St microelectronics investor day 2012


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St microelectronics investor day 2012

  1. 1. Forward Looking Statements 1 Some of the statements contained in this release that are not historical facts are statements of future expectations and other forward-looking statements (within the meaning ofSection 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, each as amended) that are ba sed on management’s current views and assumptions,and are conditioned upon and also involve known and unknown risks and uncertainties that could cause actual results, performa nce or events to differ materially from those in suchstatements due to, among other factors:• the possible impact of an impairment charge on the carrying value of the ST-Ericsson investment in our books of approximately $1.7 billion as well as on our consolidated results of the successful execution of ST-Ericssons new strategic direction plan and its related savings announced on April 23rd 2012;• changes in demand in the key application markets and/or from key customers served by our products, including demand for products where we have achieved design wins and/or demand for applications where we are targeting growth, all of which make it extremely difficult to accurately forecast and plan our future business activities;• our ability in periods of reduced demand or visibility on orders to reduce our expenses as required, as well as our ability t o operate our manufacturing facilities at sufficient levels with existing process technologies to cover our fixed operating costs;• our ability, in an intensively competitive environment, to identify and allocate necessary design resources to successfully d evelop and secure customer acceptance for new products meeting their expectations as well as our ability to achieve our pricing expectations for high-volume supplies of new products in whose development we have been, or are currently, investing;• the financial impact of obsolete or excess inventories if actual demand differs from our expectations as well as the ability of our customers to successfully compete in the markets they serve using our products;• our ability to maintain or improve our competiveness when a high percentage of our costs are fixed and are incurred in Euros and currencies other than U.S. dollars, especially in light of the increasing volatility in the foreign exchange markets and, more particularly, in the U.S. dollar exchange rate as compared to the Euro and the other major currencies we use for our operations;• the outcome of ongoing litigation as well as any new litigation to which we may become a defendant;• changes in our overall tax position as a result of changes in tax laws, expected income or the outcome of tax audits, changes in international tax treaties which may impact our results of operations as well as our ability to accurately estimate tax credits, benefits, deductions and provisions and to r ealize deferred tax assets;• the impact of intellectual property (“IP”) claims by our competitors or other third parties, and our ability to obtain requir ed licenses on reasonable terms and conditions;• product warranty or liability claims based on epidemic or delivery failures or recalls by our customers for a product containing one of our parts;• availability and costs of raw materials, utilities, third-party manufacturing services, or other supplies required by our operations; and• current economic uncertainties involving the possibility during 2012 of limited growth or recession in global or important regions of the world economy, sovereign default, changes in the political, social, economic or infrastructure environment, including as a result of military conflict, social unrest and/or terrorist activities, economic turmoil, as well as natural events such as severe weather, health risks, epidemics, earthquakes, tsunami, volcano eruptions or other acts of nature in, or affecting, the countries in which we, our key customers or our suppliers, operate and causing unplanned disruptions in our supply chain and reduced or delayed demand from our customers.Such forward-looking statements are subject to various risks and uncertainties, which may cause actual results and performance of our business to differ materially and adversely fromthe forward-looking statements. Certain forward-looking statements can be identified by the use of forward-looking terminology, such as “believes,” “expects,” “may,” “are expected to,”“should,” “would be,” “seeks” or “anticipates” or similar expressions or the negative thereof or other variations thereof or comparable terminology, or by discussions of strategy, plans orintentions.Some of these risk factors are set forth and are discussed in more detail in “Item 3. Key Information — Risk Factors” included in our Annual Report on Form 20-F for the year endedDecember 31, 2011, as filed with the SEC on March 5, 2012. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actualresults may vary materially from those described in this release as anticipated, believed or expected. We do not intend, and do not assume any obligation, to update any industryinformation or forward-looking statements set forth in this release to reflect subsequent events or circumstances. 1
