A European Perspective for Electronic Industry

in Latin America

François GuibertCorporate Vice President, Emerging Markets Region General Manager

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Security Networking

Storage

Consumer

Automotive

Wireless

Computer Science

Electronic, a Global WorldElectronic, a Global World

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Electronic a Wide Variety of TerminalsElectronic a Wide Variety of Terminals

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Electronic is a key-industryfor the wealth of nations

Electronic is a key-industryfor the wealth of nations

Most other industries and all services will be unable to operate without electronic.Electronic generates more added-value than any other manufacturing industry.Electronic Industry controls three times more jobs than it generates.Electronic accounts for 30% of the fixed asset investments of the overall industries.In the next ten years, the Electronic Industry will continue growing more than two times the global world GDP.

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Electronic Industry worldwide represents ($US):

Electronic Industry worldwide represents ($US):

4.404.40 x Oil, Petrol & Minerals2.752.75 x Chemical & Plastics2.452.45 x Food, Beverage & Tobacco2.442.44 x Transportation2.202.20 x Electricity, Gas & water

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Electronic is a key enabler of added-value and jobs for the whole industryElectronic is a key enabler of added-value and jobs for the whole industry

Traditional Manufacturing

$1,020B

Telecom operators… $5,000B …Broadcasting Cies…

$213B

Automobile, Petrol, Chemical, Aviation

Semiconductor Industry

Service providers

Electronics Industry

Industrial world in 2004

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Electronic Industry profile in 2004Electronic Industry profile in 2004

Segments

Industrial15%

Computer33%

Commu-nication

28%Consumer

10%

Gov. Military

8%

Automo-tive6%

RegionsOther Asia/Pac.

17%

China16%

Japan14%

Europe25%

Americas28%

Total : $1,020BSource : IC Insights

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Electronic Industry production growthElectronic Industry production growthCAGR comparisons

1978-2004

3%

-2%

-1%

2%

3%

5%

5%

7.5%Electronics

Civil aviation

Chemical

Auto.

Oil

Textile

Steel

world GDP

Electronic Industry is the fastest growing industry

Long-term evolution

0

200

400

600

800

1000

1200

78 83 88 93 98 03

$B

Source : IC Insights, ST

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Electronic Industry trendsElectronic Industry trendsWorld Electronic Industry growth

$1,020B$1,080B

$1,440B

00 01 02 03 04 05 06 07 08 09 10

CAGR 7%

Electronic industry growth is driven by:

Development of consumer applications through digitalization.

Development of new regions “BRIC”: Brazil, Russia, India, and China.

CAGR is 4 percentage points above the world GDP growth.

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Electronic is a pillar for the industrial strategy of nations

Electronic is a pillar for the industrial strategy of nations

Research Programs

•Energy savingphotovoltaic

•Medicalelectronic analysis

•Etc…

Development and InnovationPrograms

• Buildingsenergy controlsecurityaccess control

•Automotivesecurity and intelligencehybrid vehicles

•Airplanesautomationair control

•Etc…

• City transitautomaticmass transport

•SecurityIdentitycontrolNetwork

•Transportationfast traincontainersfollow-up

•Etc…

InfrastructurePrograms

•Internethigh bit rate

•TV high definition•Medical

electronic network•Etc…

Sources: ST based on Jan 2005 report to French government

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Electronic is at the center of the industrial policy of Nations

Electronic is at the center of the industrial policy of Nations

'50 '60 '70 '80 '90 '00

USA

INDIA

EUROPE

CHINATAIWAN

KOREA

EUROPEJAPAN

Semiconductor

Reinforcing the strategic programs through R&D in Semiconductor:

USAEuropeTaiwan

ComputerTelecom

CommunicationSemiconductor FoundriesPC

ConsumerSemiconductor

ConsumerSemiconductor

SoftwareCommunication

DefenseSemiconductorComputer

Launching the strategic programs through R&D in systems

PCSemiconductor

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United States of AmericaUnited States of America

SILICONVALLEY

Semiconductors

Equipment

NationalDefense

Electronicprograms

Component

Software

PC & Peripherals

Defense

Enhancement through

Microelectronic programs

Sematech…

Mainframe Computer

Digital Consumer

20001950

Data Com.Radio Com.

