Chip Expansion on a Budget: STMicro CEO Spurns Big-Money Deals

  • $1.4 Billion yearly R&D enough for broad-range strategy: CEO
  • Qualcomm unveiled $47 billion bid for STMicro rival NXP

Expanding beyond smartphones into serving carmakers is costing Qualcomm Inc. $47 billion, in the largest deal in chip history. STMicroelectronics NV’s chief executive officer says he needs a budget about 3 percent of that.

To tailor to customers from Apple Inc. to Robert Bosch GmbH and upkeep a broad range of products from smartphone sensors to digital components for cars, STMicro’s research and development budget of as much as $1.4 billion a year is enough, CEO Carlo Bozotti said in an interview Thursday. While his company has “the capital structure to do important M&A,” deals aren’t a priority, he said.

“Consolidation is all about mass of research and development,” Bozotti said at the company’s offices in Montrouge, near Paris. “We want to remain a broad range company, and our R&D budget is compatible to support that.”

Qualcomm said Thursday it’ll buy NXP Semiconductors NV, the biggest supplier of chips used in the automotive industry, in a deal aimed at speeding up expansion into new industries and reducing dependence on the smartphone market.

Under Bozotti, STMicro has spent the past 6 years refocusing on new customers including carmarkers. The CEO was forced to look outside the company’s main revenue stream after phonemaker Nokia’s troubles translated into a massive drop in sales and years of restructuring at STMicro.

STMicro said Thursday it’s well positioned to achieve growth this year and reported an improvement in third-quarter sales and gross margin. Its shares climbed as much as 11 percent to 8 euros, the highest level since April 29, 2015.

Asked about his succession, the 63-year-old Italian manager declined to comment. According to people familiar with the matter, the chipmaker is struggling to name a successor to Bozotti -- more than six months into the search -- amid disagreements between its French and Italian state shareholders.

“We’re focusing on the execution,” Bozotti said. “Our priority is on organic growth, cost discipline and translating that into financial leverage.”