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Executives

Bob Krysiak – Executive Vice President and President, Americas Region

Tait Sorensen – Vice President of Investor Relations

Analysts

Simon Schafer – Goldman Sachs

STMicroelectronics N.V. (STM) Goldman Sachs Technology and Internet Conference 2013 Call February 12, 2013 7:40 PM ET

Simon Schafer – Goldman Sachs

STMicro fire side chat here at Goldman Sachs Tech & Internet Conference this year. I’m Simon Schafer. I cover the European semis and tech hardware industries at Goldman in London. Great pleasure to have STM at this conference. Again we’ve done this for a number of years. So thanks again for joining us.

We’ve got Bob Krysiak, EVP of the Americas at STM; and then Tait Sorensen, VP of Investor Relations as well. So thanks guys for doing this. What I thought we do is just talk a little bit about the environment. We’ve asked the number of your competitors this question this morning, and of course, the one thing that came through on the conference calls in Q4 earnings season just a couple of weeks back is I guess a number of your peers including ST actually commenting about someone improves order trends really coming into the year. And actually your staff is also you guys have giving somewhat better guidance than its seasonally normal, but may be just remind us as to what your latest guidance is and how are you shaping up into the first and second quarter?

Bob Krysiak

Yes. So again obviously we had a good Q4. 2012 announcements were out decline versus 2011. We guided midpoint sequentially to Q1 to minus 3% and I think we were actually I mean even a big debate inside the company. This was slightly above seasonal for us, typically because you lose. In Asia you lose 7% just in days of manufacturing, which is a big manufacturing base for us. And of course the usual seasonal challenges, so actually the guidance for us was pretty good it was well received. We saw orders uptick in January Carlo was quite comfortable about backlog that we have.

He is putting pressure on us to do more. There is always, but, it’s pretty good, we’re quite comfortable with it. Some customers were obviously we’re seeing this kind of tablet, smartphone, model change over switch here obviously taking place, and I think people have read it all that. There are some model changes overtake, which taken place in Asia, North America which peoples transit down in one level and up to another model, you’ll see that happening. But besides that, the market seems to be pretty good.

The only market which we are just kind of struggling, and it’s been struggling obviously for some time is or segment is really it can be a prefer market, which is in kind of a little bit of a decline, print media, printing and of course storage, any illustration with the PC has been struggling. The rest of the business is growing quite well. All segments, all product groups, all product divisions are going. Again with some fluctuations depending on model changeovers, which we’ve normally expect to see this in anyway. And that’s normal anyway.

So the backlog for Q2, it looks pretty healthy. The forecast obviously, we’re not giving any forecast normally, but what we’ve given to the corporation in terms of sales, the corporation sales. It looks pretty healthy, no major concerns, no big cancellations and some short-term orders coming in. People are kind of nervous, so they are ordering in last minute and we’re seeing that.

In Asia, the big distribution channel, which is a very large channel for us it looks forward portions of business in Asia, its pretty healthy, is nowhere, no big stocking issues there. Europe is sluggish, clearly the industrial and automotive in particular, we’ll talk about that. North America, which I’m responsible for is doing quite well. Ultimately, it is improving, days of in between cars are in production are lower than they were in Q4 the other way and so we’re quite comfortable about the way the market is shaping up for us. And of course last year we predicted the second half the whole industry was hoping the second half will be much better. This year we really aren’t hoping this is going to be case and the forecast of my customer is such that there are new product cycles driving the growth in the second half. Last year we’re looking for the market recovery.

Simon Schafer – Goldman Sachs

When you talk about…?

Tait Sorensen

Simon if I could just clear up a point the minus 3% is for the wholly-owned businesses, that’s up the midpoint minus 70% which will be in total.

Bob Krysiak

Yeah, absolutely. I will (inaudible).

Simon Schafer – Goldman Sachs

Well, don’t worry we’ll come back to that. We will.