  2. 2. Agenda 2 Presentation SpeakerTime9:00 Introduction T. Sorensen9:05 Company Strategy & Vision C. Bozotti9:25 ST Business & Financial Roadmap P. Lambinet9:55 ST-Ericsson D. Lamouche10:20 Manufacturing & Technology R&D J.M. Chery10:50 Break11:05 PANEL: Digital & Multimedia Convergence G.L. Bertino, M. Cetto, R. Krysiak, P. Lambinet,11:35 PANEL: Power P. Grimme , F. Guibert, M. Monti, C. Papa12:05 PANEL: Sense E. Aussedat, M. Cassis, C. Dardanne, B. Vigna12:35 Q & A Panel C. Bozotti, J.M. Chery, C. Ferro, P. Lambinet, D. Lamouche, C. Papa1:30 Lunch2:30 Breakout Sessions5:00 to 6:30 Reception
  3. 3. Agenda – Breakout Sessions 3 New Pearl Plymouth Minskoff Nederlander Palace Amsterdam Imaging, BiCMOS Digital Analog, MEMS &2:30 – 3:00 ST-Ericsson Convergence ASIC & Silicon Automotive Sensors Photonics Industrial & Power Analog, MEMS &3:00 – 3:30 Discretes Automotive Microcontrollers Sensors Imaging, BiCMOS Digital Industrial & Power3:30 – 4:00 ST-Ericsson Convergence ASIC & Silicon Discretes Photonics Digital Industrial & Power4:00 – 4:30 Convergence Automotive Microcontrollers Discretes Imaging, BiCMOS Analog, MEMS &4:30 – 5:00 ST-Ericsson ASIC & Silicon Microcontrollers Sensors Photonics5:00 – 6:30 Reception – MAJESTIC Ballroom Foyer (5th Floor) • Automotive Marco Monti, Paul Grimme • Analog, MEMS & Sensors Benedetto Vigna, Marco Cassis • Digital Convergence Gian Luca Bertino, Robert Krysiak • Imaging, BiCMOS ASIC & Silicon Photonics Eric Aussedat, Flavio Benetti • Industrial & Power Discretes Carmelo Papa, Matteo Lo Presti • Microcontrollers Claude Dardanne, Francois Guibert • ST-Ericsson Carlo Ferro, Ronen Ben-Hamou
  4. 4. ST Business & Financial RoadmapPhilippe LambinetExecutive Vice PresidentCorporate Strategy OfficerGeneral Manager, Digital Sector
  5. 5. About ST 2• A global semiconductor leader• The largest European semiconductor company• 2011 revenues of $9.73B(1)• Approx. 50,000 employees worldwide(1)• 12,000 people working in R&D• 12 manufacturing sites• Listed on New York Stock Exchange, Euronext Paris and Borsa Italiana, Milano (1) Including ST-Ericsson, a 50:50 joint venture with Ericsson
  6. 6. Partners of our Customers Worldwide 3with 78 sales offices in 36 countries
  7. 7. Focused Product Segments 450/50 JV with Ericsson Analog & Power Wireless Digital Automotive Microcontrollers Discrete Digital Imaging, BiCMOS ASIC Automotive Analog, Micro, Industrial & Convergence & Silicon Photonics Products MEMS & Memory & Power Group Group Group Sensors Security Discrete (DCG) (IBP) (APG) (AMS) (MMS) (IPD) 4
  8. 8. FY11 Revenues by Product Segments 5 Wireless ST-Ericsson Automotive (APG) • #1 in China • #1 ASIC 16% 17% • #1 Smart Power • #3 WorldwideDigital• #1 in Set-top Box outside US• #2 in Set-top Box Worldwide 19% Analog, MEMS & 35% Microcontrollers (AMM) • #1 in MEMS 13% Sensors and MicroactuatorsPower Discrete (PDP)• #1 in Thyristor• #1 HV>400V PowerMOS ST’s exposure to the Wireless segment* at the earnings level *See appendix is 9% Source: IHS iSuppli 2011 rankings
  9. 9. Our Vision 6
  10. 10. 7
  11. 11. 1987 8One Device = One Function
  12. 12. 2012 9Connecting Users to Content and Services
  13. 13. Technology Adoption Rates Acceleration 10 Source: Charlie Catlett, Argonne Natl Laboratory
  14. 14. Convergence of Functionalities 11 Camera Battery life Parental control GPS Camcorder Home sharing Social Networks Web browsing Apps stores Gaming Picture stabilization Content sharing Email Content personalization SMS MP3 player Data security
  15. 15. 40% Application Drivers towards 2015 12 35% SSD 30% Tablets 25% Smartphones 20% (4G CAGR > 100%) Building & Home Automation2011 - 2015 CAGR 15% Energy Generation & Distribution Fiber Appliances 10% Broadband Ebooks WLAN Acess/Routers Medical Fab Automation HDD STB Game Consoles 5% Infotainment Automotive Body TV 0% Computer Systems Printer -5% Flat Panel Monitor -10% -15% Mobile Phone 1G/2G -20% 100 1,000 10,000 100,000 Market Size in 2015 ($M) Automotive Electronics Categories Consumer Electronics Categories Data Processing Categories Industrial Electronics Categories Wired Communications Categories Wireless Communications Categories Source : IHS iSuppli (SAM, excl. DRAM, Flash, MPUs, Opto)
  16. 16. Key Attributes 13Display Interact Connect Power
  17. 17. Key Requirements 14 Performance Interface Smart World Power SecurityMultimedia Convergence + Sense & Power
  18. 18. Leading Sense & Power 15 Analog MCUs Key EnablersMEMS/Sensors ● Leading position in key products Power Management ● Rich portfolio of technologies ● Broad system know-how Supporting our target markets Automotive Communications Computer Consumer Industrial & Peripherals & Other
