STMicroelectronics Tait Sorensen Senior Manager, Investor Relations June 9, 2006 PacificCrest Conference
Disclaimer This presentation may include statements that are not historical facts and are statements of future expectations and may include other forward looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended) that are based on management's current views and assumptions and that involve known and unknown risks and uncertainties that could cause actual results or performances to differ materially from those in such statements. In particular the following important factors could cause actual results to differ materially from the expectations of the Company or its management: (i) future developments in the world semiconductor market, in particular the future demand for semiconductor products in the key application markets and from key customers served by our products, (ii) pricing pressures, losses or curtailments of purchases from key customers, (iii) the financial impact of inadequate or excess inventories if actual demand differs from our anticipations, (iv) impact of foreign currency fluctuations, in particular a weakening of the U.S. dollar compared to the euro, (v) our ability to be successful in our strategic research and development initiatives to develop new products to meet anticipated market demand, as well as our ability to achieve our corporate performance roadmap by timely and successful completion of our other various announced initiatives to improve our overall efficiency and financial performance, (vi) anticipated benefits of research and development alliances and cooperative activities, (vii) the ability of our suppliers to meet our demands for products and competitive pricing, (viii) changes in the economic, social or political environment, as well as natural events in the counties where we and our key customers operate, (ix) Changes in our overall tax position as a result of changes in tax laws or the outcome of tax audits, (x) product liability or warranty claims for a product containing one of our parts, (xi) our ability to obtain required licenses on third party intellectual property and the outcome of litigation. Unfavorable changes in any of the above or other factors listed under Risk Factors noted from time to time in the Company s SEC reports including the Form 20F, most recently filed on March 3, 2006, and the Company s press release dated April 25, 2006, could materially affect the Company.
ST Total Revenues Q106 Total Revenues = $2.36B -1.1% vs Q405; +13.5% vs Q105 $US M 3000 2500 2000 1500 1000 500 Sequential Drivers Automotive Digital Consumer Reduced seasonality in Wireless Year over Year Growth Drivers Automotive Wireless 0 Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106
STMicroelectronics: A Global Semiconductor Company Sales by region as % of Q1 2006 sales 12% North America 31% Europe 25% Greater China 3% Japan 7% Emerging Markets* 22% Asia Pacific Q106 sales = $2.36B Approximately 50,000 employees *India, Africa, Latin America, Middle East
ST Targeted Markets Communications Wireless - Connectivity - Mobile Phone - Portable MM Networking Computer Peripherals Key Applications: Data storage Printers Imaging Monitors & Displays Optical mouse Digital Consumer Set-Top Boxes DVDs Digital TVs Digital Cameras Digital Audio Automotive Smart Cards Engine/body/safety Telephone Car radio Banking Car multimedia User ID Telematics Security
Revenues by Application and Ranking US$M 900 800 700 600 500 400 300 200 100 0 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Ranking* in Application Markets 03 04 05 Wireless #3 #4 #3 Digital Cons. #3 #3 #3 Automotive #3 #3 #3 Digital Consumer Automotive Wireless *Source :Dataquest, Gartner, isuppli - March 2006
Multimedia Convergence John Rossi VP, Market Development & Applications Lab Consumer Business Unit June 9, 2006 PacificCrest Conference
10 years after MPEG2 Standard Definition: A New Wave with High Definition, DVR, MPEG4, IP 180 Mpcs 160 140 CAGR +25% 2005 2007 idtv ATSC & DVB-T Integrated HD Digital TVs 120 100 80 60 40 20 0 SD MPEG2 2004 2005 2006 2007 Terrestrial IP Cable Satellite FTA Satellite PayTV DVR Digital Set-top MPEG4 Boxes IP Emerging Markets * Source : instat 2005, ST Sales & Market Research, Feb. 2006
2005: ST Shipped 60+ Million MPEG2 & 4 ICs Mu 80 70 60 50 40 30 20 10 59% 58% 69% 50% Share Competition ST Market Share in MPEG STB market: 60% # 1 in Terrestrial # 1 in Satellite # 1 in Cable # 1 in IP 0 SAT CABLE DTT IPTV Total 2005 Market estimated at 100Mu Source : ST Sales & Market Research, Feb. 2006
2005: ST inside 60+ Million Set-top Boxes A Fragmented Market... TOP 10 Next 50+ COSHIP HOMECAST KAON PHILIPS SAMSUNG SANDMARTIN SCIENTIFIC-ATLANTA SKARDIN THOMSON VESTEL 60% 40% ADB ARION ASCOM ASUSTEK AV FRONTIER AVNET BEKOTEKNIK BGTECH BHARAT CHANGHONG CYBERHOME DAHUA DMT EASTERN ECHOSTAR FINMEK FREE FTA FUTURE ELECTRONICS GENIUS GLOBAL GMI HUMAX HYUNDAI I3MICRO JIUZHOU JVC KATEK LG ELECTRONICS LOEWE MATSUSHITA MOTOROLA NOKIA NU HORIZON OCTALTV OPEN TECH ORIENT POWER PACE PANDA PESI PIONEER QUANTA SAGEM SEG HI-TECH SEUNG JUN SHARP SHENZHOU SIEMENS SKYWORTH SONY TECHNISAT TELRA TEON TONGDA TONIC TTE UEC WORLDSAT ZINWELL
Market Trends for STB and DVD Service convergence IPTV, multiple play (US cable, FT, Free, Telefonica, China Telecom, ) Exchange of content between devices (Canal+, Echostar, ) HD advanced codecs (H264, VC1) DVR Connectivity Retail products Microsoft technologies (Windows media connect / PlaysforSure ) Multi-Play Very high TV/Telco operator s interest in TV oriented portable media players Satellite - Europe and US Cable - US Telco - WW