Bob Krysiak

Yes

Simon Schafer – Goldman Sachs

And Bob just, I mean are you talking about just an order uptick from the distribution channel, that’s a significant part of your business, which obviously last year when we look at the entire industry there was a lot of destocking going on, because we were in the bad environment and son on. But you have seen this destocking amongst and then amongst distribution partners and of course you’ve also seen a significant shortening in lead time.

Bob Krysiak

Yes

Simon Schafer – Goldman Sachs

So maybe just I mean just to clarify you talking about an uptick from distribution partners that you talking across the board. And then maybe also the final reminder, where your lead time is now compared to a year ago?

Bob Krysiak

Yeah, obviously I seeing first of all the backlog, the distributors, the channel partners we have, their inventory was kind of high in Q3, okay, and they were kind of reductive (inaudible). They are still concerned about the future I mean the outlook is not great, but it’s improving, our PLS and billing is improving and it’s higher than it was in Q3 that’s what I can say for us and we’re seeing the same thing in across the board in Europe and Asia in particular.

So again we see healthy stock in between the Asia particularly around three months, two and a half to three months and that’s pretty good. That’s pretty good for where we were. So that the image is burned off, last year second half and in particular, and I think North America is in same position. Our turns are good. There are some problems with the (inaudible) guys they kind of over stock to – but they’ve suffered from about a year with a lot of overstocking, but they are not significant in the fulfillment process. They’re more in the kind of sampling and new product introduction process.

So some of them really higher stock, but that’s a global issue, because they service global customers. But, yes and we’re quite about that. I think obviously the cycle time (inaudible) significantly as a company in Q4 obviously deliberately, because the market situation and the cycle times are okay. I mean, they are pretty good. They are coming; they were coming down at the end of the last year. Of course, with the exception of the deliver process of destocking ourselves and getting inventory out manufacturing and, but now cycle times in some quarters are quite long. So there are short lead times in fulfillment orders coming in, which were struggling to fulfill.

So, again customers didn’t foresee maybe some upside they’ve seen in set-top box, in particularly one way. We’ve seen some upsides in that business within cable in Latin America and so and so forth. So emerging markets driving some of that, because they’re still growing quite well. And so, those types of markets where this digital CMOS is involved, we know the cycle time is never below 12 weeks to 16 weeks because of the complexity of the kind of products we’re dealing with. So they’re not coming down. They are still typically around 16 weeks. Worst case stage, the worst we’re really seeing in those cycle times, the digital CMOS is around 20 weeks when the market are really going down drastically, around 16 weeks a month.

Simon Schafer – Goldman Sachs

Okay. Great. So maybe we can talk a little more ST divisional specific and then we start on the MEMS business, just because I think there are a number of people in this audience who had advanced them to talk about some very big aspirations in specific at big OEM enhance that?

Bob Krysiak

One of my favorite customers you mean.

Simon Schafer – Goldman Sachs

One of your favorite customers. They’ve been talking about that for some time, but for whatever reason and I think that was also evidence in their Q filings. They’ve actually seen a good amount of increase in ways of procurement and so on.

Bob Krysiak

Right.

Simon Schafer – Goldman Sachs

So any thought as to how sustainable your competitive edges in MEMS. You’ve done great in innovating that product really…

Bob Krysiak

Absolutely it continues.

Simon Schafer – Goldman Sachs

But how sustainable is that and what are you doing to try and keep…?

Bob Krysiak

We think it’s very sustainable. And of course we talk to customers all the time everyday, okay. And (inaudible) on a great job in publicizing itself did a great job last year, same thing in last year, same thing this year. And of course what we don’t like by the way is people using our IP, because there is an issue with us and in that sense in particular on IP when you bring that. I should warn people about that and I think they are truly aware of it and that’s an issue. But in terms of growth, we still see the growth in innovation, in gyros, physical size, more features, less power, more intelligence and we see a variety of different products coming this year.

