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GENEVA, September 3, 2003 -On July 24, 2003, STMicroelectronics
(NYSE: STM) announced that it would define a plan to improve its
cost competitiveness by migrating at least half of its European and
U.S. 6-inch wafer production either to finer geometry 8-inch wafer fabs
or to the Company's 6-inch fab in Singapore. Rapid changes in the semiconductor
industry, characterized by the replacement of mature 6-inch wafer technology,
which is more exposed to competition, by new-generation 8- and 12-inch
wafer technology have prompted the need for this plan, as have pricing
pressure and the trend among ST's customers to shift their own production
to Asia.
In this context, ST's French subsidiary, STMicroelectronics SA, called
a meeting with labor representatives of the Comité Central d'Entreprise
(Central Workers' Committee) today to inform them of its plans for revamping
its manufacturing operations in France to address the changing global
marketplace. The meeting broke up early when labor representatives walked
out. The project which was to be presented was therefore sent to each
representative by mail this afternoon. These plans include:
- a project to withdraw from the 6-inch fab in Rennes
- continuation of the highly specialized discrete-components activity
at the Company's site in Tours
- gradual migration of the 6-inch activity to the 8-inch fab at the
Rousset site near Aix en Provence
With 428 employees under permanent contract and 34 employees scheduled
to take early retirement, the Rennes site is ST's smallest 6-inch production
unit. Its location within the city of Rennes prevents the site from expanding
to accommodate 8- or 12-inch technology.
In November 2001, a Comité de Diversification de l'Activité (Business
Diversification Committee) was created to identify potential new activities
for the site. The Committee examined a project to convert the site to
new technologies, such as MEMS (Micromachining electromechanical systems),
or to establish research and development activities. However, the MEMS
market is highly competitive, represents limited volumes, and accounts
for only about 1% of the global semiconductor market. R&D activities alone
would not be enough to sustain the site.
In the absence of an internal solution, and with the help of two specialized
consulting firms, ST's management initiated efforts to attract other companies
to the Rennes site with the aim of maintaining industrial activity there.
These efforts will continue. In the meantime, however, production of 6-inch
wafers at the Rennes site will gradually decrease, before stopping completely
at the end of March 2004. The activity of assembling and testing components
for the space industry, which cannot continue alone at the Rennes site,
will be transferred to another ST site in Europe.
According to the plan ST would offer jobs at its other sites in France
to all Rennes employees, at equivalent professional conditions. The
transfers would be accompanied by an incentive package that includes
relocation for the employee and his or her spouse, and any necessary
training programs. For employees who do not accept a transfer, ST would
provide aid or assistance, such as training programs and help in finding
a job outside the Company. In addition, early retirement programs would
be foreseen, via the French national "CASA/CATS" programs, as applicable.
Currently ST has 384 permanent positions that need to be filled in France.
More openings may arise in the coming months.
Specialized in discrete components, ST's Tours site focuses on
highly specialized technologies and markets for which it is fully qualified.
It is therefore not affected by the same 6-inch wafer competitive circumstances
as Rennes.
At ST's Rousset location, migration from 6-inch wafers began
in May 2000 when ST opened an 8-inch fab at the site. On a timetable
to be determined by market conditions, 6-inch production should gradually
phase out in favor of 8-inch ramp-up. The Rousset site is ST's main
location for providing integrated circuits for microcontroller-based
smart cards.
Within the framework of this plan, ST wishes to work in concert with
labor representatives and other partners to ensure the restructuring
process at the Rennes site goes as smoothly as possible for everyone
involved.
STMicroelectronics has semiconductor fabrication plants at four locations
in France: Rennes and Tours are both 6-inch fabs; the Rousset site has
a 6-inch and an 8-inch fab; and finally, the Company has two leading-edge
wafer fabs at Crolles, near Grenoble which are an 8-inch fab and pilot
line, and the Crolles2 facility, in partnership with Motorola and Philips,
which is a 12-inch pilot-line.
About STMicroelectronics
STMicroelectronics is a global leader in developing and delivering semiconductor
solutions across the spectrum of microelectronics applications. An unrivalled
combination of silicon and system expertise, manufacturing strength,
Intellectual Property (IP) portfolio and strategic partners positions
the Company at the forefront of System-on-Chip (SoC) technology and
its products play a key role in enabling today's convergence markets.
The Company's shares are traded on the New York Stock Exchange, on Euronext
Paris and on the Milan Stock Exchange. In 2002, the Company's net revenues
were $6.32 billion and net earnings were $429.4 million. Further information
on ST can be found at http://www.st.com.
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