  19. 19. Growth Drivers for Sense & Power 16 Healthcare• Aging/growing population & Security • Increasing threats Wellness Energy Automotive Growth • Rising global car • Finite natural resources production and silicon content drive market • New opportunities (HEV/EV)
  20. 20. New Sense & Power Products in 2012 17 • Analog & MEMS • Automotive • Motion MEMS Combo • Power Amplifier • Altimeter • ABS, Air Bag, Powertrain, Smart Power • Microphone • PowerTM MCU • Touch screen controllers • Operational amplifiers • Smart Sensors (RF, MCU, Sensor)• Memory, Microcontrollers & Security • Industrial & Power Discrete • MCU Cortex - M0/M4 families • IGBT for motor control, solar and UPS • 32-bit F0 series • Amoled power management • 32-bit F3/F4 Series • Power MOSFET MDmesh V • Secure MCU (ST31 on ARM SC000 core) • Smart Grid: • NFC for mobile handsets • Power Line Modem • Android, Windows 8 and other • Photovoltaic ICs • EEprom dual interface
  21. 21. Driving Multimedia Convergence 18 Digital TV Digital & Monitor Set-Top Box Automotive Infotainment Network Infrastructure (ASIC) Key Enablers SmartphonesImaging ● Low-power and high performance CMOS & Tablets process roadmap ● Leading position in all converging markets ● Broad system know-how
  22. 22. Growth Drivers for Multimedia Convergence 19 Secure, ubiquitous, personalized services Explosion of Emerging digital markets content Growth
  23. 23. New Multimedia Convergence Products in 2012 20• Digital Convergence Platform • Imaging • Digital TV: Newman • Imaging diversification • Set-top Box: Orly • DisplayPort • Consumer, computer, • Premium monitors: Athena automotive, medical • DisplayPort based Smart Connectivity: • Expanding customer base Pegasus • Networking ASICs
  24. 24. Next Step in Multimedia Convergence 21• We will offer a unified processing platform to serve all markets• We will leverage our broad system knowledge and customer relationships Mu Specific 3,000 IPs by Mobile PCs Market 2,500 E-book Readers HW/SW Handheld Video Game Players Video Game Consoles 2,000 Digital Picture Frames Digital Still Cameras 1,500 Camcorders ST Portable navigation Residential Gateways Unified 1,000 Tablets Processing Smart Phones Platform Car Infotainment 500 Smart TVs Digital Set Top Boxes 0 2010 2016 Source: IHS iSuppli
  25. 25. Our Strengths 22• Expertise in leading edge  • CPU and graphics  platform • Power consumption • Ecosystems  • Video quality  • Google, Windows, Adobe, … • Security • Customer relationships  • Reliability 
  26. 26. ST Unique Offer 23 Process Key IPs Functions Packages Products Markets CPU cores Display QFP 32 nm Multimedia ConvergenceMore Moore Video composition BGA Platforms & display Industrial & Others 28 nm User CMOS Logic LOC A/V decode Interf ace Transport LGA ASICs Sense & 28 nm FDSOI GPU Communications power Position Sensors Security CMOS Analog 55/40 nm SOP Mixed Signal/RF DDR i/f More Than Moore Microcontrollers Motion (MCUs) USB SiP Computer CMOS Embedded 80/55 nm & Peripherals Non Volatile Memory SATA WLCSP HDMI Multimedia Audio Bipolar CMOS / Analog ICs & convergence 160/110 nm DMOS PCIe DIP MEMS MCU TO2xxx Consumer 22 um/AR 1:25 MEMS Video Analog Discrete & SMDP Integrated Gyroscope Power 0.4 mm Power & Discrete Devices Accelerometer Networking TSSOP Automotive
  27. 27. ST Total Revenues 24  FY11 total revenues = $9.73B  Wholly-Owned Businesses +1% year-over-year  Wireless down 30% 12000 10000US$M 8000 6000 4000 2000 0 FY05 FY06 FY07 FY08 FY09 FY10 FY11 ST ex Flash Wholly-Owned Wireless 24
  28. 28. Billings Bottomed in Q112 25  ST Q112 Revenues = $2.02B  Sequentially, Separate Revenue Dynamics Again  Wholly-Owned Businesses down 3%  Wireless down 29%  Q212 Revenue Guidance: +7.5%; +/- 3 percentage points 3000 2500US$M 2000 1500 1000 500 0 Wholly-Owned Wireless Guidance
  29. 29. Wholly-Owned Business Performance 26ST’s Wholly-Owned Businesses outgrew ...expanding its market share toits SAM by +220bps during 2011... 5.8% from 5.7% 1.5% 10.0 6.0% 1.0% Revenues (USD bn) Market ShareGrowth (%) 0.5% 5.0 5.0% 0.0% -0.5% -1.0% 0.0 4.0% -1.5% 2010 2011 SAM excl. WLS ST-WO Revenues Market Share • SAM = Serviceable Available Market • SAM Wholly-Owned Businesses = SAM excluding Wireless SAM • ST Wholly-Owned Businesses are comprised of Automotive, Digital, Analog, MEMS & Microcontrollers and Power Discrete Source: WSTS, STMicroelectronics
  30. 30. Wholly-Owned Business vs. Wireless 27 Wholly-Owned* Wireless **In US$M FY10 FY11 Q112 FY10 FY11 Q112Revenues 8,127 8,183 1,727 2,219 1,552 290Operating Income (Loss) before impairment, 1,063 933 13 (483) (812) (293)restructuring & one-time itemsOperating Margin 13.1% 11.4% 0.8% na na naMinority Interests na na na 297 413*** 168 * ST Wholly-Owned Businesses are comprised of Automotive, Digital, Analog, MEMS & Microcontrollers, Power Discrete and Others ** 100% of ST-Ericsson’s results (out of which 50% from the competence of ST) as consolidated by ST plus other margins of ST rel ated to ST- Ericsson’s business *** Q411 Wireless Minority Interests exclude the impact of $92M related to ST-Ericsson valuation allowance
