Saying 1992 represents the beginning of a rebound in the semiconductor industry, Franco-Italian manufacturer SGS-Thomson Microelectronics NV reported that its non-consolidated results show a gross operating profit of $127m and net profit of $3m. For its 1992 revenue figures, the company reported the figure cited by Dataquest, of $1,605m, which represents an increase of 12% over 1991. Pasquale Pistorio, SGS-Thomson president and chief executive, said the company’s final figures should not vary much from the preliminary data. Now that the rationalisation process is over, we will have a reduced impact in terms of restructuring costs, and with the new equity, less impact from interest payments, so our 1993 results should be substantially better, Pistorio said. The company’s remaining 15 manufacturing sites are sufficient, Pistorio said. Although some people might say 15 is too many, they are very specific in what they do, he added, noting that three plants were taken off the books in 1992. Pistorio noted that SGS-Thomson has doubled its sales and improved its world ranking to 13th from 15th since the merger in 1987, despite a difficult economic climate. In 1987, constituents SGS Microelettronica and Thomson Semiconductor had combined sales of $850m. Although the company reduced its debt to $808m at the end of 1992, from a total at the end of 1991 of approximately $900m, it is up from total debt at the end of 1987 of $671m. The debt has increased, but not so much if you consider that we financed the merger ourselves, Pistorio said. He estimated that the company has spent $350m in the last five years in costs associated with the merger. As for the losses during the five years, Pistorio said, We have had quite a positive operating performance; it just wasn’t enough to pay all of the restructuring costs and interest payments. The main external determinants of SGS-Thomson’s performance over the next five years will be the $500m in new equity it expects from its shareholders, and the market growth. SGS-Thomson’s shareholders have also promised to provide approximately $500m for research and development over the next five years. Questions have been raised in the Italian press recently about the willingness and/or ability of IRI-Finmeccanica to meet its half of the equity obligation. Further complicating the issue was a report in the French press this week saying that authorities in Brussels are talking about further investigating the recapitalisation project.

Evaded

Pistorio evaded questions about when the company would receive the first equity payments, saying it was up to its shareholders to comment. He would say only that I’m sure it will arrive. Without specifying exactly how he would use the new equity, Pistorio said it will enhance our ability to invest. Jean-Philippe Dauvin, SGS-Thomson’s corporate director of market research, predicted that the industry will grow approximately 12% in 1993, and 10% every year for the next five years. Pistorio said the US market has been accelerating since the fourth quarter 1992. As further evidence that the semiconductor market may be turning around, Jim Eastlake, associate director of Dataquest’s European components group in Denham, said consumer electronics companies have re-entered the market in the last six weeks after a hiatus of approximately 18 months. Inventories are so low, they have to replenish; even some of the military companies are coming back, he said. SGS-Thomson’s product mix has shifted in the last five years toward higher-end, more value-added products with higher margins, Pistorio said. Overall, the company is still aiming for a 5% share of the world semiconductor market, which is almost double its current 2.7% share. While stopping short of predicting it would reach the $7,000m to $9,000m in revenue necessary to claim 5% of what will be then a $170,000m market, Pistorio said doubling its revenue in the next five years is nothing; we did it in the last five with very few financial resources.