We saw the introduction, the first introduction of MEMS microphones for us last year where we shipped 60 million units last year. We will more than outperform that this year, okay, and of course we sold the precious environmental sensors to our production last year as well and again you’ll see those growing into line this year as well. So I think we are diversifying our products, we are diversifying our customers. We are basically of course different competitor as you would expect, but we see no ending signs in terms of our growth.

Of course we face competition from the likes of our friends at Invensense, but again, once again we found some legal issues and disagreements amongst ourselves, but we don’t see any reason to panic about what’s happening in the marketplace where we’ve no indications from our customers if we’re losing share. Of course we do when someone lose some in certain markets and Invensense is one of the competitors we faced, but not the only one. And, but again, as I said, we are diversifying our products. We’re building individual hub-based solutions for Windows 8 platforms, of course the platforms we already know and hubs for audio, environmental centers and for all those motion in MEMS and those hubs are very important growth prospect for us.

The traction there is huge. I think we had in gyros last year from [ours] 60% market share. The next year is competitive where we had less than 10%. So I think the momentum is with us. I don’t think it’s going to disappear tomorrow. I’m not saying we won’t lose some share at some point. It’s inevitable. At some point we can’t be the leader in everything, but right now we are meeting the market needs, we’re meeting our customers’ needs despite what the competition says of us. Honestly we are very, very confident about this business, very confident.

Simon Schafer – Goldman Sachs

Okay. And maybe you can talk about the digital business a little bit. You are losing money in that segment and one of the things that you changed last year was that to take in good amount of expertise and headcount away from the ST-Ericsson joint venture and you brought those guys back in-house for product developments.

Bob Krysiak

Right.

Simon Schafer – Goldman Sachs

But talk to us a little bit about the roadmap in apps processes in TV and consumer electronics and anchor it really? I mean, it’s business that is very quick designed and cycled. It’s (inaudible) you do need to be in that business? Do you have a credible plan to bring it back to profitability?

Bob Krysiak

Absolutely. I think if you, the set-top box business was stand-alone and we don’t break it up. It’s is doing well in terms of profitability. I think it has great prospects. We’re looking for share gains in North America to recover our position of the past. So with our joint venture we had previously with Scientific Atlanta, that collaboration, North American cable with The Gateway and client boxes. We have good positions in markets in products with that. We are certainly number one apps worldwide in digital broadcasting outside of North America and we see high growth and (inaudible) into the satellite, China Cable and other emerging markets and of course with the World Cup and the World Cup and Soccer Cup and Olympic games coming in Latin America there is a fever in infrastructure conversion from analog to digital in those markets, which obviously we’re going to play a big role in. So we see great opportunities there.

The TV business, which is one of the areas what we had I mean a kind of, we signaled last year that we would not participate in the general market and TV, but we do specific collaborations with customers, where they did mostly our software and we provide you an IP or chipsets for them, customer by customer, case by case. So we weren’t going to stay in the TV business and other merchant provider to all platforms. We said we wouldn’t do that, let’s what we stop really in second half of last year and Chris reduced our expenses in that space and I think we’ve reduced our expenses overall by in the digital area by about $150 million by record. Okay, we’re on pass, on track to do that.

So in terms of the app processor platforms of course, both from the microcontroller point of view, which is a very successful business for us. We’re well based, we have armed in the new set-top box chipsets ahead of the game and ahead of the competition, higher performance, multiple [colors] and of course we have apps processors in for our AC customers, A15 and the Atlas product, the 64 bit product. So we decided last year to put that together for infotainment infrastructure set-top box and our customer engagement program, if our customers want to using our apps processors and significant IP that we have around video processing or apps processor platforms, we would engage with customers on the case by case basis, a little bit like TV.

We weren’t out there to do what NVIDIA or Marvell does with the standard offerings in terms of multi-core application processors like mission of ST-Ericsson was, but we have the IP and capability and we do have some engagements – and a strong interest particularly around the area this technology may have heard of starting about FD-SOI line, which is getting a lot of interest from the marketplace major customers, portable device manufacturers, gaming platform vendors, ASIC customers, big ASIC customers and even competitors extremely interested in this technology.