  31. 31. ST Gross Margin & Opex Evolution 2840% Gross Margin Evolution35%30% Progressive Recovering from low disappearance of25% volumes recorded unused capacity from mid-2011 and charges and20% one-time arbitration improvement in Q111 Q211 Q311 Q411 Q112 Q212 award manufacturing Gross Margin - Reported Unused Capacity efficiencies Arbitration Award Guidance1,000 800 Operating Expenses Evolution 600 US$M 400 Opex expected to be: Key program:  Stable in $ in Q212 ST-Ericsson 200  Down in $ in H212 restructuring 0 Q111 Q211 Q311 Q411 Q112 Q212 R&D SG&A
  32. 32. Net Financial Position* 29US$M Reported Attributable to ST Expect net financial1,400 $1.27B position attributable to ST1,000 to be stable to slightly up at the end of 600 December 2012 200-200 12/31/08 12/31/09 12/31/10 12/31/11 3/31/2012 12/31/12e-600 Maintained strong net cash position throughout FY11 and Q112 despite weak market conditions from mid-2011 as well as a specific situation at a major customer  While funding $1.38B of capex…  …and absorbing our portion of ST-Ericsson investment…  …redeemed $764M in debt and paid $415M in dividends *See appendix **Includes ST-Ericsson short-term debt to Ericsson of $489M as of Mar. 31, 2012, $400M as Dec. 31, 2011, and $75M as of Dec. 31, 2010.
  33. 33. Dividend Evolution 30$0.40 9% • STM dividend yield of >8%$0.35 8% among the highest in the semiconductor industry 7%$0.30 6% • ST cumulative dividends over$0.25 the past 6 years (including the 5% $0.40 per share submitted to$0.20 the 2011 AGM for approval) 4% have been > $1.5B$0.15 3% • Quarterly dividend offers a$0.10 steady income to 2% shareholders and also$0.05 1% potential stock price revaluation$0.00 0% Dividend Yield *Source: Bloomberg (May 21, 2012) **2011 annualized dividend as submitted to the Annual General Meeting 30
  34. 34. Wireless 312011 Revenues: $1.55B; -30% Y/Y  ST-Ericsson to lower breakeven point • 50% Minority Interest  Revised, more flexible business model  ST expects a significant reduction in losses at ST-Ericsson in 2012 ST-Ericsson Operating Profitability Improvement 16% 500 35% 0 0% -500 -35% -1,000 -70% 2009 2010 2011 Mid term Operating Profit Operating Profit Margin
  35. 35. Digital 32 Operating Margin Mid-Term Drivers2011 Revenues: $1.84B; -15% Y/Y  Realize synergies related to unified processing platform  Capitalize on recovery in STB market  Ramp new products  TV, monitors, Smart Connectivity products  Communication infrastructure ASICs  Market/product diversification in Imaging  New applications – proximity sensing, user detection, etc. 19%  New markets – auto, gaming, medical, security, sports Operating Margin Expansion: Mid-term Target: Mid-Single Digit % 10% 5% 0% Q111 FY11 Q112 -5% -10% -15%
  36. 36. Power Discrete Products (PDP) 33 Operating Margin Mid-Term Drivers2011 Revenues: $1.24B; -6% Y/Y  Capitalize on market megatrends  Energy saving, automations green & renewable energy  Improve product mix  IGBT & Power Modules drive motor control applications  Breakthrough low voltage Power MOSFET technology (OFT)  Manufacturing flexibility 13%  Efficient front/back-end capabilities  Singapore conversion to 200mm Operating Margin Expansion: Mid-term Target: Mid-Teens % 20% 15% 10% 5% 0% Q111 FY11 Q112 -5%
  37. 37. Automotive Product Group (APG) 34 Operating Margin Mid-Term Drivers2011 Revenues: $1.68B; +18% Y/Y  Capitalize on solid growth in Auto market  Increasing pervasion of electronics in the car  Volume opportunities in emerging markets  New and innovative products  32-bit Power MCU in eFlash, RF for Active Safety  Leader in BCD technologies; introducing new generation 17%  Complete system offer in emerging markets Operating Margin Expansion: Mid-Term Target: Mid-Teens % 15% 10% 5% 0% Q111 FY11 Q112 34
  38. 38. Analog, MEMS & MCUs (AMM)* 35 Operating Margin Mid-Term Drivers2011 Revenues: $3.38B; +7% Y/Y  Rapid growth in Motion MEMS / expanding product portfolio  Microphone, pressure sensor, compass, etc.  Enlargement of 32-bit MCU portfolio (GP & Secure)  Ramping new BCD technologies for motor control  New products for SmartGrid and OLED display drivers  New wave of advanced analog products  Expansion of customer base and targeted applications 35% Operating Margin Expansion: Mid-Term Target: Low-Twenties % 25% 20% 15% 10% 5% 0% Q111 FY11 Q112 *New AMM perimeter starting January 1, 2012
  39. 39. ST Financial Model 36ST remains committed to delivering on a fully consolidated basis:9% to 12% operating margin12% to 18% return on net assets (RONA) target16% to 22% RONA attributable to ST
