STMicroelectronics. Alain Dutheil Chief Operating Officer. SG Premium Review Paris December 3, 2010

Transcription

1 STMicroelectronics Alain Dutheil Chief Operating Officer SG Premium Review Paris December 3, 2010

2 ST Highlights A worldwide semiconductor leader positioned to capture higher value from the expected industry growth The semiconductor industry is well positioned to grow in future years ST value driven by two major strategic transformations Product portfolio Divestiture of flash complete Investment in wireless to translate into value driver Technology and Manufacturing towards an asset-lighter company Sales momentum with products and customers Expanded customer base Innovative products Execution in delivering targeted return on invested capital supported by a strong capital structure and sustainable profitability model 2

3 STMicroelectronics A Global Semiconductor Company 3 Q310 revenue: $2,657M By location of order shipment 13% America 24% EMEA 45% Greater China & South Asia 18% Japan & Korea 15 main manufacturing sites Advanced R&D centers in 10 countries Over 51,000 employees, including ST-Ericsson (Dec. 31, 2009) Listed on NYSE Euronext (New York & Paris) and Milan stock exchanges

4 4 The Evolution of ST 2010 Completed the sale of Numonyx to Micron 2009 ST and Ericsson created ST-Ericsson JV 2008 Deconsolidation of Flash, acquired NXP Wireless, announced the JV with Ericsson Mobile Platforms 2005 New CEO 2000 Became #1 European semiconductor company 1999 Entered world s Top Ten semiconductor suppliers 1994 IPO 1987 Merger of SGS Microelettronica of Italy and Thomson Semiconducteurs of France STMicroelectronics Today #1 European semiconductor company Focus on multimedia applications, analog and power management World leading positions in wireless, auto, industrial, consumer and computer peripherals end-markets Key strategic alliances with global technology leaders including: Bosch, Ericsson, HP, IBM, Nokia, Samsung Strong balance sheet: cash & cash equivalents of $2.78B * * At Sept. 25, 2010, includes cash of JV, cash restricted as collateral to third party s obligation and non-current marketable securities (excluding Micron shares)

5 Business Segment Overview 5 50/50 JV with Ericsson Wireless Automotive, Consumer, Computer & Communication Infrastructure ( ACCI ) Industrial and Multisegment Sector ( IMS ) Major Product Lines Home Entertainment & Displays Computer & Communication Infrastructure Automotive Products Group Analog, Power and MEMS Microcontrollers, Memories and Smartcards Products Major Customers

6 6 Revenues by Product Segment Q310 Sales: $2,657M ACCI Segment 34% 28% Computer and Communication Infrastructure (CCI) Home Entertainment & Displays (HED)** 21% 38% Automotive (APG) 41% IMS Segment 38% 31% 69% Analog, Power and MEMS (APM) Micro, non-flash Memory and Smartcard (MMS) ACCI IMS Wireless* * See appendix ** Includes Imaging business ST s exposure to the Wireless segment at the earnings level is ~12%

7 Semiconductor Market Growth Total Available Market e 7 $B ~16% per year ~13% ex FY % ~9% per year % Recession led to 2 years of decline Semis well positioned to grow in future years Expected 5% to 10% growth of served market in 2011 Source: WSTS

8 8 Reshaping ST s Product Portfolio Genesis Microchip Wireless Mobile Platforms 5 years R&D grants secured Manufacturing restructuring ST-NXP synergy plan Headcount realignment ST-Ericsson cost realignment Micron acquired Numonyx Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 50%

9 ST-Ericsson: Transforming the Company Entry & feature phones Modem only Three big customers High-value entry Smartphones Connected devices Application engine Modem Connectivity Custom solutions Diversified customer portfolio Open/complete platforms Europe and Asia Global 2010 Priorities Competitive cost structure Transition product portfolio

10 10 Advancing Process R&D Partnerships Leadership and reduced process development costs are enabled through the International Semiconductor Development Alliance (ISDA) ST & Philips Semi (NXP) ST & Philips Semi (NXP) + Motorola (Freescale)

11 ST Manufacturing Evolution 11 ST STRATEGY PATH: IDM Flexible IDM Lighter Asset NUMBER OF FRONT END FABS: WAFER PROBING (EWS): From Europe to a major WW center in Singapore ASSEMBLY NUMBER OF PLANTS: In Mediterranean : 3 2 In Asia: 3 (1 China) 4 (2 China) Expand Asia 2005 end 2010