And its every week goes by engagements interesting high level engagements in participating and using this technology either through ourselves through our customers or through global foundries are which we recently licensed. I think on the digital business, I think we’ve taken some steps on the TV business, which became bloody, I think of course bloody for the TV manufacturers, particularly in Japan and I said we’ve decided that we won’t produce an open platform with all the R&D insensitive you’ve expect. And you know it wasn’t about CapEx little more R&D expense. And we rather focus on the higher growth areas particular as said set-top boxes and digitalizing where we’re growing and most of our growth is in North America.

Simon Schafer – Goldman Sachs

Right.

Bob Krysiak

Which is good for me.

Simon Schafer – Goldman Sachs

All right. But I guess what you’re saying is that there is no really hint of any consideration that business isn’t core to what STMicro do in fact….

Bob Krysiak

No.

Simon Schafer – Goldman Sachs

You would consider part of the platform.

Bob Krysiak

Yes absolutely. And there is reason why it can’t you know it was getting…

Simon Schafer – Goldman Sachs

Kind of any prospect for any sort of timing in terms of returns profitability or…

Bob Krysiak

The other thing we’ve indicated I think the management distribution level the group level is under huge pressure they go and do and I think Carlo on a CEO he is absolutely intensifying his efforts on the margin and profitability all those divisions so far on the scrutiny, but I think we’ve got great hope that we’re going to do it, because the design wins in (inaudible) sorry the momentum we have in the marketplace in design wins both in our Class 2 products and our high end product is there.

So it’s getting into production now. The design wins are down or design wins are underway. So significant engagements and they’re going to production. It’s now getting to introduction. I think the game will change without doubt. And plus in our 20 nanometer and below technologies for ASICs. We’re having a lot of success in the last few years with ASIC customers and infrastructure. So we’re very pleased with that that will also contribute significantly in the coming years. It takes time to these are very complex for you devices where design times are two years, but some of those will go into production in second half. Some of our ASIC businesses in the second half will ramp into production. So we’ll just start to see the benefit of that and certainly next year should be a different year.

Simon Schafer – Goldman Sachs

Right, understood. You talked to us a little bit about automotive. You’ve obviously yield when you look at your production partners, your customers production runs that’s keep on coming down and at the end of last year, but then you actually gave guidance for Q1 that is significantly above seasonally. You guided up revenues sequentially also. Why you saying that was there big turnaround in that revenue line?

Tait Sorensen

Well, of course what happened in 2012 was, first half was pretty good for automotive and then there were two factors. One was in the second half. One was obviously European automakers and Germany in particular slow down, which we wasn’t anticipated per se and the other one was the Japan 3 returned from the 2011 crisis. So they gain share.

Simon Schafer – Goldman Sachs

Okay.

Tait Sorensen

We have exposure that you find with Japanese customers [of course], but not as big as the European customers obviously. So we gained a little bit, but obviously they took share from some of our North America and European customers. And so this year what we’re seeing is, first of all at the end of last year, we saw the inventory, the days of inventory were higher then we would like its comfortable but that’s come down towards the end of 2012, and so the market in North America for example is growing again, okay. That’s one factor. The other factor is Japan and Asia is growing again, all right in automotive area and so, again we’re seeing some uptick in the marketplace.

Europe is kind of flat and it’s little over capacity as you know in car manufacturing row, but nonetheless our major customers are growing and I think that’s the reason for the growth we’re seeing. It’s not in the areas of P&D these are the kind of products, but is in some in dash products, amplifiers, audio devices, satellite radio technologies, they’re growing fast this year and next year. We expect this growth significantly as we have a very good position in those market places and very high share. So, I think we’re comfortable with the growth factors we’ve seen this year.