  40. 40. Key Programs to Increase Value 37Increase Shareholder Value Expand ST- Boost Cost Customer EricssonInnovation Reduction Base Turnaround
  41. 41. Appendix 38 2012 Trends2011
  42. 42. Financial Performance 39In US$M, except EPS FY10 Q111 Q211 Q311 Q411 FY11 Q112Net Revenues 10,346 2,535 2,567 2,442 2,191 9,735 2,017Gross Margin 38.8% 39.1% 38.1% 35.8% 33.4% 36.7% 29.6%Operating Income (Loss) before impairment, 580 142 114 (13) (123) 121 (280)restructuring & one-time items*Operating Margin before impairment, restructuring & one- 9.2% 9.9% 9.1% 4.3% (0.2%) 6.0% (6.5%)time items attributable to ST*Net Income – Reported 830 170 420 71 (11) 650 (176)EPS Diluted 0.92 0.19 0.46 0.08 (0.01) 0.72 (0.20)Adjusted EPS Diluted* 0.75 0.20 0.14 0.09 (0.01) 0.41 (0.14)Free Cash Flow* 961 51 (250) (136) 47 (288) 98Net Financial Position, adjusted for 50% investment in 1,227 1,255 1,293 1,134 1,167 1,167 1,267ST-Ericsson*Effective Exchange Rate €/$ 1.36 1.33 1.37 1.40 1.36 1.37 1.33
  43. 43. Glossary 40• Free cash flow is defined as net cash from operating activities minus net cash from (used in) investing activities, excluding payment for pu rchases of and proceeds from the sale of marketable securities (both current and non-current), short-term deposits and restricted cash. We believe free cash flow provides useful information for investors and management because it measures our capacity to generate cash from our operating and investing activities to sustain our operating activi ies. Free cash flow is not a U.S. GAAP measure and does t not represent total cash flow since it does not include the cash flows generated by or used in financing activities. In addit ion, our definition of free cash flow may differ from definitions used by other companies.• Net financial position: resources (debt), represents the balance between our total financial resources and our total financial debt. Our total financ resources include cash and cash ial equivalents, net of bank overdrafts, if any, current and non-current marketable securities excluding Micron shares received in connection with the sales of Numonyx, short-term deposits and non-current restricted cash, and our total financial debt includes short term borrowings, current portion of long-term debt and long-term debt, all as reported in our consolidated balance sheet. We believe our net financial position provides useful information for investors because it givesevidence of our global position either in terms of net indebtedness or net cash position by measuring our capital resources based on cash, cash equivalents and marketable securities and the total level of our financial indebtedness. Net financial position is not a U.S. GAAP measure.• Return on Net Assets (RONA) is the ratio of operating income before impairment and restructuring charges divided by average net assets used during the pe riod. ST defines average net assets as average total assets net of total liabilities as reported in our consolidated balance sheet excluding all itemsrelated to our financial position such as cash and cash equivalents, marketable securities, short term deposits, restricted cash, bank overdrafts, current portion of long term debt and long term debt.• Operating income before impairment, restructuring and one time item excludes impairment, restructuring charges and other related closure costsand NXP Arbitration award.• Operating income before impairment, restructuring and one-time item attributable to ST is calculated as operating income before impairment, restructuring and one time item excluding 50% of ST-Ericsson operating loss before impairment and restructuring as consolidated by ST.Operating margin before impairment, restructuring and one time item attributable to ST is calculated as operating income before impairment, restructuring and one time item attributable to ST divided by reported r evenues excluding 50% of ST-Ericsson revenues as consolidated by ST. Return on Net Assets (RONA) attributable to ST is calculated as annualized operating income before impairment, restructuring and one time item attributable to ST divided by reported net assets excluding 50% of ST-Ericsson net assets as consolidated by ST.• Adjusted net earnings and earnings per share (EPS) are used by our management to help enhance an understanding of ongoing operations and to communicate the impact of the excluded items. Adjusted earnings excludes impairment, restructuring charges and other related closure costs attributable toST, the impact of equity investment divestiture and subsequent sale of Micron shares, other-than-temporary impairment (OTTI) charges and realized gain on financial assets, NXP Arbitration award net of the relevant tax impact.• Consolidation of ST-Ericsson: ST-Ericsson, a joint venture owned 50% by ST, began operations on February 3, 2009 and is consolidated into ST’s operating resul s as of that date. ST- t Ericsson is led by a development and marketing company consolidated by ST. A separate platform design company providing platf orm designs mostly to the development and marketing company is accounted for by ST using the equity method.• Wireless Segment: As of February 3, 2009, “Wireless” includes the portion of sales and operating results of the 50/50 ST-Ericsson joint venture as consolidated in the Company’s revenues and operating results, as well as other items affecting operating results related to the wireless business.• Sales recorded by ST-Ericsson and consolidated by ST are included in Telecom and Distribution 40
