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7
Ky
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-
K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-
16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Report on For
m 6-K dated Marc
h
24
, 2022
Commission File Numb
er: 1-1
3546
STMicroelectronics N.V.
(Name of Registrant)
WTC Schiphol Airpor
t
Schiphol Boulevard 265
1118 BH Schiphol Airpor
t
The Nether
lands
(Address of Princi
pal Executive Offi
ce)
Indicate by check mark
whether the registran
t files or will file ann
ual reports u
nder cover
of Form
20
-F or Form
40
-
F.
Form
20
-F
☒
Form 40-F
☐
Indicate by check mark
if the registrant
is submitting t
he Form 6-K in p
aper as permitt
ed by Regulation
S-
T
Rule
101
(b) (1):
Yes
☐
No
☒
Indicate by check mark
if the registrant
is submitting t
he Form 6-K in p
aper as permitt
ed by Regulation
S-
T
Rule
101
(b) (7):
Yes
☐
No
☒
Indicate by check mark
whether the registran
t by furnish
ing the information contained in
this
form is also th
ere
by
furnishing the in
formation to the Commiss
ion purs
uant to Rule
12g3
-2(b) un
der the Secur
ities Exchange Act o
f
1934
:
Yes
☐
No
☒
If “Yes” is marked, ind
icate below the file n
umber assigned to
the registrant in con
nection with Rule
12g3
-2(b): 82
-
Enclosure: STMicroele
ctronics’
20
21 Dutch St
atutory Ann
ual Report, including th
e 2021 I
FRS Statutory Accou
nts.
Contents
1.
MESSAGE FROM THE PRE
SIDENT AND C
HIEF EXECUTIVE
OFFICER ON T
HE FINANCIAL YEAR
2021
....
4
2.
CORPORATE OVERVIEW
..........................................................................................................................
6
2.1.
H
ISTORY
AND
DEVELOPM
ENT
OF
STM
ICROEL
ECTRONICS
..................................................................................
6
2.2.
S
TRATEGY
&
OBJECTI
VES
.........................................................................................................................
6
2.3.
O
RGANIZATI
ONAL
STRU
CTURE
...................................................................................................................
7
2.4.
P
RODUCTS
A
ND
ACTIVIT
IES
.......................................................................................................................
7
2.5.
S
ALES
, M
ARK
ETING
AND
D
ISTRIBU
TION
.......................................................................................................
7
2.6.
R
ESEARCH
& D
EVE
LOPMENT
....................................................................................................................
8
3.
REPORT OF THE MANAGING B
OARD
......................................................................................................
9
3.1.
S
TATEME
NT
OF
THE
S
OLE
MEMBER
OF
THE
M
ANAGIN
G
B
OARD
.........................................................................
9
3.2.
B
USINESS
OVE
RVIEW
&
PERFORMAN
CE
.......................................................................................................
9
3.2.1.
Results highlights for th
e year 2021
.........................................................................................
9
3.2.2.
Business overview
....................................................................................................................
10
3.2.3.
Key announcem
ents
.................................................................................................................
16
3.2.4.
Financial o
utlook: Capital investmen
t
......................................................................................
17
3.2.5.
Liquidity and
financial position
................................................................................................
18
3.2.6.
Financial risk man
agement
......................................................................................................
22
3.3.
R
ISK
MANAG
EMENT
AND
I
NT
ERNAL
CON
TROL
...............................................................................................
23
3.3.1.
Risk Manageme
nt
....................................................................................................................
23
3.3.2.
Internal Control
........................................................................................................................
45
3.4.
S
USTAINABI
LITY
.....................................................................................................................................
46
3.4.1.
Environmental Ma
tters
.............................................................................................................
46
3.4.2.
Labor and H
uman rights
................................................................................................
...........
52
3.4.3.
Anti-bribery and corruption
......................................................................................................
53
3.4.4.
Social and em
ployee matters
....................................................................................................
54
3.4.5.
EU Taxonomy
............................................................................................................................
56
4.
REPORT OF THE SUPERVISORY BO
ARD
...................................................................................................
60
4.1.
C
OMPOSITI
ON
OF
THE
S
UPERVISORY
B
OAR
D
................................................................................................
.
61
4.2.
M
EETINGS
A
ND
ACTIVITI
ES
OF
THE
S
UPER
VISORY
B
OARD
.................................................................................
