As previously disclosed, the moves reposition the Company’s cost structure in the competitive environment of the industry, characterised by the slowing growth rate of demand and the continued weakness of the dollar, which has a special impact on European-based companies. Within this challenging environment, ST has previously announced a series of wide-ranging initiatives aimed at improving the Company’s competitiveness and financial performance through accelerated innovation, a reduction of costs, and the broadening of its customer base.

In addition to the prior measures, the Company has presented today principles of the initiatives which will bring the cumulative reduction of its workforce in Europe - out of a total of 3,000 outside Asia - to 2,300 jobs by mid-2006, including the non renewal of some temporary positions.

The company plans to reorganise its European activities by converting 6 inch production tools to 8 inches, in pursuit of the programme already undertaken, optimising on a global scale its EWS activities (wafer test), harmonising its support functions, reducing its costs and rationalising its activities (outside of manufacturing) and disengaging from certain activities. This project must now be submitted to the workers representatives in each of the countries involved.

STMicroelectronics is moreover committed to do everything in its power to minimise the social impact of this reorganisation. This project, on which workers’ representatives will be consulted, will be carried out in accordance with the social traditions of STMicroelectronics and, in particular, whenever possible, by putting in place measures that favour voluntary redundancy (early retirement measures, job creation schemes, individual projects, transition to part-time work) and by giving itself the time needed to present and discuss practical conditions for the implementation of this project with workers representatives.

STMicroelectronics intends to remain a key player in European research: in 2004, ST committed more than 1.5 billion dollars (representing 17.5 % of revenues) to research & development, of which 80 % was in Europe. At the European level, nearly 30 % of its personnel work in Research & Development.

STMicroelectronics further reaffirms its commitment to remain an integrated technological and industrial company, assuring in Europe research together with development and the manufacture of added value products. STMicroelectronics therefore intends to pursue the modernisation undertaken on its European industrial sites, like Agrate, Catania, Crolles, Rousset and Tours.