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ST carries torch for Europe's IC market

Posted: 16 Jan 2009     Print Version  Bookmark and Share

Keywords:restructuring  high-tech  semiconductor 

It's going to be a long, cold and dreary winter for semiconductor firms as revenue growth stalls and margins deteriorate. But amidst the turmoil, STMicroelectronics NV is emerging as the most likely beneficiary of Europe's multi-year and now rapidly accelerating restructuring of regional high-tech markets.

The consolidation of Europe's high-tech sector extends well beyond the embattled semiconductor industry although the effects are much more evident in the chip sector, where two of the top three players are struggling for survival. These companies also are trying to pull together the most viable business structure for themselves in a rapidly changing global market.

Indeed, Europe's entire high-tech supply chain, stretching from raw material suppliers to component vendors, equipment manufacturers and retail outlets, is being overhauled in response to changes in consumer demand and more recently due to a sudden slowdown in the global economy. This is where ST has staked out a formidable position for itself by partnering with local rivals, customers and even foreign technology companies.

ST has over the last few years leveraged its broad product base, strong credit ratings and cash positions to lead Europe's top-tier IC vendors through a series of tough restructuring programmes involving the traditional tools of cost cutting, layoffs and joint ventures. The company has in recent months leveraged its privileged position with European equipment vendors like Alcatel Lucent, Ericsson and Nokia to reinforce its role as a leading supplier and strategic partner to the region's tier-one OEMs.

The Switzerland-based company is already the dominant player in the regional semiconductor market and is, by revenue, the world's fifth largest chip vendor. ST maintains significant market share in five key sectors: automotive, consumer, telecom, computer and industrial.

"ST has maintained resilient profitability through industry cycles, thanks to good market and technology positions, a focus on differentiated ICs and a strong network of strategic alliances," Standard & Poor's analysts Matthias Raab said in a recent research report. "In 2008, ST ranked No. 5 in the fragmented $260 billion (Rs.1,300,946.14 crore) semiconductor industry and slightly increased its market share to about 4 per cent," added Raab. "It benefitted from a strong product portfolio and generated a substantial part of its sales with products positioned in the top three in the market thanks to its strong R&D efforts."

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