Introduction & Overview
Tait Sorensen Director, Investor Relations
Agenda
Time Presentation Speaker 8:00 am Registration/Breakfast 8:30 am Welcome Carlo Bozotti Introduction & Overview Tait Sorensen 8:35 am Business & Operations Didier Lamouche 9:05 am Products & Regional Overview Francois Guibert 9:45 am Financial Performance & Roadmap Carlo Ferro 10:15 am Company Strategy & Vision Carlo Bozotti 10:30 am Q&A Panel Carlo Bozotti, Didier Lamouche, Carlo Ferro, Francois Guibert 11:00 am Close Forward Looking Statements
.Some the statements contained in this release that are not historical facts are statements of future expectations and other forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, each as amended) that are based 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, performance or events to differ materially from those in such statements due to, among other factors:
. Changes in demand in the key application markets and from key customers served by our products, which make it extremely difficult to accurately forecast and plan our future business activities; . our ability to utilize and operate our manufacturing facilities at sufficient levels to cover fixed operating costs during periods of reduced customer demand, as well as our ability to ramp up production efficiently and rapidly to respond to increased customer demand, in an intensely cyclical and competitive industry; . the operations of the ST-Ericsson Wireless joint venture, which represents a significant investment and risk for our business and which may lead to significant additional impairment and restructuring charges, in the event ST-Ericsson is unable to successfully compete in a rapidly changing and increasingly competitive market; . our ability to compete with products and prices in an intensely competitive industry and the financial impact of obsolete or excess inventories if actual demand differs from our expectations; . 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 or the outcome of tax audits, and our ability to accurately estimate tax credits, benefits, deductions and provisions and to realize deferred tax assets; . the impact of intellectual property (“IP”) claims by our competitors or other third parties, and our ability to obtain required 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; . our ability in an intensively competitive environment to successfully develop and secure customer acceptance and to achieve our pricing expectations for high-volume supplies of new products in whose development we have been, or are currently, investing; . availability and costs of raw materials, utilities, third-party manufacturing services, or other supplies required by our operations; and . changes in the political, social or economic 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 (in particular, the aftermath of the recent events in Japan), 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 from the 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 or intentions. .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 ended December 31, 2010, as filed with the SEC on March 7, 2011. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results 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 industry information or forward-looking statements set forth in this release to reflect subsequent events or circumstances. Business & Operations
Didier Lamouche Chief Operating Officer
Agenda
. Semiconductor Market . ST: . Strong Positions in Targeted Markets . Technology R&D a Key Strength . Manufacturing Strategy to Support Revenue Growth . Japan Impact . Conclusion
2 Semiconductors: The Industry of Industries
Total Available Market Serviceable Available Market
. Growth in 2010: +26%
. Growth sustained by: From Enterprise . Baseline development driven demand … . New applications . Pervasion … to End-user / Consumer driven demand
Source: WSTS
3
Key Markets / Applications Market Data – 2010
Industrial Automotive 8% Wired 9% 6% CAGR 2010-14
Wired Consumer 19% Wireless 20% Data Processing
Consumer
Industrial
Automotive
Data Wireless Processing 38% 0% 5% 10% 15%
Source: iSuppli, March 2011 (including memories)
4 Strategic Trends 1 - Multimedia Convergence . Multimedia Convergence Automotive Industrial 8% Wired 9% 6% . Smart consumer devices . Connectivity Consumer Wireless 19% . Mobility 20%
Data Data Processing 38%
Multimedia Convergence
Source: iSuppli, March 2011 (including memories)
5
Multimedia Convergence
DTV
Tablets
PC Power Handheld GPS Games Laptop
Netbook PMP Smartphone
Universal Smartbook Remote
Performance
