - Shares of Franco-Italian chipmaker STMicroelectronics bounced back in early trading on Thursday after boss Jean-Marc Chery signalled sustained demand from the smartphone industry, which includes top client Apple. Investors poring over STMicro’s latest earnings report had first winced at rising operating costs despite a global surge in demand for semiconductors that helped it beat market expectations in the first quarter. Yet the company’s stock quickly went back into positive territory, rising by more than 3% by 0833 GMT and topping France’s CAC 40 index after Chery said the group would continue to supply the smartphone industry with high-margin sensors over the next three years. Apple is one of STMicro’s 10 biggest clients. Some analysts estimate the U.S. giant represents up to 20% of STMicro’s global revenue. “I can confirm that we have a clear visibility on where ST products will remain (for computer and smartphone makers), for the current three years”, Chery told analysts in a call, triggering a sudden rise in the group’s shares. “And they will contribute to our revenue growth.” The company also said it had brought forward its target of $12 billion in annual sales by two years. A wave of orders has swept the semiconductor industry to cause a global shortage that stopped production lines at several automakers, propelling production capacity at STMicro’s plants. STMicro, which also supplies automaker Tesla, said it now expected full-year revenues to be around $12.1 billion, a threshold it had postponed to 2023. The group added that it planned investments of $2 billion, at the high end of its guidance, to meet booming orders for chips. The global shortage has spilled over into a debate over the capacity of the United States and Europe to make the most-advanced chips at home to cut dependence on Asia, now the heart of the industry. That prompted chip giants Intel and TSMC to announce massive investments to boost capacity or build new plants. Top executives of both firms are set to meet European industry chief Thierry Breton on Friday in Brussels. STMicro produces a wide range of chips, from low-margin microcontrollers to more sophisticated sensors used in smartphones and autonomous vehicles. STMicro reported first-quarter net revenues of $3.02 billion, beating a Refinitiv IBES estimate of $2.92 billion. The group’s gross margin of 39% for the period exceeded its own expectations. It sees net revenues of about $2.9 billion and a gross margin of about 39.5% in the second quarter.