64
4.3.
A
UDIT
C
OMMIT
T
EE
................................
................................................................................................
65
4.4.
C
OMPENSATI
ON
C
OMMITTEE
....................................................................................................................
66
4.5.
S
TRATEGI
C
C
OMMITTEE
...........................................................................................................................
66
4.6.
N
OMINA
TING
AND
C
ORPO
RATE
G
OVERNAN
C
E
C
OMMITTEE
..............................................................................
66
4.7.
S
ECRETARIAT
A
ND
C
ONTROLLERS
...............................................................................................................
67
4.8.
R
EMUNERA
TION
REPORT
..........................................................................................................................
67
4.8.1.
Supervisory board re
muneration
.............................................................................................
67
4.8.2.
Senior Manageme
nt remuneration
..........................................................................................
70
4.8.3.
Managing Bo
ard remuneration
...............................................................................................
72
4.8.4.
Share ownership
.......................................................................................................................
84
4.8.5.
Stock awards and optio
ns
........................................................................................................
85
5.
CORPORATE GOVERNANCE
.....................................................................................................................
85
5.1.
C
OMMIT
MENT
TO
THE
PRINCIPLE
S
OF
GOOD
C
ORPORATE
GOVERNANCE
...............................................................
85
5.2.
G
ENERA
L
M
EETING
OF
S
HAREHO
L
DERS
.......................................................................................................
87
5.3.
S
UPERVISOR
Y
B
OARD
..............................................................................................................................
89
5.4.
M
ANAGING
B
OAR
D
................................................................................................................................
90
5.5.
I
NDEMNIF
ICATION
OF
MEMBERS
OF
OUR
M
ANAG
ING
B
OARD
AN
D
S
UPERVISORY
B
OAR
D
.........................................
95
5.6.
R
ISK
M
ANAGE
MENT
AND
C
ONTROL
S
YSTEMS
...............................................................................................
95
5.7.
R
EQUIRED
IN
FORMATIO
N
A
RTICLE
10 T
AKEOVER
D
IR
ECTIVE
............................................................................
95
5.8.
S
HARES
W
ITHOU
T
V
OTING
R
IGHTS A
ND
S
HARES WHICH D
O NOT GIVE A
NY OR ONL
Y
A
L
IMITED
R
IGHT T
O
S
HARE IN THE
P
ROFITS OR
R
ESER
VES
.............................................................................................................................
98
5.
9.
C
ODE OF
C
O
NDUCT
................................................................................................................................
98
5.
10.
D
EVIATIONS
FROM THE
D
UTCH
C
OR
PORATE
G
OVERNANCE
C
OD
E
.......................................................................
98
5.11.
M
AJOR
S
HAREH
OLDERS
...........................................................................................................................
99
5.12.
S
HAREHOLDERS
’
A
GREEMENTS
..................................................................................................................
101
5.12.1.
STH Shareho
lders’ Agreement
...............................................................................................
101
6.
DIVIDEND POLICY
................................
.....................................................................................................
103
7.
CONSOLIDATED FINANCIAL S
TATEMENTS
................................
.............................................................
104
7.1.
C
ONSOLIDAT
ED
INCOME
ST
ATEMENT
..........................................................................................................
104
7.2.
C
ONSOLIDAT
ED
STATEME
NT
OF
COMPREHENS
IVE
INCOME
................................
...............................................
105
7.3.
C
ONSOLIDAT
ED
STATEME
NT
OF
FINANCIAL
POSIT
ION
........................................................................................
106
7.4.
C
ONSOLIDAT
ED
STATEME
NT
OF
CHANGES
IN
EQU
ITY
................................
........................................................
108
7.5.
C
ONSOLIDAT
ED
STATEME
NT
OF
CASH
FLOWS
...............................................................................................
110
7.6.
N
OTES
TO
TH
E
CONSOL
IDATED
FINAN
CIAL
STATEM
ENTS
................................
.................................................
111
7.6.1.
Corporate information
...........................................................................................................
111
7.6.2.
Basis of preparatio
n
...............................................................................................................
111
7.6.3.
Statement o
f compliance
.......................................................................................................
111
7.6.4.
Basis of consolidatio
n
.............................................................................................................
112
7.6.5.
Changes in acco
unting policies
..............................................................................................
