STMicroelectronics Sets Aggressive China Agenda

March 28, 2006 by Jeff Shepard

STMicroelectronics' recently appointed Greater China Corporate Vice President Bob Krysiak reinforced the company's intention to strengthen its local presence and continue its long-standing, successful partnership strategy by expanding the Company's network of relationships with tomorrow's giants. Since 1999, ST's sales in China have steadily outperformed the local market, growing at a CAGR of 31%, compared to 24% for China's semiconductor industry as a whole.

At a meeting in Beijing, Krysiak presented a view of the company's position in China and its strategy for market leadership. ST's partners for joint future growth are slated to include the region's top electronics companies, which are increasing their market share in a wide variety of different applications such as telecommunications, digital consumer, industrial, automotive, and smartcards.

"Today, we are the number three semiconductor supplier in China and the number two if we exclude microprocessor products. We plan to become the number one, reinforcing our position as a leading player in this market," said Bob Krysiak, Corporate Vice President and General Manager for Greater China. "Because it is in our DNA, we will continue to work closely with our existing partner and alliance network while establishing new partnerships and alliances with major emerging players, many of which will come from China and Asia."

The booming segment of Electronic Manufacturing Services (EMS) is another focal point of ST's market strategy in China. With the business model shifting towards outsourcing to original design manufacturers (ODM) and sub-contracting services, the world's major EMS and ODM players, who are largely based in the Greater China region, will outpace the market and dictate the choice of semiconductor devices.

The company has re-confirmed its investment plans for China, including the already announced investment in a joint memory manufacturing facility together with Hynix in Wuxi, where the company has a 33% minority stake. When completed, later this year, the Wuxi facility is set to become one of the largest and most advanced wafer fab in the country, for a total cost of approximately US$2 billion. Supplementing ST's existing assembly and test plant in the Futian Free-Trade Zone of Shenzhen, the company is planning to invest US$ 500 million to build its second back-end plant in China, which is expected to start production in Q3 2008. The US$500 million investment will be spread over a number of years, until the new back-end facility in Longgang reaches its full ramp-up capacity of 7 billion units per year.

ST's Greater China headquarters have been set up in Shanghai and, as a sign of further commitment to the country a new building is currently under construction, with a total investment of US$10 million once it is completed.