Suppliers

Among the main types of supplier in our business we use are: equipment suppliers, raw material suppliers, and external subcontractors:

• Equipment suppliers: the quality and technology of equipment used in semiconductor manufacturing processes define the limits of our technology; demand for increasingly smaller chip structures means that semiconductor producers must quickly incorporate the latest advances in process technology to remain competitive.
• Raw materials: these include silicon wafers, lead frames, molding compounds, ceramic packages, and very high-purity chemicals and gases. Because we depend on a limited number of suppliers for several materials, we have developed strong partnerships over time to avoid disruptions and improve quality.
• Subcontractors: we use them to outsource wafer manufacturing, and assembly and testing of finished products. Depending on the market conditions and our own available capacity, these subcontractors represent a significant proportion of our activity, allowing STMicroelectronics to optimize its capital expenditures strategy and focus on critical proprietary processes.

EC3; STE1: Payments for purchases of tangible assets
	2003	2004	2005
US$m	1,221	2,050	1,441

2004 split of purchases by category	%
Asset purchase and maintenance	50
Manufacturing materials	24
Outsourcing and others	26

2005 split of purchases by category	%
Asset purchase and maintenance	42
Manufacturing materials	28
Outsourcing and others	30

While the amount paid to suppliers of tangible assets is an official and audited figure also published in the 20-F report (page 5), the split of purchases between tangible assets, materials and others is based on different data sources and time frames; it aims at giving a realistic visibility on the most important economic flows between ST and its main supplier categories, but it should not be considered as official and audited accounting information.

This year, we have decided not to publish the split of our purchases by region, because in many cases what we buy in a given country may in fact be imported from another country, and the resulting data are very difficult, if not impossible, to analyze.