112
7.6.6.
Standards issued but n
ot yet effective
...................................................................................
113
7.6.7.
Summary of significa
nt accounting
policies
...........................................................................
114
7.6.8.
Critical accou
nting estimates and judgm
ents
........................................................................
126
7.6.9.
Investments in
subsidiaries
....................................................................................................
131
7.6.10.
Business Combina
tion
............................................................................................................
132
7.6.11.
Property, plant an
d equipment
................................
..............................................................
133
7.6.12.
Leases
.....................................................................................................................................
135
7.6.13.
Intangible a
ssets
....................................................................................................................
136
7.6.14.
Goodwill
................................................................................................................................
.
137
7.6.15.
Other financial ass
ets and financ
ial liabilities
........................................................................
139
7.6.16.
Other non-current
assets
.......................................................................................................
156
7.6.17.
Inventories
.............................................................................................................................
157
7.6.18.
Trade accoun
ts receivable
.....................................................................................................
157
7.6.
19
.
Other receivables an
d assets
................................................................................................
.
159
7.6.20.
Cash and c
ash equivalents
.....................................................................................................
159
7.6.21.
Equity
.....................................................................................................................................
160
7.6.22.
Provisions
...............................................................................................................................
165
7.6.23.
Employee b
enefits
..................................................................................................................
166
7.6.24.
Trade accoun
ts payable, other payab
les and accrued liabilities
...........................................
171
7.6.25.
Significant c
ategories of income
............................................................................................
172
7.6.26.
Revenues
................................................................................................................................
172
7.6.27.
Segment
information
.............................................................................................................
173
7.6.28.
Expenses by na
ture
................................................................................................................
176
7.6.
29
.
Other income / e
xpenses
.......................................................................................................
176
7.6.30.
Finance inc
ome / costs
................................................................................................
...........
177
7.6.31.
Components o
f other comprehensive inc
ome
........................................................................
178
7.6.32.
Income ta
x
.............................................................................................................................
178
7.6.33.
Earnings per share
.................................................................................................................
183
7.6.34.
Related party
.........................................................................................................................
183
7.6.35.
Commitments, c
ontingencies, claim
s and legal proceedings
.................................................
186
7.6.36.
Financial risk manag
ement objective
s and policies
...............................................................
188
8.
COMPANY’S FINANCIAL STATEME
NTS
.............................................................................................
191
8.1.
C
OMPANY
’
S
S
TATEMEN
T
OF
FINANCIAL
POSITI
ON
.........................................................................................
191
8.2.
C
OMPANY
’
S
I
NCOME
STA
TEMENT
.............................................................................................................
192
8.3.
N
OTES
TO
C
OMPANY
’
S
FIN
ANC
IAL
STAT
EMENTS
..........................................................................................
192
8.3.1.
General
...................................................................................................................................
192
8.3.2.
Basis of Presentatio
n
..............................................................................................................
192
8.3.3.
Summary of significa
nt accounting
policies
...........................................................................
193
8.3.4.
Lease right-
of
-use a
ssets
........................................................................................................
193
8.3.5.
Intangible assets
....................................................................................................................
195
8.3.6.
Investments in
subsidiaries
....................................................................................................
195
8.3.7.
Other financial assets a
nd financial
liabilities
........................................................................
197
8.3.8.
Cash and ca
sh equivalents
.....................................................................................................
200
8.3.9.
Group compan
ies interest-bearing short
-term loans
...............................................................
201
8.3.
10
.
Ot
her Group c
ompanies receivables a
nd payables
................................................................
201
8.3.11.
Equity
.....................................................................................................................................
202
8.3.12.
Other payables and
accrued liab
ilities
...................................................................................
204
8.3.13.
Interest-bearing loan
s and borrowings
..................................................................................
205
8.3.14.
Other non-current l
iabilities
...................................................................................................
209
8.3.15.
Guarantees and c
ontingencies
...............................................................................................
209
8.3.16.
General and adm
inistrative expenses
....................................................................................
209
8.3.17.
Financial inc
ome and expenses
..............................................................................................
210
8.3.18.
Other income (expenses)
................................................................................................
.......
210
8.3.
19
.
Contractual o
bligations
..........................................................................................................
211
8.3.20.
Related party
transactions
.....................................................................................................
211
8.3.21.