6 Strategic Trends 2 - Power & Energy Power and Energy Saving . Multimedia Convergence Automotive Industrial 8% Wired . Smart consumer devices 6% 9% . Connectivity
Wireless . Mobility Consumer 20% 19% . Power . Mobility . Energy saving
Data Processing 38%
Multimedia Convergence
Source: iSuppli, March 2011 (including memories)
7
Strategic Trends 3 - Sensing Power and Energy Saving . Multimedia Convergence Automotive Industrial 8% Wired . Smart consumer devices 9% 6% Sensing / . Connectivity User Interface . Mobility Wireless Consumer 20% . Power 19% . Mobility . Energy saving . Sensing Data Processing 38% . Man-to-machine interface
Multimedia Convergence
Source: iSuppli, March 2011 (including memories)
8 Leading in Sense & Power Applications
A revolution is ongoing in the way humans interact with the digital world… • mobility • man-machine interface • medical • secure solutions…
ST is leading this revolution with its innovative MEMS and Sensors technologies
9
Strategy Overview
Capture growth in historical markets and NEW applications
Energy Management & Smart Consumer Savings Devices Multimedia Convergence
Trust & Data Sense & Power Healthcare & Security Wellness
Power Analog & Platforms MCUs ASICs Discrete MEMS
10 Strong Positions in Targeted Markets
11
ST Total Revenues
FY10 Revenues = $10.35B . Revenue CAGR 2005-2010: ST ex Flash
US$M +6.5% compared to SAM of +5.1% 12,000
10,000 . Target growth rate faster than the markets we serve 8,000
6,000 . FY10 total revenues +21.6% year-over- 4,000 year 2,000 . Combined ACCI & IMS revenues +38% year-over-year 0 FY05 FY06 FY07 FY08 FY09 FY10 . ST-Ericsson transition to new products
ST ex Flash Flash Memory
12 Business Segments
Automotive, Consumer, Industrial and Computer & Wireless Multisegment Sector Communication (“IMS”) 50/50 JV with Ericsson Infrastructure (“ACCI”)
Home Computer & Automotive Analog, MEMS Power Entertainment Communication Products & Discrete Major Product & Displays Infrastructure Group Microcontrollers Products Lines (“HED”) (“CCI”) (“APG”) (“AMM”) (“PDP”)
Products
Major Customers
13
Top Customers
Top 10 OEM Customers FY 2010 (listed alphabetically)
Apple
Bosch
Cisco/Scientific Atlanta
Continental Q110 Q111 HP Top 20 Wireless Top 20 Non-Wireless Nokia Over 20 OEM Distribution
Research in Motion . Marketing Initiatives FY10: Samsung . New targeted key accounts: revenue up 58% Seagate . Mass market: revenue up 51%
Sony Ericsson
14 Regional Initiatives
. Enhance long-term customer partnerships and further penetrate new key accounts: Extracting the value of . Q111 new key accounts net revenues up 44% product innovation year-over-year
. Capitalize on regional opportunities: . Q111 Greater China-South Asia net revenues up 18% year-over-year
. Service the needs of the mass market: . Q111 Distribution net revenues up 34% year- over-year
15
Key Targeted Products & Applications
. #1 in MEMS for portable . #3 in Automotive WW gaining consumer devices momentum w/ PowerTM MCUs . Top player in MCUs; rapid . Leading in Set-top Box migration to 32-bit . Top player in analog ASICs for . #1 in EEPROM printers & motor control . Entering new high growth . Focusing on DTV markets (healthcare, energy, Leading . Diversify imaging to new automation) portfolio for optical sensor applications an evolving . Top player in Power Discretes marketplace . Leadership in smartphone & . Introducing innovative tablet market components in silicon & new . Engaged with 7 of Top 9 semiconductor compounds device OEMs . Focusing on renewable energy, . Expanding portfolio of hybrid vehicles, factory platforms including software automation… . Launched NovaThorTM family
16 40,000
35,000
30,000
25,000
20,000 40,000
35,000
15,000TAM 30,000
25,000
CoreWireless SC TAM M$ 10,000 20,000
15,000 5,000 Source: Strategy Analytics, April 2011
CoreWireless SC TAM M$ 10,000
0 SC Wireless Core 5,000
20080 2009 2010 2011 2012 2013 2014 2015 2016 2008 2009 2010 2011 2012 2013 2014 2015 2016
ULCULC EntryEntrySmartphone SmartphoneConnected Devices Grey ConnectedMarket Devices Grey Market
Source: ST-Ericsson internal estimates based on market and analyst reports
Smartphones will represent more than 60% SC TAM in 2016
17
2010 2013
Platform 26% Component Components vs. Platforms 33% (Smartphone volumes) Platform Component 67% 74%
Source: ST-Ericsson internal estimates based on market and analyst reports Very few SC companies can sustain platform R&D … and fewer still know how to optimize wireless platforms
18 Q1’09
Consolidation reinforces and validates complete platform approach …but full integration is long and difficult
19
Technology R&D a Key Strength
20 Technology R&D