  44. 44. Didier LamouchePresident and Chief Executive OfficerST-Ericsson
  45. 45. The new strategic direction
  46. 46. Our roadmap to success 2014 Success 2013 Growth 2012 Stabilization3
  47. 47. What it takes to transform our company Culture • From technology focus to customer focus Company Organization • Sustainable • Execution profitability • Simplicity • From brilliant ideas to Customers products delivered on • Speed • Engage with market time • Focus shapers Products • Diversification • Clear market strategy • Focused portfolio approach • Differentiation Repositioning our business model4
  48. 48. Our strategic objective and direction Become a sustainable and profitable technology leader in the wireless industry, by repositioning our whole business model and by leveraging our strength in system integration5
  49. 49. The value is in system integration System ModAp+ Connectivity System Solution System + service integration Apps ModemModAP RF, Power Processor AMS System integration Integration Platform Connectivity RF, Power AMS Modem Processor Chipset SW System integration RF, Power Modem Processor Connectivity AMS SW Complexity RF, Power Connectivity AMS Time6
  50. 50. ModAp systems as a key strategic differentiating offering through partnerships ∙ Focusing the R&D portfolio to deliver highly competitive complete system solutions in the form of integrated ModAp platforms ∙ Repositioning whole business model to develop key building blocks either directly or through partnerships ModAp system integration RF Application Modem Connectivity Power Processor Analog mixed signal • Continue to develop • Partnership with ST • Build on current • Build on current modem IP for ModAp • Transfer of R&D capabilities capabilities integration and to activities and offer thin modems to • Develop either directly headcount or through customers • Jointly promote partnerships and • Possibly license standalone APEs and alliances modem IP to 3rd thin modems parties ∙ Full continuity of ST-Ericsson committed roadmap and current customer engagements7
  51. 51. Application processor partnership with ST Combining ST and ST-Ericsson Market-specific competencies in one Team Complete platforms Development of common core APE Common Common Core APE Core APE Common Core APE Development CPU Graphics organization Video Imaging Common Display Security IPs Application Specific IPs8
  52. 52. Partnership value for ST-Ericsson Value for ST-Ericsson ST 3rd Party Standalone Roadmap continuity = - = Addressable market + + = R&D cost reduction & ++ + = synergies Fixed cost to variable ++ ++ = Royalties - (long term) -- = Cash savings ++ + = ST Partnership has the highest value for ST-Ericsson9
  53. 53. Roadmap continuity a key decision factor With a 3rd party ∙ Timing for our next generation ModAp platform significantly delayed In Production/Sampling 2012 2013/2014 2015 IMG 2xA9 Next Gen L8540 1.85G Partner A 100 42 Next Gen Partner B ARM ARM IMG 2xA9 2xA9 To be 2xA9 U8500 1G U8520 1.2G Announced 1.2G 100 14 14 4210
  54. 54. Roadmap continuity a key decision factor With ST ∙ Roadmap and revenue continuity ∙ Full continuity for customers investment in our platforms today ∙ Timing for next generation shorter In Production/Sampling 2012 2013/2014 2015 IMG IMG IMG Rogue 2xA9 To be 2xA9 Next Gen 2xA15 L8540 1.85G Announced 2+G ST 2+G 100 100 150 42 42 84 ARM ARM IMG 2xA9 2xA9 To be 2xA9 U8500 1G U8520 1.2G Announced 1.2G 100 14 14 4211
  55. 55. Execution efficiency as a revenue lever Product definition SW Development IC Development System Development Customer Engineering Manufacturing For Illustrative purposes only ∙ Improve R&D execution & accelerate time-to-market, while reducing operating expenses ∙ Consolidation into a significantly smaller number of sites, specialized by technology ∙ Develop integrated excellence centers delivering larger portion of system value chain ∙ Increase revenues through faster R&D execution12
