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ST chief calls for retrenchment, green investment in face of financial crisis

Far from warning of doom, STMicroelectronics' CEO Carlo Bozotti outlines the company's strategy of increased fiscal conservatism, organic growth, and reliance on creativity to "withstand the crisis and to fight back against it with innovation."

By Ron Wilson, Executive Editor -- EDN, 11/12/2008

Munich, Germany -- Speaking before an invited audience at STMicroelectronics' annual Electronica party in here, ST President and CEO Carlo Bozotti celebrated a strong year-to-date, but said that the industry now faces what may be the greatest financial crisis to strike the industrial nations.

"The effects will inevitably ripple through the entire economy," he said. Far from warning of doom, however, Bozotti (pictured) outlined an ST strategy of increased fiscal conservatism, organic growth, and reliance on creativity to "withstand the crisis and to fight back against it with innovation."

Bozotti described the series of acquisitions and partnerships that has reinforced ST's position in multimedia convergence and wireless communications in the last two years, and then warned the audience not to expect more such significant initiatives in the short term. Rather than major acquisitions or new partnerships, Bozotti said ST would focus on continuing to fill in existing product lines with new products.

Further, he said the company will continue to reduce fixed expense sources. In particular, Bozotti cited reducing the current approximately 25 manufacturing sites to about 15. The strategy will be to keep process technology that differentiated ST products, implying such areas as high-voltage and precision analog, while outsourcing commodity CMOS logic and similar wafer processing. The CEO has outlined this asset-lite strategy previously.

Without saying as much, Bozotti suggested that its recent partnerships in the cellular arena would be necessary to assist with the massive R&D costs there. "Research to stay in the wireless market requires about $1 billion per year," Bozotti said.

While emphasizing media convergence and wireless as major market thrusts, Bozotti also recognized that less glamorous investments have paid off perhaps disproportionately. He said that smart-power, precision analog, and MEMS together had grown to contribute 45% of worldwide revenue. The CEO did not suggest that this success, compared to the extremely competitive nature of the media and wireless markets, would influence future R/D expenditure decisions, but left the inference available to the audience.

Finally, Bozotti turned a spotlight on ST's continuing green initiatives, and suggested that his company's work on reducing its own environmental impact as well as that of its customers might serve as a useful model for world leaders trying to find a way out of the crisis. "Perhaps the best bet to trigger fast, diffuse job growth is to invest in clean energy and clean industry," Bozotti said.