STMicroelectronics : Q416 Earnings Conference Call Remarks

Q4&FY16 Earnings Live Webcast Conference Call Remarks Carlo Bozotti, President and Chief Executive Officer STMicroelectronics Thursday, January 26, 2017 FINAL

Welcome and good morning to everyone.

One year ago we shared with you our focus for 2016: first, sales growth, leveraging our strategy centered around Smart Driving and Internet of Things; and second, improvement of our operating profitability through the combination of revenue growth, gross margin expansion and operating expense control.

The start to the year was challenging, reflecting both a soft market and specific product transitions. However, in May 2016 at our Capital Markets Day, we announced our objective to restart year-over-year revenue growth in the second half of 2016.

We met our goal: with the third quarter making initial progress with year-over-year revenue growth of 1.3%; and then, more significantly, in the fourth quarter, where revenues increased 3.5% sequentially and 11.5% year-over-year.

The key word to describe our performance in the fourth quarter is "synchronization". First, year-over-year growth was broad-based - all

product groups, except discontinued businesses, contributed. Second, looking at our fourth quarter sales performance by region of origin, we saw a synchronization in the growth for Asia Pacific, EMEA and the Americas, with all growing at similar double-digit rates.

Finally, our sales performance was also well balanced, both with key accounts and in the mass market. Point-of-sales performance at our distributors was particularly strong in the fourth quarter.

This synchronization across products, regions and customers is what we were strongly aiming for.

Growth in the latter part of 2016 did not come just from more favorable market dynamics: execution on our application focus and on our product strategy were both key to this revenue turnaround.

In Automotive, revenues year-over-year increased about 12% for the fourth quarter and about 5% for 2016. The average ST content in a car has definitely increased. To give you one example: today, in some of the latest and more advanced car models in the premium segment, such as the E Class from Mercedes, there are over 800 components from ST.

In our focus on safer driving we had a number of achievements for ADAS- related components. These include a next generation ADAS processor, in cooperation with Mobileye, featuring level 5 Autonomous driving capability

and based on 7nm technology from foundry; and several design wins with our new 77GHz radar solutions.

Using our technology to make driving greener, we had multiple design wins for our Silicon Carbide products for on-board and external charging systems as well as for traction applications. We also had many awards with our latest generation of smart power technology, both in Japan and in Europe.

ST is also bringing personalized entertainment and connected experience into the car in an easy to use manner, while enabling secure communications between vehicles and the infrastructure.

In Audio and Infotainment, our recently launched Accordo 5 multimedia processor is already achieving market traction in Europe, Japan and China. This new product enables superior image, audio, and video processing for all classes of cars. We also signed a strategic agreement with a market leader for Audio amplifier products targeting the high-end premium sound market.

Finally, we landed important wins in vehicle-to-vehicle communication with multiple car makers in Europe, Japan and America.

Power Discrete results in 2016 were affected by the weak peripheral and PC market, with full year sales decreasing 1%. Recovery was however visible in the second half of the year, particularly in the fourth quarter with sales increasing about 14% year-over-year. On top of silicon carbide for automotive and non-automotive applications, among the many new discrete products introduced with which we had success during the year, I would like to highlight our protection devices for smartphones.

Moving to Microcontrollers, during 2016 we delivered year-on-year growth of 2.3%, with consecutive sequential growth throughout the year after Q1. This growth was driven, once again, by our general purpose STM32 family, where we recently shipped the 2 billionth product. This market traction is enabled by our long-term design-in activities, our introduction of innovative products -now totaling over 700 STM32 part numbers-, as well as our ever broadening ecosystem. We introduced a new high performance STM32 series, which delivers record performance and advanced secure services for the Internet of Things. We extended our ecosytem offering with new development tools, including a LoRa kit, a USB Power Delivery middleware stack and many new boards.

Here I would like to mention that we recently passed the milestone of 1 million STM32 development kits shipped to the market. This is a key