  56. 56. Lower the breakeven point ∙ Global workforce reduction of about 1,700 Operating Profitability employees worldwide*, including the headcount that would be transferred to ST Improvement 500 35% ∙ Reducing R&D costs through partnership and site consolidation ∙ Reduction of SG&A expenses by about 25 % versus 2011, streamlining the general and administrative activities 0 0% ∙ Discussions with employee representatives ongoing and on track ∙ Partnership for application processors with ST -500 -35% ∙ Transfer fixed cost to variable ∙ Achieve scale to support sustainable execution ∙ On track for closing July 1st -1,000 -70% ∙ Target annualized net savings of $320M from new 2009 2010 2011 Mid and on-going restructuring plans on completion end term of 2013 Operating Profit Operating Profit Margin ∙ Restructuring charges $130-150M (including remaining charges related to ongoing restructuring plan to be completed at 2012-end) through completion ∙ Bring breakeven point just below $600M per quarter13
  57. 57. Addressing the right market
  58. 58. Wireless industry (r)evolution • From component to platforms • Rapid disruption in mobile OS 100% 80% Other ∙ Open source (Android + Linux) taking 60% Blackberry OS over 50% market share in 3 years 40% Symbian Windows Phone ∙ In the PC industry open source (Linux) 20% iOS has only gone from 2% to 5% in the 0% Android last 10 years 2009 2010 2011 Q1 2012 Source: Strategy Analytics, May 2012, ABI, March 2012 2Q 2009 Volume 4Q 2011 Volume Share Share • Drastically altered smartphone Nokia RIM 41% 19% Apple Samsung 24% 23% device maker landscape Apple 13% Nokia 13% HTC 6% RIM 9% Samsung 3% HTC 6% Source: Strategy Analytics, May 201215
  59. 59. Highest smartphone volumes in mainstream 1000 900 800 Premium 700 600Units Mn High 500 Will be addressed by integrated 400 Mid ModAp application 300 processor and 200 modem solutions 100 Entry 0 2012 2013 2014 2015 Source: Strategy Analytics, Dec 2011 Targeting above 10% market share in volume by 2014 16
  60. 60. ST-Ericsson executing on Android Android volume market share Android volume market share Q3 2011 Q1 2012 Others Others 2% 2% Chinese 16% Chinese 22% Sams ung Japanese 38% 5% Samsung Motorola Japanese 46% 7% 4% Motorola LG 6% 6% Sony LG 9% H TC 6% Sony 17% 7% HTC 7% Source: Strategy Analytics, May 2012 NovaThor ModAp platforms now in 10 devices already launched with four top tier Android OEMs and multiple regional players17
  61. 61. CPU 2012 2013DMIPS Q1 Q2 Q3 Q4 Q1 Q2 ST-Ericsson well Premium positioned in the LTE ModAp High platforms NovaThor landscape (NovaThor NovaThor L9540) L8540 Mid NovaThor Entry Competitor products18
  62. 62. Product Roadmap
  63. 63. Our approach Integrated ModAp solutions for industry-leading bill of material and size Leading thin modems for any device Full complement of connectivity and enhancements20
  64. 64. HSPA Roadmap LTE In Production/Sampling 2012 2013/2014 ARM ARM Partnership with ST for future A9500 A9540 application processors 2xA9 2xA9 1.2G 1.85G U9500 L9540 M5730/80 21 M7400/ 100 150 M7300 42 M74XX 84 IMG IMG IMG FD-SOI FD-SOI Rogue ModAps L8540 2xA9 1.85G To be Announced 2xA9 2+G To be Announced 2xA15 2+G 100 100 150 42 42 84 ARM ARM IMG U8500 2xA9 2xA9 To be 2xA9 1G U8520 1.2G Announced 1.2G 100 14 14 42 GPU IP & speed (MHz) ARM Processor & Speed (GHz) Modem DL Speed (Mbps) CG2900 CW1100 CG2905 CW1250 To beConnectivity GBF W LAN GBF W LAN announced21
  65. 65. A disruptive innovation in modem technology Thor™ M7400 • Groundbreaking architecture • SW Modem • Mass market LTE • Mid to premium devices Future architecture investment – scalability and stability LTE 100+50Mbps >60% size 1st generation reduction compared Modem PCB area: to solutions ~1400 mm2 on the market Chipset area: 2nd today 530 mm2 generation Same board as to the left with picture edited to show Thor M7400 size Power consumption S ource: UBM TechInsigths & S T-Ericsson. M emory excluded/C2C.22
  66. 66. Need to master the whole chain ST- Competitor Competitor Competitor Competitor Ericsson A B C D Application Processor LTE Modem Integration capabilities (ModAp) Multiple OS support Advanced silicon technology Mastering the supply chain Strong Good Developing23
  67. 67. Differentiation with FD-SOI Technology ∙ FD-SOI technology offers: ∙ NovaThor L8540 in FD-SOI would have ∙ More GHz and less power ∙ Operation up to 2.5Ghz ∙ Reuse of existing design ∙ 2x the performance possible at 0.6V ∙ At comparable cost ∙ 35% less power operating at max performance of NovaThor L8540 ∙ Working with ST ∙ For a typical smartphone this translates to: ∙ 4 hours more high-speed browsing ∙ 2.5 hours more HD video playback ∙ 2 hours more HD video recording ∙ Or an additional full waking day of use24
  68. 68. Customer traction continues
  69. 69. Latest NovaThor™ phones Samsung Galaxy Beam Motorola XT760 Dual core 1GHz HD camcorder Dual core 1GHz HD camcorder 5 Mpixel camera 8 Mpixel camera Integrated projector Samsung Galaxy Xperia™ sola Ace 2 by Sony Dual core 800MHz Dual core 1GHz HD camcorder HD camcorder 5 Mpixel camera 5 Mpixel camera26
  70. 70. Continuing to build momentum Samsung Sony Samsung Samsung Samsung Motorola Via Samsung Galaxy S Advanced X peria P Galaxy S 4G Exhibit 4G Infuse 4G X T760 U8500 Sidekick 4G At rix 2 Sharp Panasonic Nokia Samsung Sony HTC Sensation Ont im Motorola Aquos Eluga T7 Galaxy Beam X peria sola Z710t WP8500 Tablet Sony Nokia Samsung Sony Panasonic Lenovo 702T Tablet P/S Galaxy Ace2 X peria U Toughbook ThinkPad27