We expect to be single digit of course, growth this year is going to be double-digit in automotive, but certainly heavy growth. But, last year we expected to be single-digit, but the second half was disappointing.

Simon Schafer

And any idea how that split up between unit, growth and, just that you know, compound growth?

Bob Krysiak

Yeah. I think it’s a little bit both, of course it helped us when Germany was exposing too much of growth or (inaudible) due to China because the content was much higher so, if we saw the hiring cars is much more literally content. If we saw the China, of course the content in automotive is much lower with the exception of car radio business, which is very high. But, now in terms of mixes, still it’s based upon power, train, safety, body electronics and audio devices are main drivers this year. I know particularly which is outstanding or I would say there is growth across the board.

Simon Schafer – Goldman Sachs

Right, understood, good. And actually you mentioned the Japanese customers but far together is with more much broader ST in terms of currency. Could you just remind us still what your customer exposure is and whether you see any meaningful impact from the yen move?

Tait Sorensen

Daily seeing we are affected by the yen. We have operating expenses inside Japan, we don’t manufacture in Japan which is one good thing. One less problem. But it’s expensive but sales marketing effort, is technically poor effort, which is relatively small in Japan. We only have a few hundred people there. So our exposure is not very high. Okay.

Simon Schafer – Goldman Sachs

Yeah, I’m thinking more from a competitive pricing point of view.

Tait Sorensen

Yeah I know –

Simon Schafer – Goldman Sachs

You are seeing much there.

Tait Sorensen

No initially…

Simon Schafer – Goldman Sachs

Or lead times are long but you are not going to…

Tait Sorensen

We are not worried about enzymes and issue. Most of your contracts for next year, most of the contracted business long-term contracted automotive were big customers. So it’s not so volatile, the business in Japan for us is not distribution, it’s not short-term, it’s not commodity either.

Simon Schafer – Goldman Sachs

Yeah.

Tait Sorensen

It’s not going to suffer from there.

Simon Schafer – Goldman Sachs

Okay, let’s talk about your Power Discrete business a little bit. That was one of the segments that really got hit hard by your Nokia exposure. Most of that I think when car was presented took a few weeks ago, he was saying well, now little back finally of course, is going to wait, but still that participation in the volumes is less too with significant factory under absorption particularly in Power Discrete. So what are the top products that can really pick up the sack and that can drive utilization rates back to level where that business can be sustainably profitability again?

Bob Krysiak

Well of course the major is protection devices and some of the new internal technologies which are driving the growth for us. And it’s a customer diversification of course, I think that business and projects reach one area but certainly was exposed to Nokia, too early exposed. But now we have been diversifying our customer base and product portfolio. So we receive that in terms of iPad, these integrations faster that active devices.

You the trust has risen in Asia and North America where revenue got good success there. So we are growing here with phone manufactures, with phone manufactures, tablet manufactures et cetera and consumer electronic companies and of course the other thing we are doing is also introducing new products like we said our antenna booster, where we have this PTEC technology which is for, which helps to reduce power and the range of the antennas from the base station, which is becoming fundamental to the mobile phone and, they were having some design wins there in North America and we expect to get more traction in the marketplace.

So, diversification in products, the reservation of customers, we’re using the know-how we leverage inside in Nokia course and developments we had there into the wider market. And we’re having a lot of success, which just takes time to get out like customer base, for one big customer with large volumes to maybe smaller customers or increase or design effort into the big customers, convincing them that this is the right technology for them because we have the leading hedge, what we call protection in products without doubt in the word, the iPods technology is the world’s best in protection and suppression inside. In each mobile phones, smartphone, you got 30 discrete protection devices and, we can put them onto a single subsidiary, make it very small as of the size of the form factor of phones get smaller with pressure from the industrial designers that type of technology may come as critical and that’s what we’re seeing. So, we will see. We will turn it out. And of course, we’ve also focused on new rectifiers, silicon carbide devices for more efficient power suppliers, which are coming from the same factory of same kind of hit by the Nokia impact, so many products.

