Europe’s efforts to revitalize manufacturing by bringing production back home would get a boost from a weaker euro, according to the chief executive officer of STMicroelectronics NV (STM), the region’s biggest semiconductor maker.
“We like to see coherence, but today there is an important divergence in macroeconomic policy between Japan and the U.S. on one side, and Europe on the other,” Carlo Bozotti, who has headed Geneva-based STMicroelectronics since 2005, said in an interview. “Japan and the U.S. printing currency doesn’t help when you have an important cost base in Europe.”
STMicroelectronics is at a disadvantage to competitors such as Intel Corp. (INTC:US) and Texas Instruments Inc. (TXN:US), Bozotti said in Paris today. With most of its costs incurred in euros even though the major chip customers are outside Europe, an exchange rate closer to $1.20 to the euro, compared with $1.30 used in STMicroelectronics’ financial forecasts, would help bring more manufacturing to Europe, the CEO said. The spot euro-dollar rate was $1.31 at 3:20 p.m. in Paris.
STMicroelectronics has 20,000 employees in France and Italy. About 8,000 people work on manufacturing sites in France, Italy and Malta. Keeping factories in Europe, close to the company’s research centers, allows STMicroelectronics to get more sophisticated products to the market faster, Bozotti said.
In March, STMicroelectronics and Ericsson AB agreed to split up their unprofitable wireless chip venture, cutting about 1,600 jobs as they divide the assets.
STMicroelectronics jumped 4.9 percent to 7.50 euros at 3:55 p.m. in Paris, bringing the stock’s gain this year to 40 percent. The company has a market value of 6.8 billion euros.
As Europe looks for ways to stimulate growth to lift it out of an economic slump, debates have emerged over how the region can grow manufacturing and convince companies that have moved production abroad to make more of their products at home.
Regulators and politicians have posed the question of re-industrialization, particularly focusing on the electronics industry.
Neelie Kroes, the commissioner responsible for setting digital policy within the European Union, last month unveiled plans to stimulate innovation in semiconductors, arguing that growth there could spur a broader economic boost and create jobs in industries ranging from automotive to energy.
Kroes set the goal of doubling European chip production by 2020, to around 20 percent of global production.
“Others are aggressively investing in computer chips and Europe cannot be left behind,” Kroes said in a May 23 statement. “I want Europe to produce more chips in Europe than the United States produces domestically. It’s a realistic goal if we channel our investments properly.”
STMicroelectronics also competes with Japan’s Renesas Electronics Corp. (6723) and Infineon Technologies AG (IFX) of Germany. The French and Italian governments together own almost 28 percent of the chipmaker’s capital.
“Your state shareholders have been right standing by your side as long-term partners,” French Industry Minister Arnaud Montebourg said in Paris today. “You are proof that it’s possible to produce electronic products in Europe, proof that production, as well as R&D, can stay in Europe.”
To contact the reporter on this story: Marie Mawad in Paris at email@example.com
To contact the editor responsible for this story: Kenneth Wong at firstname.lastname@example.org