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ST strives to zero in on more markets

Posted: 05 Jun 2008 ?? ?Print Version ?Bookmark and Share

Keywords:IC? MEMS? power? IDM?

STMicroelectronics is gearing toward high-value applications by renewing its efforts in creating analog ICs, MEMS, power semiconductors and proprietary processes fit for energy, healthcare, automotive electronics and multimedia.

"We're building an improved ST," said Carlo Bozotti, CEO, STMicroelectronics, at the recently held annual field trip meeting.

"It is not so much what the company is doing; moving toward an "asset-lighter" business model and a renewed focus on analog ICs that are also being pursued by other IDMs. But rather it's more of recognizing when ST started and the spirit that it follows through reaping the benefits," added Bozotti.

He noted that the company is pushing toward a future in which analog ICs, MEMS, power semiconductors and proprietary processes will allow it to pursue high-value applications in energy, healthcare, automotive electronics and multimedia.

At the meeting, it also presented that not everything will be plain sailing. It was announced that there will be job cuts caused by the continued rationalization of chip manufacturing, and Bozotti is running his calculator over several product families with a view to divesting them. "Between three and five product families could go within a matter of months," he said.

In addition, ST is outsourcing more processes and manufacturing. After the creation of the flash memory company Numonyx BV, as joint venture with Intel, the company is presently outsourcing jobs at about 10 percent and plans to increase this percentage to 20 percent in 2009.

ST's performance rate
ST said it has achieved a revenue growth of 11.6 percent in the Q1 compared to the previous year and with a total available market of 4-percent growth rate. The company confirmed its Q2 guidance with its sales set to increase sequentially between 5 and 11 percent compared to Q1 sales of $2.18 billion excluding flash memory. This represents a growth rate of between 10 and 16 percent year-over-year. A new key sales account jumped 48 percent in Q1 year-on-year while Japanese sales rose to 28 percent. The previous reorganization of ST's key account elite is clearly paying off.

Rising markets
"Four areas are presently growing faster with 16 worldwide strategic accounts, including China, Japan and the mass market. In terms of products, we are offering a digital baseband for cellular telephony. MEMS are rising and the automotive car navigation systems are doing fine," Bozotti said.

Bozotti pointed out that in the industrial and multisegment sector (IMS) business unit most of the product families are growingfrom smartpower through discretes to microcontrollers. Indeed, after carving out the flash memory group to form Numonyx, ST now has about 45 percent of its $8.8 billion annual post-flash revenues in the analog sector.

Carmello Papa, executive VP of IMS, showed analog IC sales are up by 41.1 percent in 2007 when compared with 2005 in a market up by 12.6 percent over the same period. MEMS sales at $200 million in 2007 had more than tripled compared with 2006. Even discrete transistors, mainly power devices, and EEPROM showed a 27.0 percent revenue growth over two years compared to a two-year market growth of 13.4 percent. But the analog mantra has been intoned by other large-scale IDMs trying to reinvent themselves, notably by Texas Instruments Inc.

ST started down this path some time ago. In the very first European edition of EE Times, Sept 1, 2006, Bozotti painted a picture of power semiconductors and analog ICs as ugly ducklings of the semiconductor flock about to emerge as swans. His prediction has proved correct.

"Three years ago, we established product divisions focusing on these products. One, based in the U.S., is the advanced analog division. Three are located in Europe that cater to industrial power management and conversion ICs, linear and interface products, and MEMS," said Bozotti. He added that it was a major effort to move the people there.

Bozotti noted that ST now has about $5 billion in annual sales of analog and power. "Although this has been impacted by the dollar rate, these product groups have proved resilient," said Bozotti.

ST remains as a high-end digital chip company aspiring to be in multimedia convergence and wireless through a pending joint venture with NXP Semiconductors, but the high margins possible in analog and MEMS clearly found favorable, according to the analysts. Malcolm Penn, analyst from Future Horizons, gave ST high marks for its analog and MEMS play claiming that ST is still a broad-based company with capabilities in multiple disciplines: microcontrollers, power, analog and more exotic activities such as MEMS. He stressed that if ever ST plans to integrate in SoC, it can. "Nobody else with the possible exception of NXP can do that. Both TI Freescale can't do it," he said.

But Penn was critical of ST's plans to bear down on manufacturing costs while partnering with IBM for R&D for 32nm and subsequent digital processes. "None of the IDMs has set out a plan that deals with that [asset-lite] business model. They all still want to be half-pregnant," Penn said.

Bozotti said he is determined to get capital expenditure down below 10 percent of ST's sales revenue. This means that outsourcing becomes a fundamental part of the company's strategy. Since it is widely understood that high-performance digital CMOS can be outsourced to foundries, ST is now embracing the outsourcing of many processes.

"We've already outsourced BiCMOS and analog CMOS. Although partially, but we've been active on this front," Bozotti said. However, we will not do so with MEMS, he added, and when pressed as to whether he could do it with BCD, a smartpower process that combines lateral DMOS power devices with bipolar circuits and CMOS. He added that in some BCD, it could happen.

Meanwhile, ST emphasized to the analysts the possibility of having $150 million in annual savings, which could be achieved by further restructuring of the manufacturing operation. The company has already simplified its manufacturing with a move from 17 front-end fabs to 10 after the creation of Numonyx. This will drop to eight more with the closure of U.S. fabs in Carrolton, Texas and Phoenix, Arizona.

ST's future is continued fab rationalization, increased foundry usage and volume 300mm wafer production at Crolles2. The next targets are a back-end facility in Singapore that is being converted to probe testing of wafers and two facilities in Europe.

Bozotti would not reveal which European units are under threat and said it did not necessarily mean closure. It's related to the formation of the joint ventures such as Numonyx and the wireless venture with NXP. Two facilities readopted to the new conditions.

- Peter Clarke
EE Times Europe

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