STMicroelectronics. & the worldwide market. Strategies and difficulties

Transcription

1 STMicroelectronics & the worldwide market. Strategies and difficulties STMicroelectronics Content Return to growth : Year 2003 Market forecast : Value-added food chain analysis What makes STMicroelectronics special 2

2 50% 40% 30% 10% 0% -10% - -30% -40% -50% The semiconductor market cycle May % 43% 40% PC era starts $ 12/12 Trend 28 quarters Jan-86 Jul-86 Jan-87 Jul-87 Jan-88 Jul-88 Jan-89 Jul-89 Jan-90 Jul-90 Jan-91 Jul-91 Jan-92 Jul-92 Jan CAGR : 12% 20 quarters Trend Jul-93 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Convergence era starts Recovery 15.7% in May 03 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Source : WSTS 3 Where are we in the cycle? New Silicon Unit growth Undercapacity Capex to sales increase Unit decrease Overcapacity Capex to sales decrease Unit recovery Tight capacity Capex to sales increase Designs growth 1999 Market Cycle 2002 Unit recovery Overcapacity Capex to sales decrease Designs growth Unit decrease Overcapacity Capex to sales decrease 1998 Source : ST 2003 We are here New Silicon Unit growth Overcapacity improvement Capex to sales decrease 4

3 End-demand for semiconductors Wireline Wireless Computer First Half 03 Access market growing fast. Negative for infra wireless and network. 8% unit growth over % GPRS share, 86% color screen. Better than expected (+5% over Hlf1 02). Driven by notebook. Year 03 Equipment Capex to sales ratio approaching 18% in Europe & Japan at year end triggering demand. Replacement cycle is starting in Q3 (Europe) % growth for world demand for handset. High degree of Si pervasion 4 to 6% growth in PC unit driven by notebook Industrial & Military Slightly growing for industrial. Slow but stable growth. Automotive Consumer Pervasion drives market despite flat production, Q2 weakens. SC market at 0% over Hlf1 02. Weak demand. Electronic Control Unit to grow by 5%, Si pervasion at 9%. Gaining traction in Q2. Source : ST Q1 03 Q2 03 Q3 03 Q Semiconductor inventory Semiconductor excess inventory at quarters end in electronic supply chain $43.2B $B Total Market $36.4B Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Source : isuppli 6

4 3-mma 35% Capex to sales ratio May % 25% Historical statistical average May 20.2% 15% 10% 1 st quarter 2003 at Capex to decrease by 5% in 03 Jan-95 Apr-95 Jul-95 Oct-95 Jan-96 Apr-96 Jul-96 Oct-96 Jan-97 Apr-97 Jul-97 Oct-97 Jan-98 Apr-98 Jul-98 Oct-98 Jan-99 Apr-99 Jul-99 Oct-99 Jan-00 Apr-00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Source : VLSI Research 7 Semiconductor market growth in 2003 Product families $B Market % of Total Growth Y-o-Y % MPU DRAM Opto % 10.2% 5.2% Opto MPU DRAM 5% 10% Discrete % Flash 25% Std & Comm. Diff. Ics Flash NV Mem & SRAM % 42.2% 6.3% 2.7% Diff. Ics Std & Com. Discrete NV Mem & SRAM 12% 10% 7% 4% Total Market % Total Market 11% Source : ST 8

5 Macroeconomic trends Very soft recovery but no recession in 03. Overcapacity crisis in the US is ending in 03, and in 04 in high tech. US investment restart should gradually benefit to Europe mid and 04 are showing modest consumer spending increase. World growth should resume late 04 and be better spread across regions than during the period. % Y-o-Y World GDP growth 5.0% 4.5% 4.0% 4.0% 3.5% 3.5% 3.3% 3.0% 3.2% 3.0% 2.5% 2.5% 1.9% 1.9% 2.0% 1.5% 1.2% 1.0% 0.5% 0.0% Source : BIPE 9 Electronic industry trends Electronic industry growth pattern should be : Gradual recovery starting 03 driven by economic recovery and replacement of installedbase in New killer app. (consumer and automotive) emerging late in the period. Following a low growth period between 1998 and 2003, electronic industry is catching up CAGR is at 5.6% ; 2 percentage points below the longterm trend World electronic industry growth = 4% = 7% = 6%