Auditors’ fees
.........................................................................................................................
211
8.3.22.
Proposed cash d
ividend
.........................................................................................................
212
9.
OTHER INFORMATION
...........................................................................................................................
21
3
9.1.
A
UDITORS
’
R
E
PORT
..............................................................................................................................
213
9.2.
A
PPROPRIA
TION
OF
RESULTS
–
PROVISI
ONS
IN
C
OMPANY
’
S
ARTI
CLES
OF
ASSO
CIATION
..........................................
213
9.3.
B
RANCHES
................................
.........................................................................................................
213
10.
IMPORTANT DATES
..............................................................................................................................
225
STMicroelectronics N
.V.'s Annual Rep
ort over 2021 consists o
f a message from the P
resident and Chief E
xecutive
Officer on the fina
ncial year 2021 (chap
ter 1), the mana
gement report (chapte
r 2
th
rough chapter 5), th
e dividend
policy (chapte
r 6), the finan
cial information (chap
ter 7 th
rough ch
apter 9) and importan
t dates (chapter 10)
.
4
1.
Message
from the President and
Chief Exec
utive Officer on
the financial year
20
21
Dear Shareholder,
2021
was
a
year
marked
by
stro
ng
market
demand
bu
t
still
impacted
by
the
pandemi
c
and
global
s
emiconductor
supply
chain
constraints.
ST
employees
work
ed
tirelessly
thro
ughout
the
year
to
su
pport
our
customers,
increas
e
our manufacturing e
fficiency, and create
inno
vat
ive products.
All this
in the context
of the
ongoing challenges of
the
pandemic, wh
ere w
e contin
ued to
supp
ort ou
r employees
across
the glob
e ens
uring th
e mos
t strin
gent health
and
safety measures in ev
ery site where we operat
e.
Our
financial
performance
reflected
stron
g
demand
throughout
the
year
across
all
the
end
markets
we
ad
dress
as
well
as
our
engaged
cu
stomer
programs,
with
net
revenues
of
$12.76
billion
incr
easin
g
24.9%
f
rom
20
20.
Our
financial performance pro
gressively strength
ened versus the expectations
we provided during th
e year, despite the
many
challenges faced
by
the
global
semicondu
ctor
indu
stry
s
upply
chain.
All
three
produ
ct
grou
ps
ach
ieved
doub
le
-
digit
growth
in
2021.
Ou
r
profitability
further
increased.
W
e
managed
to
keep
a
solid
ne
t
financial
position
while
significantly increasin
g our investments to s
upport future growth.
2021: a year of stron
g market dem
and and global shortages
We
saw
unprecedented
demand across
all
geographies
for
automotive
products
in
2021.
The
rebound
of
th
e
automotive
industry
from
the
difficult
environment
of
2020
was
b
road
-based,
acro
ss
all
customers
and
regions;
it
was
driven by
the
volume
of
vehicles
produced,
the
r
eplenishment
of
inventori
es
acros
s
the automotive
supply
chain
and,
most
importantly,
an
accelerated
tra
nsformation
towards
higher
levels
of
vehicle
el
ectrification
and
digitalization.
Throughout
the
year
we
saw very
s
trong
demand
in
Industrial,
with
factory
automation
as
one
of
the
main
drivers,
together
with
power-related applications,
including
renewable
energy,
motion
control,
power
tools
and
home
appliances
and
consumer
industrial
app
lications
such
as
power
tools
and
home
appliances. Electrif
ication and
digitalization
are
the
main
trends
d
riving
s
emiconductor
content
increase
here
as
well.
Demand
was
stron
g
b
oth
with Distribution a
s well as OEMs, in line with our approach
to be broad in the highly fragmented ind
ustrial market.
In
perso
nal
electronics,
smartphones
continued to
be
an
essential
source
of
s
ocial
conn
ection
an
d
s
treaming
services
for entertainment, fitness, gaming, and music. Smartphon
e volumes returned to a modest growth in 2021. Demand
for acc
essories
was
s
trong
throu
ghout
the
year,
with
hea
lthy
dyn
amics
related
to
other
c
onnected
devices
such
as
wearables, tablets, h
earables, True Wireless St
ereo headsets a
nd game consoles.
Finally,
we
s
aw
continu
ed
adoptio
n
of
5G
-related
products
as
well
as
a
sustained
demand
for
PCs,
and
esp
ecially
notebooks, th
roughout th
e year.