Technology is bringing a competitive advantage to ST in the field of multimedia convergence and power applications ST is unique in the semiconductor industry mastering technologies as diverse as…
Advanced Discrete MEMS CMOS
…to drive leadership in multimedia convergence and high performance/power ASIC applications
21
CMOS Technology Alliances
ST participates in these alliances: . PreT0: advanced CMOS technology research . ISDA: bulk/low-power (LP) technology development . 32/28nm . 20nm
22 Manufacturing Strategy to Support Revenue Growth
23
Lighter Asset Model Manufacturing Flexibility Through The Market Cycle
AVERAGE MARKET GROWTH SUPPLIED THROUGH MARKET EXTERNAL FLEXIBILITY DEMAND
SUPPLIED THROUGH INTERNAL CAPACITY ST INTERNAL CAPACITY
TIME
24 Manufacturing Locations France Total Wafers (Crolles, Rousset, Tours) 8" Equivalent Italy (Agrate, Catania)
China Morocco (Shenzhen, Longgang) Malta Philippines Non-Europe Europe Malaysia Singapore
Front-end sites Back-end sites
25
ST Front-End Manufacturing Vision
. Advanced CMOS technologies . Growth supported mainly through outsourcing of 2/3 of the total demand to foundry partners . 300-mm strategy for advanced logics and derivatives . Manufacturing capability and technology mastering at Crolles/300 . Technology ownership and mastering through ISDA alliance . Early prototyping and fast time to market production in Crolles/300 and/or at selected foundries . Parallel volumes ramp-up at foundries . Multiple foundry options offer flexible and competitive outsourcing
. Differentiated, derivatives and mature technologies . Exploit product differentiation capability of added-value proprietary technology . Balance internal investments and outsourcing to foundries maximizing internal saturation, even in market downturn periods
26 Manufacturing Cluster Model Flexible, Dedicated & Integrated
Smart Power & MEMS Discrete/Power
Agrate Tours/Catania Foundry Singapore Adv SOC High End & TRD MCU - Security
Product Group MFG R&D Crolles Rousset
27
Manufacturing Flexibility Outsourcing Level Adapting to Demand Change
Advanced Logic (< 65nm)
55%
40% Wafers
Q409 Q410 Q411e INTERNAL EXTERNAL
28 Back-End Manufacturing Strategy
. Capacity growth at major plants in Asia: . Shenzhen (China) Broad range . Long Gang (China) Power and commodities . Muar (Malaysia) Broad range . Calamba (Philippines) Wireless and MEMS China Morocco (Shenzhen, Longgang) Malta . Specialized EMEA plants: Philippines . Malta and Bouskoura (Morocco) focusing on MEMSMalaysia and Automotive . Packaging outsourcing 34% in units in 2010
Back-end sites
29
2011 Projects / Capital Spending
Front-end Manufacturing / R&D Investments focused on: . MEMS capacity 2X in Agrate and . Strategic growth businesses and key product ramps MDMESH/BCD in Catania . Singapore conversions and Auto/Power . Proprietary manufacturing discretes growth . U8500 platform and chip-set ramp-up at Crolles and Rousset 2011 Capital Expenditures . Crolles 300mm 32/28nm capability
Back-end Manufacturing . Capacity increase and mix evolution at Asian plants Plan: $1.1B to $1.5B . MEMS growth at Malta
Others . Testing, IT, Quality & Safety Front-End Back-End Test & Others R&D
30 Japan Impact
31
Near-Term Outlook: ST Japan
Current visibility: . 4% of FY2010 revenues shipped to Japan . Situation is still fluid . Exposure to Japanese suppliers is ~1/2 that of . >200 employees the industry . Largest businesses are . Optimizing global semiconductor supply chain automotive and resources to best meet customer demand consumer related . Repositioning of the customers global supply . No manufacturing sites chain in Q2 . Headquartered in Tokyo . Impact to ST negative short-term, some opportunities beyond . ST well-positioned as recovery progresses
32 Conclusion
33
Conclusion
Our markets have solid growth prospects despite short term uncertainties . Semiconductor industry is still cyclical in nature but resilient . While industry growth has moderated in the past 10 years, semis still grow significantly higher than Global GDP . The economic crisis of 2009 severely impacted demand but the industry and supply-chain exited stronger
ST is well positioned in its targeted markets . Balanced portfolio by application and strong product portfolio in place . Determined R&D investment has led to breakthrough product inventions . Well positioned and ready for the next wave of innovation
Strong R&D effort and a balanced manufacturing strategy to support solid growth in 2011 and beyond . Committed to an asset-lighter strategy . Focused capacity expansion and multi-sourcing strategy . Leading-edge process and product technologies
34 Products & Regional Overview