Connected Appliances by Application Y2006: total 31Mpcs 7% of appliances CAGR +48% DVD Player DVD Recorder Game Console Home Theater PVR STB Digital TV Digital Camcorder DSC Portable Game Player Portable Video Player Connectivity in STB: USB and Ethernet on all platforms Dish deploying homeplug US cable : MoCA / HPNA 802.11g/a: disappointing, =>now focusing on 802.11n But none good enough yet! Y2010: total 150Mpcs 24% of appliances DVD Player DVD Recorder Game Console Home Theater PVR STB Digital TV Digital Camcorder DSC Portable Game Player Portable Video Player Routing Performance: First step is to optimize current platform Preparing solution with dedicated processor Source: ABI Research Q405
Home Gateway Multi-Service Platform Home (Circa 2008-10) Kid s Rec. Room Home Office Family Room 802.16 Cable xdsl Sat Secure-Trusted Home Gateway Platform Access Pipes www VoIP TV Healthcare ISP Bundled Services
Combined Services Anytime & Anywhere Live broadcast Multicast or VOD Record live on servers Download from internet VOIP and videoconf Playback to client Use cheapest service (Videoconf) PayTV anywhere Display on TV Internet Broadband access Broadcast Main TV / STB DVR and DVD transcoding Transcoding Audio, video, gfx content Servers PC / mediacenter 2nd Main TV, STB, Digital Media Adapter Remote STB
Don t Protect the Pipe Macrovision CLEAR CONTENT Analog CLEAR CONTENT CLEAR CONTENT DVI HDCP 1394 CLEAR CONTENT Connection Content Protection Hard Disk CLEAR CONTENT 5C No protection CLEAR CONTENT Broadband CIM DFAST CLEAR CONTENT Mobile OMA-1 CLEAR CONTENT
71xx Key Capabilities: Conditional Access and DRM Supports all the latest generation of CA worldwide EAVS2, NASC/Nagra ICAM2, ICAM3 SVP MSDRM, WMDRM Multi2 Irdeto, Viaccess, Conax Secured platform for secure transactions Unique ID, public Key/private Key, code signature ST seen as innovation leader by the major CA/DRM players (Nagra, NDS, Microsoft, )
Complete Solution: Hardware, Software and System ST MHEG5 MHP Osmosys Highgate Cabot Bitrouter DVD FE DVD Play ST-MyTV DVD Rec ST DVR Exatel PTI Demu x OS: Linux/OS21 MCDT (Peripherals, FS) Oregan Digital 5 Simple Devices Digital Deck STAPI+ 6 Tune Cryp Dis ST r Division: HDD Software t pl 4 3 7 GUI Stack ST Highgate Exatel Partner #1 Partner #2 Partner #3 Software Licence STAPI+ Hardware: ST 51xx, Division: 8010, Hardware 7100, 7109, 5301 2 Vide o Audi o 5 Periph 8 USB GUI and Integration Services Middleware Security Solutions Storage Drivers Communication Stacks Operating Systems Advanced SOC s 1 Production-ready Reference Solutions
ST Home Video Divisions Strategic Development Axis Drive AVC cost to mass deployment Low cost architecture Latest process, single chip from beginning BOM integration Connectivity / IPTV Server and client solutions Microsoft technologies Multi DRM / security Multimedia over IP Full platform offer Multiple OS (OS21, WinCE, Linux) Middleware community STB, Blu-ray/HD-DVD, IPTV, TV Best in class HD video Multicodec high performance Leverage decoder flexibility Image quality improvements Power consumption Portable STB and DVD Environmental regulation Better reliability (no heat sink)
2006: ST in IP-STB ST s dominant market share 7109: the only credible solution for H264 and VC1 IP-STB: Innovation leader (multiple play) Europe: First to deploy high volume FT based on 7100 production started in 2005 Telefonica 7100 production now Fastweb 7100 production now Telecom Italia 7109 production in Q3/06 Major design wins with other Telcos Asia-Pacific now starting: China in production on 7100 for Shanghai Telecom Korea design win with KT on 7100, production in Q3/06 US: AT&T deployment late this year
2006: ST in Cable STB CABLE: strong market share gains for ST US: Strong demand driven by HD and HD DVR Market share growth thanks to SA-Cisco Production of the new H264 solution in large MSO s in Q4/06 Europe: UPC, largest MSO, in high volume with 5100 -New HD H264 box based on 7100 production in Q2/06 Telewest production in Q2/06 using ST silicon Analog to digital conversion in progress: KDG, Cabo, Telenet, Canal Digitale, Cablecom, Swisscom, Premiere China: Digital deployment in full speed, ST s market share 85%
2006: ST in Terrestrial STB TERRESTRIAL: the year of HD ramp up Europe: US: Market shift to DVR, major design-wins based on STi51xx, volume production now. STi7100 mass production H264 HD for Analog transition to digital HD starting ST well positioned with key design wins Japan, Rest of the World: First HD brick on Japanese market Dominant position in Australia SD and HD
2006: ST in Satellite STB US SATELLITE: transition to HD H264 started Design-wins based on 7109 for HD Zapper and HD DVR boxes Design-win for Dual TV based on 7200, the first 65nm digital consumer product in the world planned production in Q2/07 Today sole supplier of TIVO replacement DVR Design-wins based on 71xx for HD Zapper and HD DVR, production start in Q4/06
2006: ST in Satellite STB Europe: leading in HD deployment Canal+, TPS in mass production based on 7100 Premiere volume production in May based on 7100 Europe: SD Premiere big upside with new hybrid box for soccer in Germany based on 5100 Sky in production with DVR based on ST55xx Strong volumes in FTA and transition to DVR based on ST5100
June 9, 2006 PacificCrest Conference Q&A