12 12 Key Initiatives to Increase Capacity Crolles2 300mm Ramp to 3,200 w/week 32nm R&D capability Agrate 200mm Increase capacity in BCD technologies and MEMS Longgang Shenzhen Calamba Increase capacity in back-end fabs Q409 vs. Q410 Increase in total capacity including foundry = ~20% Electrical Wafer Sort Increase capacity in wafer probing Singapore 150mm Ramp to 18,000 w/day Foundry

13 13 ST Q310 Revenues Q310 Revenues = $2,657M +5.0% sequentially, with IMS, ACCI and Wireless growing 7%, 4% and 4% respectively +16.8% y-o-y, growth in all regions and market segments, excluding Telecom Q410 guidance: between +2% and +7% sequentially US$M 3,000 2,500 Q guidance range 2,000 1,500 1, * See appendix 0 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 (e) ST ex FMG* FMG* Guidance

14 14 Top Customers Top 10 OEM Customers YTD 2010 (listed alphabetically) Apple Bosch Cisco/Scientific Atlanta Continental HP Nokia Research in Motion Samsung Seagate Sony Ericsson

15 Market Share Drivers New Targeted Key Accounts Q310 Sales: +32% y-o-y Focused on Key Marketing Initiatives Innovative Products to Drive Market Share Gains Q310 Sales: Regional Focus Greater China-South Asia +29% y-o-y Japan & Korea +4% y-o-y New Marketing Programs New Products Q310 Sales: Mass Market +50% y-o-y

16 New Products Driving Sales Performance 2009: 32-bit MCUs (Industrial, Smartcards, Automotive) Set-top-box (cost-optimized 55nm/low power for Cable, Satellite, IPTV) MEMS and Advanced Analog Medical (diagnostic systems, insulin nanopumps, other microfluidics) TD-SCDMA 2010 & beyond: inemo Single Node Solution The Wave of Innovation Continues

17 17 Financial Performance In US$M, except EPS Q309 Q210 Q310 YTD 2009 YTD 2010 Net Revenues 2,275 2,531 2,657 5,927 7,513 Gross Margin 31.3% 38.3% 39.2% 28.2% 38.4% Adjusted Operating Profit* Adjusted Operating Margin* Attributable to ST* (143) (6.3%) (4.8%) % 7.7% % 11.6% (822) (13.9%) (12.4%) % 8.0% Net Income Reported (201) (1,061) 611 EPS Diluted Adjusted EPS Diluted* (0.23) (0.17) (1.21) (0.76) Net Operating Cash Flow before M&A* Effective Exchange Rate /$ * See appendix

18 18 Currency Exposure ~Total Costs (COGS+OpEx) By Currency (*) Q310 Current Exposure to the Euro COGS: Q310 ~ 35% OpEx: Q310 ~ 51% Fixed Assets: Q310 ~ 60% (*) 41% $ 52% Quarterly Currency Effect ±1% change ( vs. $) = ±$4M to $5M on gross profit Further ±$4M to $5M on OpEx SEK 2% Other 5% * Euro ( ) includes currencies such GBP, CHF, MAD Morocco. ** As of October 27, 2010 Total EBIT impact is ~ ±$8M to $10M Hedging: % of Euro exposure currently hedged** Period % of Exposure Avg. Rate Q ~60% 1.33 Q ~45% 1.31 Q ~30% 1.28 Q ~15% 1.30

19 19 Net Financial Position* End of period (US$M) Available Cash (excluding Micron shares) Restricted Cash and Non-current Marketable Securities** Sept. 26, 2009 Jun. 26, 2010 Sept. 25, ,321 2,384 2, Total Liquidity 2,951 2,731 2,780 Total Financial Debt (2,685) (2,029) (1,902) Net Financial Position Further opportunities: Sale of Micron shares Collection of proceeds from FINRA award * See appendix ** Includes cash of JV, cash restricted as collateral to third party s obligation and non-current marketable securities (excluding Micron shares)

20 Product Segments: Revenue & Operating Margin Trends 20 ACCI IMS Wireless* US$M US$M US$M % % 0% % 20% % 0% % 10% 0% -10% -20% -20% -20% 0 Q308 Q309 Q210 Q310-30% 0 Q308 Q309 Q210 Q310-30% 0 Q308 Q309 Q210 Q310-30% Q310 Record Sales Operating margin of 11.7%, already exceeded year-end goal Q310 Record Sales Operating margin of 19.7%, at high-end of year-end target; ahead of expectations * See appendix ** Segment operating results exclude, among others, unsaturation charges. Q310 Sales as expected 50% losses are minority interest Revenue Operating Margin **

21 21 Continued Progress Toward Targets 12% 11.6% 4.0% 7.7% Price OpEx Leverage New Products Manufacturing Restructuring Currency 9% Targeting: 12%-18% RONA or 16%-22% RONA attributable to ST Q310: 19% RONA attributable to ST Q110 Q210 Operating Margin Attributable to ST* Target Operating Margin* Q310 Operating Margin Attributable to ST* * Operating margin attributable to ST before restructuring charges: not a GAAP measure, see appendix.