Francois Guibert Executive Vice President President, Greater China and South Asia Region
Business Segments
Automotive, Consumer, Industrial and Computer & Wireless Multisegment Sector Communication (“IMS”) 50/50 JV with Ericsson Infrastructure (“ACCI”)
Home Computer & Automotive Analog, MEMS Power Entertainment Communication Products & Discrete Major Product & Displays Infrastructure Group Microcontrollers Products Lines (“HED”) (“CCI”) (“APG”) (“AMM”) (“PDP”)
Products
Major Customers
2 Automotive
3
ST Market Environment
Competitive Environment Customer Base
Automotive Semiconductors Revenues 2010 (US$M)
Renesas 2,973
Infineon 1,872
STMicroelectronics 1,737
Freescale 1,691
NXP 1,420
Robert Bosch 1,124
Texas Instruments 963
Toshiba 749
Osram 707
Panasonic 571
iSuppli, March 2011
4 Automotive Silicon Content
CAGR 2010-2017: Cars: 5.7% Systems: 7.3% Silicon: 8.6% 40000 322 327 315 308 35000 300 288 30000 276 261 25000 ASIC-ASSP MCU 20000 Power Sensors 15000 Standard
Silicon Market Market Silicon(M$) Others 10000 Silicon/Car ($)
5000
0 2010 2011 2012 2013 2014 2015 2016 2017 Increasing content in Hybrid (~$600) and Electric (~$900) Source: Strategy Analytics
5
Automotive Growth Driver: China
1.5 ECU Content / Vehicle Chinese-Owned Brand Normalized to 2007 1.4 Chinese-Produced Vehicles Toyota Group 1.3 Market Average
1.2
1.1 2007 = 1 High-end cars, full options and creature 1 comforts driving growth 0.9 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 . ST is #1 in China Automotive Semiconductors . ST has two R&D centers, manufacturing facilities, and . Proof point: 40% market share for increasing local support engine control ICs China is one of the main factors propelling our growth
6 Computer & Communications Infrastructure (CCI)
7
Leader in Digital and Analog ASIC
TOP 1 in TOP 2 in TOP 3 in TOP 3 in PRINTHEADS BCD ASIC HCMOS ASIC BICMOS ASIC
8 Towards a New Model in CCI Markets
PC Centric Internet as a Personal PC Network Computer Peripherals
Cloud Centric Cloud as a Connected Service Cloud Clients
9
Big Opportunity for CCI
Cloud Infrastructure Connected Clients Internet Traffic Green Systems
. Cloud computing will fuel the next wave, generating increasing demand for (green) wired and wireless infrastructure and transforming all applications in cloud conscious clients
. ASIC continues to be an effective win-win model for CCI customers and ST continues to be committed to it
. The strategy: expanded product offering and flexible business model
10 Home Entertainment & Displays (HED)
11
HED Product Portfolio
TV Set-Top Box
Monitor Imaging
12 Market Trends Driving HED Growth
Digital Living Room CE 3.0
Rich Multimedia NEW USER EXPERIENCE
Green ENVIRONMENTAL RESPECT
13
HED Group Platform Evolution
Gen. 2 Gen. 3 Gen. 4 Best New services Open Internet performance New UI / cost ratio
STi7105 STi7108 STi71xx
Freeman Douglas Diamond Newman 1000 DMIPS CPU Dual CPU & L2 cache Multi-core SMP CPU Introduction of : >2000 DMIPS >8500DMIPS AVS HD Introduction of : Introduction of: DDR2 1080p60 decode Dual 1080p60 decode e-SATA Dual 32b DDR2/3 SVC decode 3D GL-ES2.0 & SVG GPU HD encode MOCA 1.x Display Port, MOCA 2 Mass Production Volume Ramp-up Introduction
MP: 2009 MP: 2011 MP: 2012
14 15
16 A9500 A9540 A9600
U9500 L9540 L9600
M5730 M7400 M74XX
To be To be U8500 Announced Announced
To be U4500 Announced
2011 2012 2013
17
∙
∙
∙ AT&T Infuse 4G May 2011
T-Mobile Sidekick 4G March 2011 . T-Mobile Galaxy S 4G February 2011 . .
. M7400 .
18 Analog, MEMS & Microcontrollers (AMM)
19
Analog, MEMS & Microcontrollers
Ultra Low Power MCU Platform TM Cortex - M CPU eNVM Sport and fitness Code RAM Clock Sport monitoring, pedometer, Err Cor / Data Mngt Calibration fall detection
Analog Analog Digital Security Digital to Converter analog AES SecurityShock sensor, anti MEMS Converter theft, anti intrusion
Wired Wireless Multi std connectivity - I²C, Multi std connectivity - SPI, - IPV6, Smart metering Energy management - USB, - ZigBee, - Ethernet… - RF4CE, - BTLE,…
Healthcare, assisted living Rehabilitation, balance control
20 Microcontrollers Market
. Steady growth foreseen over the next 5 years US$B MCU Worldwide TAM*
. Automotive MCUs 20 . Fast growing market . Migration to 32-bit platforms 15
10 . General Purpose MCUs . Well established and profitable business model . Strong migration to 32-bit CPUs 5 0 . Secure MCUs . Growth drive by innovation 2010 2013 . Move to advanced 32-bit secure platforms General Purpose Secure Automotive
* Source: WSTS, January 2011
21
ST Leadership in Sensors Internet Devices
Motion Light / Sight Accelerometer, Gyroscope, Compass Ambient, Optical Sensors