The har
d disk d
rive market
recovered somewhat
from its
decline in
2020. We
also
saw a number of Low
-Earth-Orb
it Satellite programs launch
or ramp up glob
ally.
In
this
env
ironment, w
e
delive
red
n
et
revenu
es
of
$12.76 billion,
up
24.9%
from 2020,
with
a
gross margin
increasing
from
33.3%
to
39.6%
and
an
operating
margin
significan
tly
increasing
from
12.1
%
to
19.2%.
During
2021,
our
net
cash increased by $219M to a positiv
e net financial position of $977
million, with a higher CAPEX compared t
o 2020
rising from $1.28 b
illion to $1.83
billion.
An acceleration of th
e long-term
trends underp
inning our strategy
2021
was
the
third
year
of
execution
of
our
stra
tegy
which
stems
from
three
long
-term
enablers:
Smart
Mobility,
Power &
E
nergy
Manage
ment
and
IoT
&
5G.
These
are
the
trends
driving
our
inves
tments
and
road
map
decisions.
Their acceleration
during
2020 contin
ued through
2021, d
riving the d
emand for
our products,
in th
e short
and long
term.
5
We
see
this
trend
continu
ing
in
2022
and
we
are investing
s
ignificantly
to
sup
port
this
acceleration.
We plan
to
invest
about
$3.4
b
illion
to
$3.6
billion
in
CAPEX
in
the
year
to
further
increase
our
production
capacity
and
support
our
longer-term strategic initiatives. This amount includes capacity additions and mix change, in
particular for our wafe
r
fabs (digita
l 300m
m in
Crolles
,
France,
analog
200mm
in Sin
gapore, SiC
150
mm in
Catania
, Italy,
and
Singapore),
as
well
as
as
sembly
and
test
operation
s
(capacity
growth
on
certain
package
fa
milies
including
SiC
and
a
utomotive,
optical
s
ensing,
in
telligent
power
modules
for
au
tomotive
and
indu
strial);
and
strategic
i
nvestments
,
in
cluding
th
e
first
industrializatio
n
line
of
ou
r
new
300mm
wafer
fab
in
Agrate,
Italy,
as
well
as
GaN
technology
and
SiC
raw
material initiatives.
A
portion
of
the
CAPEX
p
lan
covers
th
e
overall
maintenance
an
d
efficiency
improve
ments
of
our
manufactu
ring
operations
and
infrastructure,
as
well
as
o
ur
2027
carbon
neutrality
execution
pro
gram.
On
this
latter
topic,
a
key
element of our sustainab
ility strategy, we are moving ah
ead in our environmental ro
admap to be carbon n
eutral by
2027. In
2021,
we
improved
furth
er o
ur
total
greenhouse
gas
emission
efficiency
and
our
use
of
renewable
energy
reached about 51%.
ST’s value
p
roposition remains based on
s
ustainable and pr
ofitable growth,
providing differentiating e
nablers to our
customers,
an
d
supportin
g
them
with
an
independ
ent,
reliable
an
d
secure
s
upply
chain
.
And
we
are committed
to
sustainability for
the benefit o
f all our stakeh
olders. We con
tinue to
work on making
ST stron
ger: we are convin
ced
we
have
the
right
strategy
and
resources
in
place:
our
balanced
end
-market
focus
and
position,
our
solid
product
and IP technology portfolio, our integrated device m
anufacturer model, our transformation program
s and our f
ocus
on high-growth applications
. We are investing in order
to captu
re new opportunities, working alongside our
customers and t
o prepare our growth for the y
ears to come with th
e strong engagement
of all our employees.
6
2.
Corporate overvi
ew
2.1. History and development of STMicroelectronics
STMicroelectronics
N.V.
was
formed an
d in
corporated
in 19
87 as
a
result of
the
combinat
ion o
f the
semiconducto
r
business of
SGS
Microelettron
ica
(th
en
owned
b
y
Società Finanziari
a
Telefonica
(
S.T.E.T.), an
Italia
n
corporation) and
the
n
on-military
busines
s
of
Thomson
Semiconducteurs
(then
owned
by
the
former
Thomson
-CSF,
now
Thales,
a
French
corporation).