22 22 Shareholders Value Proposition World-wide semiconductor leader Moved towards solid profitability model ST value driven by strategic transformations Strong capital structure Wireless as a value opportunity Innovative products and expanded customer base

23 Q&A

24 24 Forward Looking Statements 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 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. In particular, following a period of significant order cancellations in 2009, we have in 2010 experienced a strong surge in customer demand, which has led to capacity constraints in certain applications and may in the future, in case of excessive inventory at customers or distribution channels, experience order cancellations; 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, and the financial impact of obsolete or excess inventories if actual demand differs from our expectations; 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 in the semiconductor industry since a high percentage of our costs are fixed and are incurred in Euros and other currencies 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 failures or recalls by our customers for a product containing one of our parts; our ability in an intensively competitive environment to 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; 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, volcano eruptions or other acts of nature in, or affecting, the countries in which we, our key customers or our suppliers, operate. 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, 2009, as filed with the SEC on March 10, 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.

25 25 Appendix Net operating cash flow is defined as net cash from operating activities minus net cash used in investing activities, excluding payment for purchases of and proceeds from the sale of marketable securities (both current and non-current), short-term deposits and restricted cash. We believe net operating 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 activities. Net operating cash flow is not a U.S. GAAP measure and does not represent total cash flow since it does not include the cash flows generated by or used in financing activities. In addition, our definition of net operating 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 financial resources include cash and cash 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 the 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 gives evidence of our global position either in terms of net indebtedness or net cash 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 period. ST defines average net assets as average total assets net of total liabilities as reported in our consolidated balance sheet excluding all items related to our financial position such as cash and cash equivalents, marketable securities, short term deposits, bank overdrafts, current portion of long term debt and long term debt. Adjusted operating income (loss) excludes impairment, restructuring charges and other related closure costs. Adjusted operating income attributable to ST is calculated as adjusted operating income (loss) excluding 50% of ST-Ericsson operating income (loss) before restructuring as consolidated by ST. Adjusted operating margin attributable to ST is calculated as adjusted operating income attributable to ST divided by reported revenues excluding 50% of ST-Ericsson revenues as consolidated by ST. Return on Net Assets (RONA) attributable to ST is calculated as annualized adjusted operating income 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 exclude impairment, restructuring charges and other related closure costs attributable to ST, the impact of equity investment divestiture, other-than-temporary impairment (OTTI) charges on financial assets, net of the relevant tax impact. Key Information on Consolidation / Deconsolidation: ST completed the deconsolidation of its Flash Memory Group (FMG) segment and took an equity interest in Numonyx on March 30, Numonyx was sold to Micron on May 7, ST-NXP Wireless, a joint venture initially owned 80% by ST, began operations on August 2, 2008 and was fully consolidated into ST s operating results. On February 1, 2009 and prior to the closing of the merger of ST-NXP Wireless and Ericsson Mobile Platforms to create ST-Ericsson, ST exercised its option to buy out NXP s 20% ownership stake of ST-NXP Wireless. ST-Ericsson, a joint venture owned 50% by ST, began operations on February 3, 2009 and is consolidated into ST s operating results as of that date. ST- Ericsson is led by a development and marketing company and is consolidated by ST. A separate platform design company providing platform 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

26 OPERATING RESULT NET EARNINGS 26 Pre-Tax Items to Adjusted Earnings* In US$M Q309 Q210 Q310 YTD 2009 YTD 2010 U.S. GAAP Net Earnings (201) (1,061) 611 Impairment & Restructuring Charges (attributable to ST**) Numonyx Impairment OTTIC Equity Investment Divestiture Estimated Income Tax effect of Adjustment 3 (265) 60 (5) (50) (265) 38 Adjusted Net Earnings* (153) (663) 432 * See appendix ** Total Impairment & Restructuring Charges were $53M in Q309, $12M in Q210 and $27M in Q310. YTD09 and YTD10 were respectively $195M and $72M.