Should French ST Split From Italian ST?
The time may have come to turn the clock back 27 years to when SGS Ates of Italy and Thomson Semiconducteurs of France were separate companies.
In 1986, SGS’s CEO Pasquale Pistorio and Thomson’s CEO Jacques Noels began talking about merging their companies. In 1987 they sealed the deal.
Now, a generation later, the French and Italian parts of what became STMicroelectronics seem destined for different fates.
The Italian half has a profitable, slow-growth, low-ish margin business making discretes, analogue, MEMS and automotive ICs. It’s not a business that needs cutting edge technology, it does not need vast capex, it is highly cost-sensitive and it is reasonably protectable in the light of ST’s long experience and IP position.
The French half is engaged at the leading edge of the digital IC business with a facility in Crolles which is not far behind the best of the rest of the world in IC process technology. The French half has the promise of growing a huge business in digital ICs but its capex and R&D needs are also huge.
The French side of ST has aspirations to turn the IC world on its head by getting FD-SOI adopted as a mainstream process technology in competition with the general worldwide consensus to go with finfet processes.
Finfet is proving to be a difficult process but it promises high performance ; FD-SOI is a simpler process which delivers low power.
Subject to the approval of the China government, ST has inked a deal with the China foundry SMIC to provide volume FD-SOI wafers.
It may also do the same with Samsung which is currently one of ST’s foundries for bulk.
The French government is behind the French side of ST in its aspirations to become as good as the best in the world at IC process technology, and the EC support plans for IC technology are also backing the French side of ST in its ambitions.
The only snag is that the Italian side of ST doesn’t want to go down this French route of growing a digital business on the back of a process technology which has little surrounding ecosystem.
Italian ST gives priority to shareholders; French ST wants to build a cutting edge technology business.
Can these twin aspirations sit together in the same company?
Can a CEO be committed to both ST’s shareholders and to building a leading technology company?
Should we go back to 1987 and undo the SGS-Thomson merger?