  71. 71. Conclusion ∙ The wireless industry has gone through dramatic changes 2014 ∙ adapted our strategy to cope with new landscape Success ∙ Clear path to success defined ∙ execution of product delivery is priority one focus ∙ major re-positioning and actions in 5 months ∙ major organization re-alignment toward accountability and 2013 execution focus Growth ∙ strategy re-definition and main steps taken ∙ cost reduction roadmap defined ∙ Early signs of recovery visible ∙ successful bring-up of 6 smartphones from market leaders in 2012 last 3 months Stabilization ∙ Q2 sequential growth over 10% ∙ Confident on future success despite challenges28
  72. 72. Thank you
  73. 73. Manufacturingand Technology R&DJean-Marc CheryExecutive Vice PresidentChief Manufacturing and Technology Officer
  74. 74. 21. Introduction
  75. 75. Complete Products, IPs, 3 & Technologies Portfolio Power MEMS Smartphones TV & digital Analog MCUs / ASICS Automotive Imagingmanagement sensors and tablets set-top boxPower & Analog Mixed MEMS BCD eNVM Advanced CMOSDiscrete Signal/RFLeadframe package Leadframe package Laminated substrate Laminated substrate WLSP & 3D MEMS leaded / leadless leaded / leadless package wired package flipchip Integration
  76. 76. Technology R&D Model 4
  77. 77. Technology R&D Model 5
  78. 78. Manufacturing Model 6 Flexible and independentmanufacturing
  79. 79. 72. Technology R&D
  80. 80. Multimedia Convergence: 8 The Ideal TechnologyMultimedia convergence is about… Performance Design Power simplicity leakage Cost of Area scaling ownership
  81. 81. Multimedia Convergence: 9 28nm Bulk Weaknesses Peak performance vs. energy efficiency 500% 4.7x 100% Peak Performance (DMIPS/mW)Energy Efficiency (DMIPS) 400% 80% 300% 60% 200% 40% 100% 20% 7% 0% 0% 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 Vdd Transistor performance improvement Gain by traditional scaling Gain by innovation 100% Relative % Improvement 80% 60% 40% 20% 0% 180 nm 130 nm 90 nm 65 nm 45 nm 32 nm
  82. 82. Multimedia Convergence: Fully Depleted 10 Devices Enabling sub-20nm Technologies• Main candidates after bulk are fully depleted devices • For improved electrostatic control and device scalability FDSOI = 2D FinFET = 3D drain gate height gate source Thin Silicon film Thin Silicon f ilm
  83. 83. Multimedia Convergence: 11 28nm FDSOI Better Energy Efficiency 6x 1.3X 500% 100% 4.7xEnergy Efficiency Peak Performance (DMIPS/mW) 400% 80% (DMIPS) 300% 60% 200% 40% 100% 20% 20% 3x 7% 0% 0% 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 Vdd
  84. 84. Multimedia Convergence: 12 Value Proposition Planar Technology – 2D 3D Technology 28nm LP • Available for Design: Now!High-K/Metal 28nm Boost • Superior Power Performance gate FDSOI/UTBOX • Faster Design • Enable Product Cost / Power Reduction +30% 20nm LPM 20nm Boost Strained-Silicon FDSOI/UTBOX +20% 14nm Bulk-Trigate • High Logic/Memory Integration • More complexity added to the process • Available for Design: Q4 2012 • Enable New High Performance Product 2012 2013 2014 2015 2016
  85. 85. Other VLSI Key Differentiation Initiatives 13 • Embedded Flash PCM for future shrink nodes • Ultra Fast and Low Power Microcontrollers • Imaging sensor with BSI on bulk
  86. 86. Smart Power: The Ideal Technology 14 • Thick Cu metallization & bonding POWER DEVICES over active areas• Figures of merit: • Rsp = RonxA • Gate charge (Qg) – Fsw up ISOLATION to 5 Mhz • Safe operating area • Junction isolation • DTI (Deep Trench Isolation) • SOI• Trends: • Integration density saturating with LITHO scaling • Device architecture and drain engineering • Thick copper metallization for high current • LOGIC: from 100 K gates up to 500 K gates • e-Memories ST ROADMAP • BCD8sP best in class for Power devices integration capabilities • Customized solutions by application  Low Maks Count • BCD9s (110 nm) ready for prototype in Q113 and BCD10 (90 nm) process architectures in definition phase
  87. 87. Smart Power: BCD9S 15Full Copper Metallization Power areas comparison vs. BCD6s-DCu 1.4 1.25 1.2 1.0 1.0 0.84 0.7 0.8 0.59 0.5 0.6 Power Areas from Rdson 0.4 (BCD6s-Dcu=1) 0.2 Power Areas from energy 0.0 pulsing BCD6s-DCu BCD8sAuto BCD9s
  88. 88. POWER: Top Priority Technology Platforms 16 IGBT SiC MD6 GaN OFT
  89. 89. SENSE: Technology Coverage 17SENSORS ACTUATORS• Accelerometers • Thermal• Gyroscopes• Compasses• iNEMOTM• Pressure • Piezoelectric• MicroPhone • Electrostatic
  90. 90. Packaging Technology R&D 18SenseMEMS and microphones (LGAs), Optical modules and Imagers towards BSIPower & BCDHigh dissipation, miniaturized packages (PSSO, QFNs)Multimedia Convergence with advanced CMOSIntegration and miniaturization based on BGAs. Towards Flip Chip & WLP
  91. 91. 193. Manufacturing