Simon Schafer – Goldman Sachs

Yeah. So, when we put it all together, you guys actually put out some relatively specific goals in terms of operating profitability for the core residual asset, if we just ignore ST-Ericsson and will come back for that one. But, the 10% figure that you guys have communicated, in our creditability is that that over the next 12 or 18 months. Any indication of to what sort of revenue line you’ll have to achieve?

Bob Krysiak

Yeah.

Simon Schafer – Goldman Sachs

And how quick that might happen?

Bob Krysiak

When we kind of – the monies, and otherwise money for expenses is we said we want to get probably wants us to land in Q4 this year at around $600 million to $620 million of expenses close to ST-Ericsson and so Q1 of 2014, our objective is to obviously with the growth in new products is to saturate our manufacturing machine and have the building cost of course to market. The second half of last year hasn’t helped anyone including ourselves. But I think our expectation is about $1.9 billion, $1.95 billion. We’ll saturate our manufacturing machine, no under loading cost and you know our sales from last year, okay.

So anything above $2 billion, we start just to generate operating profit as you can imagine and that’s why we don’t see it as a huge target to avail that in the mid-term objective of 10% to 14% NOP, and again, it’s pretty engaged on several things. One is seeking our expense target this year in Q4 and I think there is a very strong plan inside the company to do it and then of course the other thing is we know the model that needs to be to [save] our manufacturing machine and we can see the growth of the market that we got affiliate with. So I think we’re comfortable that we can do it, okay. It’s not going to be easy, but I don’t think it’s outweighs the total. It’s with inside.

Tait Sorensen

Yeah.

Bob Krysiak

And most of the analysts by the way, some people say it’s too easy, but they would.

Simon Schafer – Goldman Sachs

All right.

Bob Krysiak

So everything we said so far doesn’t include ST-Ericsson. So let’s get to that topic.

Simon Schafer – Goldman Sachs

Well, I mean, when you guys basically have told investors is that you want to exit this joint venture and you are going to do so by the third quarter of this year, I think that’s the official goal. But then you joint venture partner, Ericsson of course has communicated two things. Number one they have said that they, I think this asset has some strategic merit, which basically means that they feel like they should be supporting it, but at the same time they’ve also communicated that they don’t want buy your half. So what does that leave you with, how you’re going to actually exit this joint venture?

Bob Krysiak

Yeah. I think the plan is that we’ve communicated, obviously as you say, exit by Q3 and of course, Carlos is absolutely drawing line in the sentence from end of that period. We’re going to stop funding it and our partners know it. There are a number of options on the table in the short-term, in terms of actions that might be taken by the two companies. We can’t say what they are, but they are not going to be dragged out forever. Carlos made it made very clear that he is going to make more aggressive moves to actually reduce the funding and support for this company. And he is given an indication including the $100 million that we will spend on ST-Ericsson this quarter that the overall cost this year, including restructuring, will be in the range of $300 million to $500 million and it won’t go beyond that. That [cent] is being flex planned and that’s it. And that includes, again, support for the company in this quarter.

So I think we’ve controlled funding. We know what we need to do. I think there is an aggressive plan inside [become] to resources, people and options, and of course an IP, retention and, again, there are a variety of options, one of which doesn’t include giving all back to ST-Ericsson.

Simon Schafer – Goldman Sachs

Right.

Bob Krysiak

So we don’t want to. But nonetheless there are number of options that we obviously we can’t discuss them right now.

Simon Schafer – Goldman Sachs

And just to go by the $300 million to $500 million from estimated max liability, does that also preclude that you might take more people back in-house, because one of the things that you did last year, of course is just, you just decided to take up a bunch of the ASIC guys, bunch of the outspoken people back in-house?