1970/1980

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1960 1970 1980 1990 2000 2010

JapanJapan

Radio

AudioK7

VideoRecorder

VHS standardTV

Production for export

RenewedMicroelectronicPublic Programs

Foreign design

Original design

Production for local demand

Large equipment production creating market for microelectronics

Governmental microelectronic program « VLSI » :

LogicMemories

World recognized microelectronic industry

VLSI public program

Subcontracting

Enhancing Semiconductor Industry

Enhancing Equipment Industry

Exports

Exports

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EuropeEurope

Defenseelectronics

Consumer Applicationsupport

National programs

Smart Card

ESPRIT

EUREKA

JESSI

MEDEA

European and Pan National programsEuropean and Pan National programs

Digitalcommunication

European programs

ComputerIndustry:

ICLSiemensBull

Pan National programs

Equipment industry support

Telecommunications

Digital TV

Semiconductor support

1960 1970 1980 1990 2000

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TaiwanTaiwan

AudioToys

Diversified Electronic Leadership

PC

Consumer

Becoming a Leading Semiconductor Supplier

SCfoundryindustry

TSMCUMC……

PCMotherboardPeripherals

ITRIERSO

Subcontracting SemiconductorsSubcontracting EquipmentsHsinchu (High Tech Park)

1980 1990 2000

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Peoples Republic of ChinaPeoples Republic of ChinaBalancing Growth and Cost

Competitiveness

2000 2010 2020

Mastering Electronic manufacturing science

Thru foreign companies transplant :

OEMEMS

EstablishingChina as asignificant

Competitor inAdvancedElectronic

Creation of areas of competenciesShenzhen/Hong Kong: Consumer/PCShanghai: SemiconductorsBeijing: Telecom

Design houses

ODM

Foundries development

EstablishingChina as theworkshop of

the world

PC

Wireline

Wireless

Consumer

EstablishingChina as a

competitor inSemiconductor

OEM (Original Equipment Manufacturers)EMS (Equipment Manufacturer Services)ODM (Original Design Manufacturers)

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Ingredients for success in Electronic IndustryIngredients for success in Electronic IndustryElectronic

Focus

RegionalEconomicSuccess

Education

Tax incentives

Technologic Parks

Diversification of major Industrial Companies

Development of Startups

Government Focus

Government

Key Financial & Industrial Players

R&D efforts

Electronic IndustryCompetitiveness

Semiconductors Innovation/Integration

Electronic Key Applications(PC, Telecom, Consumer, Appliances…)

With Electronic / Semiconductor world leaders

Partnership

Entrepreneurs Dedication

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Europe has reached leading position in many key-applications :

Telecommunication (in particular Mobile Phone…)Digital consumer (SetTopBox…)Smart Card (telecom, banking, security…)Automotive (electronic, security…)Semiconductors (STMicroelectronics, Infineon, Philips…)

Why Europe is the partner of choiceWhy Europe is the partner of choice

Solid member of the top 10 semiconductor suppliers, key contributor to the European Electronic success and having a strong historical culture of cooperation, STMicroelectronics is ready to contribute to Latin America Electronic Industry Development.

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Opportunities for Latin America in Electronic

Opportunities for Latin America in Electronic

Present Situation Possible driversMarket Potential

Regional (around 550M inhabitants)Worldwide Export opportunities

Stable and High Growth Economic ProspectAvailable Industry Structure with access to External Technical CooperationPossible Partnership with Key Local EntrepreneursEngineering Educational System

Digital Set Top Box / HDTV

Smart Cards

White Goods (appliances)

Electronic Meters

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STMicroelectronicsa global semiconductor company

27 %Europe

14 %North

America

5 %Japan

42 %Asia Pacific12 %

Emerging Markets*

o 2004 Sales : US$ 8.76 billiono over 45,000 employeeso 17 main production siteso 16 advanced R&D centerso 39 design and application centerso 88 direct sales offices in 31 countries

* Latin America, India, Middle East & Africa, Russia & Eastern Europe,

Sales by region as % of 2004 sales

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Global manufacturing

8" Front-end

Back-endOther Front-end

infrastructure

USA France Italy

MaltaMoroccoChina

Malaysia

Singapore

Advanced wafer fabs:12" Crolles (France) - Pilot line in operation12" Catania (Italy) – Building & Facilities underway

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STMicroelectronics Strategy focusing on Key Programs and Product Lines

STMicroelectronics Strategy focusing on Key Programs and Product Lines

NOR Flash

NAND Flash

Memory cards

Smartcards

Discretes

MOSFET

VIPower

Wireless broadband - handsets

3G PlatformNomadik

Wireless LANWireline broadbandComputer Peripherals

Storage & Printing

Automotive

Set-Top BoxesDVDsDigital TVsShared Platform

ImagingMicrocontrollers

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STMicroelectronics ContributionMultiple Product Offerings

STMicroelectronics ContributionMultiple Product Offerings

FromSystem-on-Chip

System-above-ChipSystem-in-Package

To PLATFORM SOLUTIONS

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« No advanced industrial society can exist without controlled access to an advanced electronics industry, which

in turn cannot exist without controlled access to an advanced

semiconductor industry »

Pasquale Pistorio(Honorary Chairman )