Touch Pressure Absolute, Differential Resistive, Capacitive, Mobile Tablet Multi-Touch, Haptic Temperature Sound Ambient, Localized Microphone, Speaker
RF Desktop Laptop Humidity Integrated Passive Active Device, Relative, Absolute Integrated Passive Device (EMI Filter)
22 Leadership in Extreme Analog: MEMS
Continuous Expert Manufacturing AdvancedInnovation Technology ST MEMS in 2010
Micron-sized High volume silicon • ST revenues > $300M; Market Transducer TAM = $1,600M* + = • #1 in Consumer & Mobile Advanced Analog Low Cost Handset MEMS Chip • >1 Billion accelerometers & gyroscopes shipped Innovative packaging Small Size
* iSuppli
23
Addressing Megatrends Shaping our Future…
Connectivity & Net
Remote Integration Monitoring MEMS
Sustainability Safety Analog & Health & Green
Efficiency
24 Power Discrete (PDP)
25
Power Discrete at a Glance Power Discrete Revenues 2010 Key Facts TAM = $17.8B Billing = $1.3B Market share = 7.4%
2008 2009 2010 Record sales with revenues up by 39 % vs. 2009 Worldwide industrial competence centers Innovation results: Prague . 3 new products per day Schaumburg Seoul Tokyo Boston Catania Shanghai . 2 new System Solutions (boards) per week Noida Taipei . 14% of sales with products less than 2 years old Singapore . > 400 new patents and patent applications (filed or granted) on power technology in the last 2 years Source: WSTS, STMicroelectronics
26 Power Discrete: a Core Pillar of Growth
High Voltage Protection Thyristors Schottky & Power MOSFETs IPADTM & IPD Diodes Ultrafast Diodes ( >400 V) & Triacs
#1 #1 #1 #1 #1
Market Share Market Share Market Share Market Share Market Share 27% 5% 22% 14% 36%
Competitive Advantages: . The widest range of Power Technologies and Packages . Leading expertise in innovative silicon structures and new composite materials . Extremely competitive manufacturing
Source: iSuppli, WSTS, STMicroelectronics
27
Power Discrete: Results in Key Areas
Power Supply 2010 - High Voltage & Low Voltage Power MOSFETs + 40 % - Schottky & Ultrafast Diodes 2009 - Overvoltage Protections Sales Growth
Lighting - High Voltage & Low Voltage Power MOSFETs 2010 - Schottky & Ultrafast Diodes + 34 % - IGBTs & TRIACs 2009 - Overvoltage Protection - Power Bipolars Sales Growth
Motor Control - ACSwitches 2010 - IGBTs + 49 % - High Voltage & Low Voltage Power MOSFETs 2009 - Schottky & Ultrafast Diodes - Intelligent Power Modules Sales Growth Source: STMicroelectronics
28 Market Trends
Energy efficiency and costs
Growing energy demand
Environmental technology and sustainability
29
Greater China & South Asia Region
30 Greater China & South Asia Perimeter (2010)
CHINA TAIWAN GC & SA Population : 1.4B Population : 23M HONG KONG GDP : $5,700B GDP : $440B Population : 3.1B Population : 7M INDIA Per Capita : $4,200 Per Capita : $19,000 GDP : $230B GDP : $11T Population : 1.2B S/C TAM : $76.2B S/C TAM : $21.6B GDP : $1,600B Per Capita : $32,000 Per Capita : $3,500 Per Capita : $1,330 VIETNAM S/C TAM (2010) : $132B S/C TAM : $3.8B Population : 89M S/C TAM (2011) : $142B CHINA GDP : $99B Per Capita : $1,100 TAIWAN STRATEGIC S/C TAM : $0.3B INDIA China, Taiwan, India HONG KONG PHILIPPINES THAILAND Population : 94M VIETNAM TRADITIONAL Population : 67M THAILAND GDP : $190B PHILIPPINES Singapore, Malaysia, GDP : $240B Per Capita : $2,000 Thailand, Hong Kong, Per Capita : $3,700 S/C TAM : $2.2B Australia, New Zealand S/C TAM : $3.9B MALAYSIA INDONESIA SINGAPORE EMERGING MALAYSIA Population : 234M Philippines, Vietnam, Population : 29M GDP : $670B SINGAPORE INDONESIA GDP : $230B Per Capita : $2,800 Indonesia Population : 5M Per Capita : $8,000 S/C TAM : $1.5B GDP : $220B S/C TAM : $3.3B AUSTRALIA Per Capita : $44,000 Population : 22M AUSTRALIA NEW ZEALAND S/C TAM : $18.4B GDP : $1,250B Population : 4M Per Capita : $56,000 NEW GDP : $136B S/C TAM : $0.9B ZEALAND Per Capita : $31,000 Source: FocusEconomics - January 2011, WSTS, ST Note: S/C TAM = Semiconductor Total Available Market; All $ amounts are in USD
31
GC&SA Semiconductor Market By Applications 2010 GC&SA TAM: $132B ST Key Applications
Smart Card Computer Automotive Computer Peripheral Peripheral • Car Electronics • Printers PC & Comm • Car Infotainment • Hard Disk Drive Infrastructure • GPS Navigation Consumer Wireless PC & Comm Infrastructure • DTV, Monitors • Set Top Boxes • Wired & Wireless Infrastructure • Networking Switches/Routers Smart Card • PC Power Management
• E-Passport Aerospace Industrial • ID Cards
Industrial • Power Management Wireless • Power Meters Automotive • LED Lighting • Mobile and Smart Phones Consumer • MEMS for Various Applications • Mobile Broadband Modem
Source: iSuppli