6 Automotive market : increasing pervasion Index 100 in More security Higher level of confort Multimedia and telematics fast penetration Environment Powertrain 21% 17% Chassis 12% 14% Safety 12% 14% Security 10% 11% Body systems 28% 29% Driver information and car audio 17% 16% Total ECU 100% 100% Electronic control units : More than 10% growth per year 140 Vehicles production : 3% growth per year PC demand : replacement postponing close to the end PC and handhelds shipments (index 100 in 2000) 200 Handheld computers 13% Desktop PC 43% Handheld computers 10% Laptop 44% Laptop 27% Desktop PC 63% (Units) Equipment life cycle can not be indefinitely elongated More capacity required Higher price/performance ratio More mobility 12

7 Access : increasing demand for broadband equipments Number of broadband subscribers (million) Cable modem (million units) xdsl modems (million units) Fast development of households equipment in most advanced and in developing countries : the number of subscribers will triple during the next five years Churn increases equipments demand Replacement demand is starting with ADSL 2, 2+ and VDSL 13 Telecom equipment spending : high recovery in the long run 40% 30% Over capacity, mainly in transport Data networking as the only market driver Operator s weak financial position Traffic requirement lower than expected Deacreasing operator s debt/sales Traffic requirement and broadband access deployment accelerating Replacement of obsolete infrastructures CAGR : 10% Telecom capex growth rate 10% 0% -10% Fixed equipment growth rate Wireless equipment growth rate - -30% Total telecom equipment spending growth rate

8 Cellular phones : from voice to multmedia communication higher level of replacement More silicon inside % Million units Cellular handsets Cellular cameras Cellular phone with camera as % of cellular handset shipments 50% 40% 30% 10% Cellular camera as % of cellular handset shipments % 15 Consumer : home digitalization volumes driven by convergence / connectivity /interactivity More devices and more functionalities price decrease : more people have access to more devices increasing equipment rate accelerating replacement rate of equipments Expected CAGR for the next 5 years Digital consumer demand in volume (2008 over 2003) (index 100 for each application in 2000) Analog TV CRT : 95 million units Analog TV LCD : 25 million units Digital TV : 90 million units Digital set top box DVD Webcam 25% 41% Digital still camera 30% 2000 Digital TV 45%

9 Digital Video : more complexity for more functionalities and higher quality Index 100 in Set top Box Pay TV satellite Cable Units shipments Pay TV satellite Cable Satellite free to air Pay TV satellite Cable Satellite free to air HD xdsl set top box HD CAGR 2008 over 2003 : Digital Video : more diversity and higher price performance ratio Index 100 in 2000 (million units) DVD player DVD Units shipments DVD player DVD + VCR integrated DVD recorder CAGR 2008 over 2003 : 25% DVD player DVD + VCR integrated DVD recorder HD DVD

10 203E 204E 205E 206E 207E 208E $B World semiconductor market A ten-year perspective Losing momentum : 4.5% per year : 8.2% per year Regaining momentum : 12% per year Reference scenario : Yearly growth $B Incubation phase 9% per year Take-off phase Consumer Defense 10% per year Acceleration Main-frame Mid-frame 18% per year % per year Boom phase PC 21% per year $B145 Transition Geography Applications 0% growth Return to growth Convergence of platform 12% per year $B $B1.5 $B4.0 $B

11 Reference scenario : Semiconductor market long-term trend SC Market $ Billions 1000 C.T.V. 100 VCR Defense Main Frame Office PC Home PC Internet Portable SC Market % Growth Convergence of platform 75% 50% 10 25% SC Current Market Trend Line Source : WSTS, ST % -25% Reference scenario : regional market structure Asia/Pac. Europe CAGR in % % 16.2% Other Asia/Pac. 29% Market structure in 2008 Total $276B 55% in low cost areas Europe 17% Americas 9.5% Japan 8.4% Americas 18% World 12.0% Japan 18% China 18% 22

12 OEM customers concentration evolution Strong move since % % of Semiconductor Purchases 80% 60% 40% # of OEM Companies % Sources: Gartner Dataquest, isuppli 23 Semiconductor vendors concentration evolution Slow move since % % of Semiconductor Revenues 80% 60% 40% # of SC Companies 0% Sources: Gartner Dataquest, isuppli 24

13 ODMs & EMS in Semiconductor Purchasing Trends Semiconductor purchasing evolution 100% 80% In 2008, we estimate that 55% of semiconductor purchase will be from EMS & ODMs 60% 40% Semiconductor spend for OEMs directly Semiconductor spend for EMS and ODMs 0% Source: isuppli, february Worldwide semiconductor market share by vendor base region Japanese are still a world power 66% European North America Japanese APAC/ROW 55% 44% 33% 22% 11% 0% % of World market 26

