NEW YORK " STMicroelectronics NV became a top-five semiconductor company by focusing narrowly on a core group of 30 customers, most of them among the industry's largest. But the company quietly ditched that policy recently when president and CEO Pasquale Pistorio, determined to move the Geneva company out of what he termed the "zone of instability," told his managers that ST would start servicing hundreds and possibly thousands of new customers.
It's not that ST has suddenly become enamored of the mass market. Pistorio insisted in an interview last week at the company's New York office that the company will not become a purveyor of commodity components.
But the emergence of new markets and players (notably in the Far East), the declining revenue base among many big OEMs and ST's desire to rise above the chip industry's consolidation are forcing the company to cast a wider net. "The seven to 10 IDMs [integrated device manufacturers] that would remain as the industry consolidates would each have an IC market share above 5 percent-some, like Intel, would be above 10 percent-and then there are the companies in the 0.5 percent to 5 percent range," Pistorio said. "These [latter companies] are the ones in the instability zone. Today, many of us are in that zone. [But] once you pass 5 percent, you enter the zone of stability . . . you have the dimension of scale to compete in any chosen area."
It shouldn't take too much for ST to get in the zone: Analysts estimate its share this year at 4.5 percent. ST hopes to clear the 5 percent hurdle by 2007. That will require tapping new customers, Pistorio said.
To so do, the company is broadening its engineering and tech teams, along with its sales and marketing operations.
Filippo Faccenda, an analyst in the Milan, Italy, office of Banca Leonardo SpA, said ST can secure a 4.8 percent market share in 2005, "thanks to its large product portfolio, which makes the company less volatile and more oriented toward application convergence."
By the end of 2005, the company will likely have a new CEO. Pistorio, now 67, insists he will step down when his contract expires in the spring of that year. If Pistorio has his way, his successor will preside over a vastly altered company from the one Pistorio now steers.