32 GC&SA at a Glance
Q1 2011 Revenues: US$1.13B (18% YoY) R&D Center Assembly & Test Assembly & Test 2010 Revenues: US$4.56B
HQ S&M CHINA ~24,000 employees TAIWAN
INDIA HONG KONG 3 R&D / IC Design Centers
VIETNAM Assembly & Test THAILAND • India, China, Singapore PHILIPPINES
Assembly & Test MALAYSIA 2 Wafer Fabrication plants SINGAPORE 4 Assembly & Test plants INDONESIA BHQ 19 Sales Offices EWS Center 1 Asia Logistic Hub AUSTRALIA All product group & central function teams NEW Wafer Fab Wafer Fab Logistics Hub ZEALAND
33
GC&SA Region: Key Applications Focus HD/3D TV E-Metering
E-Metering
HD/3D TV CHINA
TAIWAN LED Apps
INDIA HONG KONG LED Apps THAILANDVIETNAM MEMS Apps PHILIPPINES
Secure Micros MALAYSIA SINGAPORE Secure Micros
INDONESIA ST’s Key Applications: Car Electronics & • Automotive Car Infotainment • Consumer Printer AUSTRALIA • Comm. Infrastructure NEW • Computer Peripherals ZEALAND 32-bit MCUs • Industrial • Smart Cards • Wireless HDD 32-bit MCUs Secure Micros Touch Display
34 GC&SA Region: Emerging Applications
Solar Smart Electric Electronics Grid EV Vehicle
Bio Wireless Bio Sensors Power CHINA Sensors Charging TAIWAN
Aerospace INDIA Internet HONG KONG Haptic Touch M2M of Things THAILAND VIETNAM PHILIPPINES LED Solar Lantern Aerospace Medical MALAYSIA SINGAPORE Electronics Electronics INDONESIA Medical Bio Electronics Sensors AUSTRALIA
NEW Haptic ZEALAND 3D Touch Touch Imaging
35
ST’s Top Customers: GC&SA Region Smart Card & Computer EMS/ODM Industrial Consumer Automotive Computer Telecom Specific Country Peripherals Distribution
36 Japan & Korea Region
37
Japan & Korea at a Glance
ST Japan ST Korea Employees: ~200 Employees: ~140 Tokyo (Headquarters): Seoul: Sales / Marketing, Design, S/W Development, Sales / Marketing, Application Support, Application Support, Field Competence Center, Field Quality Service Quality Service Osaka & Nagoya: Sales Japan & Korea Chiba: Central Warehouse 2010 Net Revenues: $1.87B ST-Ericsson Korea ST-Ericsson Japan Employees: ~120 Employees: ~30 Seoul (Headquarters): Tokyo (Headquarters): Sales / Marketing, Sales / Marketing, Operator Customer Engineering, Relations, Field Quality Field Quality Shin-Yokohama: Teagu: Marketing & Field Customer Engineering & Quality R&D
38 Japan & Korea Semiconductor Market By Applications 2010 Japan & Korea TAM: $61B ST Key Applications Industrial Automotive Automotive • Car Electronics • Power MGMT • Car Infotainment • Smart Meters • GPS Navigation • LED Lighting Communication • Mobile & Smartphone Consumer Consumer • Tablet
Communication • Game Computer Peripherals • DTV, STB • Printer • DSC, DVC • Hard Disk Drive Industrial & Others PC & Peripherals
Japanese & Korean customers have a strong
Source : iSuppli presence in the global market
39
Business Opportunities
ST’s product strategy accelerates new business opportunities in Japan and Korea
MCU Advanced Analog / Power Sensors ASIC BCD
. High-potential New Products . New Markets and Applications . New generation of MEMS . Smart Energy (Gyro, Pressure, Compass, Microphone . LED lighting, Smart Grid, Smart Meter, Solar …. and multi-sensors) . Healthcare and Medical . Other Sensors . Tablet (Touch Chip, Temperature, Proximity) . Robot . STM32 and STM8 MCUs . EV . Automotive 32bit MCUs (PowerPC core) . Secure MCUs for brand protection
40 Financial Performance & Roadmap
Carlo Ferro Senior Executive Vice President, Chief Financial Officer
Agenda
. Since our Last Investors & Analysts Day . Driving Profitable Growth . ST’s Long-Term Financial Strategy . Value Proposition
2 Since our Last Investors & Analysts Day . Reached record financial results in Q410 . Solid margin progression driven by improved product portfolio and operating leverage . Reached target profitability model for ACCI & IMS one quarter early . Completed the exit from flash memories . Completed the restructuring of our manufacturing operations . Improved net cash position by $572 million to $1.14 billion . Increased dividend to $0.40 cents per share
Net Revenues (US$M) RONA Attributable to ST* Gross Cash (US$M)
3000 25% 3000 2800 20% 15% 2000 2600 10% Debt 1000 2400 5% Net Cash 2200 0% 0 Q110 Q410 Q111 Q110 Q410 Q111 Q409 Q410 Q111 * See appendix
3
Financial Performance*
Q110 Q210 Q310 Q410 Q111 FY10 FY09 In US$M, except EPS
Net Revenues 2,325 2,531 2,657 2,833 2,535 10,346 8,510
Gross Margin 37.7% 38.3% 39.2% 39.9% 39.1% 38.8% 30.9%
Operating Profit before restructuring 13 103 220 245 142 580 (732) Operating Margin before restructuring 4.0% 7.7% 11.6% 12.4% 9.9% 9.2% -6.8% attributable to ST
Net Income – Reported 57 356 198 219 170 830 (1,131)
