Vision and Strategy

Message from Alain Dutheil

CHIEF OPERATING OFFICER AND VICE CHAIRMAN OF THE CORPORATE EXECUTIVE COMMITTEE

"Our strategy to face this
challenge is to be ‘an employer
of choice’, taking into conside-
ration all the elements that
drive employee motivation."

We explained in last year’s report how globalization and the overall economic conditions have pushed semiconductor manufacturers to transfer a significant part of their production lines to low cost areas in order to cope with constant price pressure common to our industry. 2007 was no exception: the evolution of market conditions, exchange rates, and the increasing need for competitiveness have led ST to take some important and drastic decisions regarding its manufacturing infrastructure.

We have announced that we will close our two manufacturing sites in the United States and one of our Moroccan sites, and transfer most of the corresponding activities to Asia and to subcontractors. The expected result is an improvement of our cost structure thanks to the improved utilization rate of our equipment, and also thanks to the lower labor cost in Asia.

However, such strategic moves always have a very serious impact on our workforce, and just as in the past, we are committed to alleviating the negative consequences for our people as much as we can. This of course must be done taking into consideration the local economic environment and cultural differences.

In Morocco, we are transferring activities from our older site in Ain Sebâa while increasing the activity of our newer site in Bouskoura, thus minimizing the reduction in headcount. In the US, on top of the appropriate severance packages we are offering retention packages to make sure that our key people do not resign too soon, which would put our production at risk.

There are also consequences for our receiving plants in Asia. Given the consistently high turnover in this region, we must ensure the stability of our experienced employees. Our strategy to face this challenge is to be ‘an employer of choice’, taking into consideration all the elements that drive employee motivation: competitive salaries to start, but also management style, company values, employee development and satisfaction through training and empowerment, commitment to sustainable development and involvement in local communities.

This approach is not new, and it has been shared of course by all of our sites for many years. Everyone in ST is deeply convinced that this is the winning strategy to develop our people and support their contribution to our long-term performance.