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ST hinges future on 'big-chip-in-the-middle' strategy

Posted: 24 May 2011 ?? ?Print Version ?Bookmark and Share

Keywords:big chips? platform? applications processor?

For STMicroelectronics, the key to survival and success is a much wider product portfolio that includes big chips in the middle, such as digital TV SoCs and ST-Ericsson's multimode modem/applications processor. Such strategy runs counter to NXP Semiconductors' "no-big-chip-in-the-middle" philosophy on which hinges its own recovery program.

Carlo Bozzoti, six years after succeeding the legendary Pasquale Pistorio as ST Microelectronics' CEO, looked visibly confident, in control of the company's destiny, and even relaxed while bantering on stage with members of his management team at ST's Investor and Analyst Day held in New York on May 19.

There is reason to feel upbeat. ST's first quarter in 2011 showed a solid start with net revenues of $2.5 billion and a gross margin of 39.1 percent, helped by the company's strong growth in analog, MEMS and MCU revenues (38 percent increase compared to a year ago). However, ST's wireless revenues dropped 34 percent, a result of ST-Ericsson's legacy products suffering a bigger than expected decline.

Clearly, Bozotti's turnaround remains only half done.

Gilles Delfassy

Gilles Delfassy: president and CEO of ST-Ericsson

Gilles Delfassy, president and CEO of ST-Ericsson, in particular, is painfully aware of the challenge. He said: "This is not at all where it should be," adding that to achieve the publicly promised break-even target in Q2, 2012 is "not going to be easy."

Nonetheless, Bozotti evinced strong support for ST-Ericsson. Beyond what he described as "four growth areas" including energy, healthcare, trust (security) and smart devices, Bozotti stressed that the real big growth is "in wireless." He said, "ST-Ericsson, built on a strong foundation, has made a transition to the best-in-class modems and application processors."

ST-Ericsson is now armed with new "Nova" ARM-based application processors and "Thor" modems, in addition to "NovaThor" combining a modem and apps processor into a single chip.

Tractions from customers for all these new products "are very strong," Delfassy stressed.

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