EPS Diluted 0.06 0.39 0.22 0.24 0.19 0.92 (1.29) Adjusted EPS Diluted 0.07 0.18 0.23 0.27 0.20 0.75 (0.72)
RONA attributable to ST 5.1% 11.9% 19.0% 20.7% 14.3% 14.2% (7.2%)
Free Cash Flow** 176 212 224 349 51 961 1363 Net Financial Position 566 702 878 1,152 1,138 1,152 420
Effective Exchange Rate €/$ 1.39 1.35 1.34 1.34 1.33 1.36 1.37
* See appendix ** Including M&A, main amount being $1,145M in Q109
4 Driving Profitable Growth
5
Innovating Toward Faster Growth
. Focusing on growth areas US$M Total Revenues 12000 . ACCI, AMM, PDP and transition in Wireless . FY10 Revenues: 10000 . Record high revenues of $10.35B . ST revenues impacted by the transition of ST- 8000 Flash Ericsson to new platforms Others . 58% growth with Target New Customers 6000 Wireless ACCI . Opportunities today 4000 PDP . New products / platforms / technologies AMM . Regions / developing countries 2000 . New products and extended customers in Wireless 0 FY08 FY09 FY10 . Target growth rate: Faster than the markets we serve
6 Leading Portfolio for Profitable Growth
. Q111 MEMS revenues . Q111 auto grew 34% Y-o-Y increased over 2x Y-o-Y; . Accelerated pervasiveness in expected to double in 2011 electric and hybrid cars . Q111 MCU revenues up over . DTV & Display port ramping in 50% year-over-year 2H11 . Innovative products . CCI transition to Printers and entering new high growth ASIC for networking markets Leading portfolio for . Diversification of imaging profitable . Power transistors and IGBTs growth . Q111 high-speed modem both up >25% Y-o-Y sales nearly doubled . Introducing innovative sequentially components in silicon & new . Engaged with 7 of Top 9 semiconductor compounds device OEMs . Focusing on renewable . U8500 on track energy, hybrid vehicles, factory automation…
7
Margin Expansion: ACCI Automotive, Consumer, Computer & Communications Infrastructure Q111: $1.05B revenue; 11.0% operating margin Operating margin mid-term drivers:
. Capitalize on growth in Auto . Ramp DTV & Display Port 42% . Focus on ASICs for Printers & Networking . Continue optimization of Imaging . Product cost initiatives
. SAM LTM* up 18% Mid-Term Target: . ACCI LTM*: Teens . Revenues up 26% Average Peer LTM** . Operating margin up 11 12.1% 11.0% percentage points 5.5%
* Last twelve months ** Top peers for ACCI product group, excluding Japanese companies & MPUs Q110 Q410 Q111
8 Margin Expansion: AMM Analog, MEMS & Microcontrollers Q111: $755M revenue; 22.0% operating margin Operating margin mid-term drivers: . Rapid growth in MEMS and expansion of portfolio . Advanced analog system solution
30% . Sustained growth in MCUs . Expansion of customer base & targeted applications . Manufacturing ramp in new technologies Mid-Term Target: 25% to 30% . SAM LTM* up 26% Average Peer LTM** 22.0% . AMM LTM*: 24.4% . Revenues up 43% . Operating margin up 15.2 12.0% percentage points
* Last twelve months ** Top peers for AMM product group, excluding Japanese companies Q110 Q410 Q111
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Margin Expansion: PDP Power Discrete Products Q111: $333M revenue; 15.1% operating margin Operating margin mid-term drivers:
. Focus on high-margin, growing markets (energy, 13% hybrid vehicle, factory automation) . Systems approach to deliver complete solutions to the mass market . Leverage expertise in composite materials (SiC, GaN) . Singapore technology upgrade
. SAM LTM* up 29% Mid-Term Target: . PDP LTM*: High Teens Average Peer LTM** . Revenues up 30% 15.1% 17.2% . Operating margin up 9.2 9.1% percentage points
* Last twelve months ** Top peers for PDP product group, excluding Japanese companies Q110 Q410 Q111
10 Wireless:
Situation today $M Q4 2010 Q1 2011 ∙ Nokia’s adoption of Windows Phone OS introduces uncertainty NET SALES 577 444 ∙ Near-term financial situation deteriorating faster than anticipated OPERATING INCOME/(LOSS) (119) (149) ∙ Steep decline of legacy INVENTORY 275 321 ∙ TD decline NET FINANCIAL POSITION (82) (195) ∙ Exchange rate Well positioned for recovery and growth ∙ New NovaThor™ product roadmap positioning us as a wireless platform leader ∙ 21 Mbps modem sales nearly doubled sequentially ∙ Solid ramp of U8500 in second half 2011 ∙ 7 of the top 9 device manufacturers by revenue actively engaged with us on our new product portfolio ∙ Expanded customer base reduces dependency on the few, but awaits new products ramp ∙ Improving cost efficiencies to offset headwinds ∙ Targeting break-even in Q2 2012 50% minority interest
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Business Priorities