14 What makes STMicroelectronics special? a) Focus on differentiated products b) Selective presence in standard products A well balanced portfolio Pioneering System-on-Chip solution Focusing on high growth applications Leading global customer base Strategic alliances Global manufacturing presence Global geographical presence The people that make things happen 27 Broad portfolio ST H sales 100% = US$ 3.32 billion Focus on differentiated products Selective in standard products Telecom peripherals & automotive Consumer & microcontrollers 70% Differentiated Products 12% 13% 5% Memories & Logic Discretes Standard & Commodities 28

15 Balanced sales in high growth ST H sales* 100%=US$ 3.32 billion market segments Market growth CAGR Communications 30% Computer Computer Automotive 12 % 11 % Automotive 15% Consumer Industrial Communicat. 6 % 11 % 10 % Industrial 15% Consumer Estimates within a variance of 5% - 10% in the absolute dollar amount, the relative weighting of each of the Company s target segments in the first half of 2003 Sources: ST 29 A pioneer and leader in system-on-chip solutions System know-how Broad range of technologies Strategic alliances Broad IP portfolio Powerful engines DSP & MCU cores World-class volume manufacturing Software expertise Design methodology Delivering SOCs to market 30

16 Complete product solutions Priority segments for high growth applications Computer peripherals Focus applications Data storage Digital consumer Set-top boxes Automotive Engine/body/safety Communications Wireless Smart cards Telephone Printers and imaging Monitors and displays DVDs Digital TVs Digital cameras Car radio Car multimedia Telematics Networking Wireless infrastructure Banking User ID Security Webcam MP3 players Optical Mouse 31 Diversified customer base H Top 30* OEM and Top EMS Customers Communications Alcatel Ericsson Motorola Nokia Nortel Networks Siemens Consumer Echostar Hughes LG Electronics Matsushita Philips Pioneer Samsung Scientific Atlanta Sony Thomson Vestel Automotive Bosch Conti Daimler-Chrysler Delphi Denso Visteon (Ford) Marelli Computer Agilent HP-Compaq Maxtor Seagate Western Digital Smart Card / Industrial Delta * Alphabetically listed by main application sector EMS Celestica Flextronics Sanmina-SCI Solectron Jabil 32

17 Vital role of strategic alliances Full range of leading-edge technologies Design expertise and CAD tools in analog and digital Efficient manufacturing Corporate culture with focus on partnership ST (Silicon Know-how) Customer (System Know-how) Winning products with better performance and lower cost 33 Global strategic alliances Revenues from Strategic Partners* (MUS$) CAGR 98/ % * Total of 12 partners, 11 of which being disclosed H H Communications Alcatel Nokia Nortel Networks Automotive Bosch Marelli Siemens VDO Computer HP (printers) Seagate Western Digital Consumer Thomson Pioneer 34

18 Global manufacturing infrastructure USA France Italy Morocco Malta China Malaysia Singapore New advanced fabs : 8" AMK (Singapore) - Ramping-up 12" Crolles (France) - Pilot line underway 12" Catania (Italy) - Under construction Legend 8" Front-end Back-end Other Front-end 35 STMicroelectronics a global semiconductor company Sales by region % of H sales 14 % North America H Sales : US$ 3.32 billion 2002 Sales : US$ 6.32 billion over 43,000 employees 17 main production sites 16 advanced R&D centers 39 design and application centers 88 direct sales offices in 31 countries * Eastern Europe, India, Africa, South America, Middle East 29 % Europe 9 % Emerging Markets* 5 % Japan 43 % Asia Pacific 36

19 The organization President & CEO P. Pistorio REGIONS GROUPS/DIVISIONS STAFF FUNCTIONS Telecom Periph & Auto A. Romano Discrete & STD ICs S. Castorina Memories C. Bozotti Strategic Planning A. Dutheil CFO C. Ferro TQEM G. Auguste Consumer & Micro P. Geyres Subsyst. G. Seragnoli Treasurer P. Mosconi Human Resources A. Dutheil Communications C.E. Ottaviani Europe E. Villa North America R. Pieranunzi Asia/Pac. J.C. Marquet Japan K. Shibata Emerg. Mkts C. Papa Front-end Manuf. L. Bosson CENTRAL FUNCTIONS Back-end Manuf. G. Seragnoli Central R&D J. Monnier AST A. Cuomo 37 ST into the Top Final Rankings Dataquest Rank Company Intel Samsung Toshiba ST TI NEC Infineon Motorola Philips Hitachi Sales $M Sources : Gartner Dataquest

20 Outperforming the market ST has outperformed the market in the latest cycle ST has outperformed the market since its foundation Index base 1 00 Index base 1 00 CAGR +10.4% ST sales CAGR +14.3% ST sales Market* CAGR +2.9% Market* CAGR +10.3% * Sources: WSTS, ST 39