STMicroelectronics, a leading designer and producer of semiconductors, this week outlined its new strategic plan. One of the main features of the new strategy will be the exit from ST-Ericsson chip joint venture and thus from application processors business.
“We have made the decision to exit ST-Ericsson after a transition period. We will continue to support ST-Ericsson as their supply-chain partner, advanced process-technology partner and application-processor IP provider. Our new strategy is centered on leadership in sense and power and automotive products, and in embedded-processing solutions. Our specific focus is on five product areas: MEMS and sensors, smart power, automotive products, microcontrollers, and application processors including digital consumer,” said Carlo Bozotti, president and chief executive officer of ST.
These families are expected to experience solid growth rates driven by secular trends and fit extremely well with our market-leading positions and competitive advantages. Our innovative products in these areas combined with our world-class technology and manufacturing, bring us even more opportunities to significantly grow and gain market share.
“The new ST will be more focused, leaner and better positioned to deliver value to our customers and our shareholders, targeting to rapidly achieve operating margins of 10%,” said Mr. Bozotti.
The company’s new strategy is based on two product-segment organizations: sense, power and automotive products; and embedded processing solutions.
ST will build on its leading position in sense & power, which includes MEMS and sensors, power discrete and advanced analog products, and in automotive products, from powertrain to safety, and from body to infotainment.
In embedded processing solutions the company will focus on the core of the electronics systems rather than on wireless broadband access. The embedded processing solutions segment includes microcontrollers, imaging products, digital consumer products, application processors and digital ASICs.
In line with the new financial model, the company expects both product segments to be profitable and to generate cash. In particular, embedded processing solutions will turn to profitability leveraging on a stronger product and technology focus, expanded customer base and manufacturing synergies between microcontrollers and digital products.
ST will address an estimated $140 billion market in 2013 and has significant potential to grow and gain market share.
“The opportunities in this industry are extremely exciting. As semiconductors continue to be more pervasive, we see a world where ST products are everywhere microelectronics make a positive contribution to people’s lives. With our new strategic plan, we will grow faster, be more profitable and overall become an even stronger company,” said Mr. Bozotti.
As a consequence of the major changes that occurred in the dynamics of the wireless market, ST has taken the decision to exit ST-Ericsson after a transition period and is currently in negotiations on exit options. This disengagement process has started, with the transition expected to end during the third quarter of 2013. While no further details can be provided at this time, any option taken will be in line with the new financial model as presented by ST today.
ST will continue to support ST-Ericsson as its supply-chain partner, advanced process-technology partner (FD-SOI) and application-processor IP provider.
ST is targeting an operating margin of 10% or more. In order to achieve the new financial model, ST expects to reduce quarterly net operating expenses to an average quarterly rate in the range of $600 million to $650 million by the beginning of 2014.