• Further penetrate new key accounts Grow revenues faster • Marketing initiatives deployed than the market • Ramp of MEMS, Automotive and Wireless Financial • Increase sales of new products • Increase mix of Analog, MEMS and MCUs Improvement Improve / protect margin • ST-Ericsson ramp of U8500 & high-speed modems
• Conversion of Singapore 6” to 8” 16-22% Manufacturing efficiency • Prepare Crolles 12” for wireless ramp • Accelerate gold to copper conversion Attributable RONA • Return to inventory turns target of 4.5 to 5.0 • Improve front-end manufacturing cycle time Assets management • Improve test efficiency
12 ST’s Long-Term Financial Strategy
13
Our Financial Strategy Pillars
High Margin Operating Margin Accelerated Assets
Products Leverage Turns
$ $ $
INNOVATION GROWTH ASSETS LIGHTER
14 R&D Efficiency . Continued focus on innovative products to boost margin expansion: . ACCI + AMM + PDP R&D to Sales ratio of ~15% on FY10 net revenues . Wireless to leverage new product revenues . R&D investment in ST-Ericsson is shared 50/50 with Ericsson . Process technology effort net of grants is 2.9% on FY10 net revenues
ST Total R&D / Net Revenues (%) 25%
20%
15%
10%
5%
0% 2008* 2010 Process Technology Product Development ST R&D to Net Revenues ex Flash, IP R&D Write-off & Wireless
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Asset-Lighter Strategy
. Asset-Lighter Model: CapEx to Sales ratio structurally below 10% in a cycle . Restructuring of manufacturing operations substantially complete . Increase outsourcing of advanced CMOS ≤ 130nm . Temporary pick-up in investment ($1.1B to $1.5B in 2011) to impact free cash flow
45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
CapEx as % of Revenues
16 Currency Exposure
. ~ 13% of sales are in € . Quarterly Effect of ±1% change (€ vs. $) . ~ 40% of total costs are in € . ±$4M to $5M on gross profit . COGS + Operating Expenses . Further ±$4M to $5M on operating expenses . Total EBIT impact ~ ±$8M to $10M ~Total Costs (COGS+OpEx) By Currency (Q111)*
€* $ 41% 52% Percent of € exposure hedged at average € / $ rate
SEK 2% Other 5%
* Euro (€) includes currencies such GBP, CHF, MAD Morocco
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…Mitigating Currency Exposure
. Price resilience on €-invoiced revenues Reduce € cost . Increase sourcing of silicon from foundry exposure by . New US$ entity to prevent revaluation of 4-5 percentage points depreciation
. Extended 12 to 24 months hedging to capture opportunities with defined €/$ spot Enhanced financial rates hedging . Enhanced hedging instruments
18 Dividend
$300 4% .STM dividend yield of ~3.5%
$250 . Semiconductor HOLDERs ETF (SMH) dividend 3% yield ~1.6%* $200 . SOX dividend yield ~1.1% . 10-year US Treasury Bills yield ~3.2% $150 2% .ST cumulative dividends over the past 5 $100 years (including the $.40 per share declared 1% $50 for 2011) have been > $1.2B
$0 0% .Quarterly dividend offers a steady income with limited risk, in addition to stock price Annual Dividends Paid (US$M) Yield revaluation
* Source: Thomson Reuters as of 5/13/11
19
Value Proposition
20 Return on Invested Capital
30% RONA attributable to ST* . Return on net assets (RONA) attributable to ST: 20.7% . Within target of 16% to 22% 20% 19.0% despite current efforts in LTM average = 16.3%
Wireless 11.9% 14.3% . Significantly greater than 10%
WACC 5.1% . Sustainable despite currency rate 0% Q1 10 Q2 10 Q3 10 Q4 10 Q1 11
* See appendix
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ST Financial Model*
AMM . 9% to 12% operating margin x 1.3-1.4 net assets turns PDP
. 12% to 18% return on net ACCI assets (RONA) target Wireless . 16% to 22% RONA attributable to ST
Targeting improvement in all businesses *Assumes effective exchange rate between 1.40 €/$ to 1.45 €/$
22 Value Opportunity
ST Group Businesses** 50% ST-Ericsson Net Financial Position Revenues ~$2.02B* Revenues ~$8.54B* Attributable Loss ~($257M)* Net Cash of $1.14B Value opportunities after the + Operating Margin ~15%* ongoing transition from new Ongoing recovery of $358M products, expanded due by Credit Suisse RONA ~30%* customers, platform - technology… Temporary financing of STE IPRs: >16,000 Patents IPRs: >4,000 Patents
STMicroelectronics Value * LTM Results **Group Business include ACCI, AMM and PDP
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Value Proposition Innovative Strategic products transformation serving high towards assets growth end lighter model markets
Wireless as a mid-term opportunity
Unique Expanded Sustainable Executed cost technologies in customer base profitability and and analog and with end market strong capital manufacturing digital leaders structure restructuring
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