Bob Krysiak

Everything, includes all the options that we’ve considered, all options with the exception of obviously on the balance sheet (inaudible) ST written down to zero. So there are options. You can imagine obviously that to include, but we’re not taking into account any other factors although there’s a range of which, if we have to take certain people back in into…

Tait Sorensen

The balance, the $500 million would include everything, yes.

Bob Krysiak

Yes. Absolutely, absolutely, but what Carlos also mentioned is, well, is immediately, I think the benefit maybe of, for example, the power management activity, improving productivity and gains quickly there where we focused on Nokia in the past in particular. We have absolutely world-class power management activities inside the company and technology. We can now though hunt for products, for sockets, keeping power management in Phoenix for the mobile market and we have some traction already, okay. This is where we started. So I think we’ll be pretty successful. So even if we take some people back that’s well going to support our initiative that much.

Simon Schafer – Goldman Sachs

Yeah, understood. But ST-Ericsson of course have communicated well in revenue growth for the past quarter and they are facing a pretty significant drop off. Some of that is seasonal, but clearly it doesn’t help when one of your parents have effectively announced a discontinuation of funding. So isn’t that a problem? Could you not be facing some significant factory under absorption of the ST-Ericsson revenue contribution, continues to see a much quicker decline than perhaps you would have expected before? Could that really affect your underlying gross margin, your gross profitability for the [quarter]?

Bob Krysiak

I don’t think so. I’ve seen (inaudible) again. It does depend on the options in the end of the ownership of the ongoing business and revenue and how long the lifetime of those products go. Of course ST is inevitably the manufacturing machine supporting them. So we have an input there, but I think as well as talking to the market, we’ve also spoken extensively to key customers. So of course the customers understand our situation and the situation we put ST-Ericsson in. And of course we continue to support the manufacturing of those products. Now the eventual shape or otherwise depends on the model and the decision that’s made by the two management and again may not be respected on that, but that’s the dependency and we’re like those.

Simon Schafer – Goldman Sachs

Right. But the end of the day, I guess when you guys think about your margin goal of the 10% figure that you called out, that always you bear in mind that you might face some significant under-absorption charges perhaps as part of the significant revenue phase out?

Bob Krysiak

I think what we have done to mitigate that because obviously we – first of all, one of the key manufacturing area is you don’t want to really affect the business. That significantly is obviously the growth facility in our 12-inch facility and we’ve done there is, have necessity by the way is put other products including imaging devices, which were seeing growth interaction in diverse markets, not just wireless and higher margin products also replaced things like our MEMS basics in the 12-inch facility and they are growing, as we said, significantly.

And the other one is one of the key areas, obviously our digital ASICs is still growing, okay. Our digital ASIC business is set-top box that is picking up the slag, okay. The ST-Ericsson might have taken if it was slightly more successful. So, I mean, we know everybody is concerned. We’re taking (inaudible) Carlos made a very important bow move and also included things like standard microcontrollers with embedded flash technology moving into 12-inch, makes them incredibly more competitive. And already they are very attractive in some of the margin. So our STM32 family are great close in that family. We’ll also be moving to 12-inch. So those products, imaging, microcontrollers and digital consumer and MEMS ASICs will take up the slag. It would have been taken by ST-Ericsson had it been a bit more successful. So we mitigate them to some extent, okay.

Simon Schafer – Goldman Sachs

Okay. Okay. And I’m just going to open it up to the audience and people don’t ask questions we can – we actually will be staying here for the breakout as well. But any other questions from the audience?

Question-and-Answer Session

Simon Schafer – Goldman Sachs

If not, I think we’ll continue here. We’ve actually a famous room for the breakout session. Thanks again guys for doing this. We appreciate it.

Bob Krysiak

You’re welcome.

Tait Sorensen

Thank you, Simon.

Bob Krysiak

Thanks, Simon.

Simon Schafer – Goldman Sachs

Thank you.

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Source: STMicroelectronics' Management Presents at Goldman Sachs Technology and Internet Conference 2013 (Transcript)
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