We
co
mpleted
our
in
itial
public
off
ering
in
December
1994
with
simultaneous
listings
on
th
e
Bourse de Paris (now known a
s “Euronext Paris”) and the Ne
w York Stock Exchange (“NYSE”). In 1998, we
also listed
our shares o
n the Borsa Italiana S.p.A. (“Bors
a Italiana”).
We
operated
as
SG
S-Thoms
on
Microelectronics
N.V.
until
May
1998,
when
we
changed
our
n
ame
to
STMicroelectronics
N.V.
We
are
organized
under
the
laws
of
T
he
Netherlands
,
with
our
corp
orate
legal
s
eat
in
Amsterdam,
Th
e
Netherlands
,
and
our
head
offices
at
WTC
Schiphol
Airport,
Schip
hol
Boulevard
265,
1118
BH
Schiphol,
The
Netherlands.
Our
telephon
e
number
th
ere
is
+31-
20
-
654
-3210.
Our
headquarters
and
op
erational
offices are
managed through our wholly ow
ned subsidiary, STMicroelectronics International N.V.,
an
d are
located at
39
Chemin
du
Champ
des
Filles,
1228
Plan-l
es
-
Ou
ates,
G
eneva,
Switzerland.
Our
main
t
elephone
number
ther
e
is
+41-
22
-
929
-2929.
Our
agent
for
service
o
f
process
in
the
Un
ited
States
related
to
our
registration
under
th
e
U.S.
Securities
Exchan
ge
Act
of
1934,
as
amended,
is
Corporation
Service
Company
(CSC
),
80
State
Street,
Albany,
New
York, 12207. Our operations a
re also conducted through our
v
arious subsidiaries, which are
organized and operated
according to the laws o
f their country o
f incorporation, a
nd consolidated by STMicroelect
ronics N.V.
2.2. Strategy & objectives
At ST
, we
ar
e 48,000
creators and makers
of semiconductor technologies
mastering the semiconductor supply chain
with state-
of
-the-art manufa
cturing facilities. As indepen
dent device manufacturer,
we work with more than
200,000 customers and t
housands of partners to design and bu
ild products, solutions, and ecosystems that addres
s
their challenges and opportunities, and the need to support
a more sustainab
le world. We
develop industry
-leading
technologies
th
at
allow
us
to
provide
products
an
d
solutions
that
meet
an
d
exceed
the
needs
and
expectation
s
of
our customers n
ow and into the future.
Our
stra
tegy
focuses
on
long-term
value
cre
ation
for
the
Company
and
its
affi
liated
e
nterprises
and
takes
into
account
the s
hort-,
medium-
and
longer-term
evolution
o
f the
markets
we s
erve a
nd
the env
ironment and
opportunities we s
ee. It stems from key long
-term enablers: Smart Mo
bility, where we provid
e innovative solutions
to help our customers make driving safer, greener
and
more connected for everyone; Power & Energy: our
technology and solutions en
ab
le customers
to increase energy
efficiency everywhere and
su
pport the
use of
renewable
energy
s
ources;
Internet
of
Things
(“IoT”)
&
5G
supporting
the
proliferation
of
smart,
connected
IoT
devices with produ
cts, solutions
an
d ecosystems to make develop
ment fast and eas
y for our cus
tomers.
We
are focused
on application
areas which
are expected
to
experience
solid growth
rates driven
b
y
broad,
long-term
trends
in electronic
sys
tems. These
trends
require
enablers
such
as
autonomous
systems,
robotics,
securely
connected machines and
personal devices,
digitalization
and electrification of
automobiles and infrastructure,
advanced communications
equipment
an
d
networks and
more
power
efficient systems.
These e
nablers drive
in
tu
rn
the demand for the el
ectronic components
we develop and man
ufacture.
We
are
a
global
independent
s
emiconductor
company
that
designs,
develops,
manufactures
and
marke
ts
a
broad
range
o
f
prod
ucts used
in a
wi
de
v
ariety
of
ap
plications for
the four
end
-markets w
e
ad
dress: automotive,
in
dustrial,
personal
electronics
and communications
equ
ipment,
com
puters
an
d
peripherals
.
For the
au
tomotive
and
indus
trial
markets
we
add
ress
a
wide
customer
bas
e,
particularly
in
indu
strial,
with
a
b
road
and
deep
product
portfolio.
In
personal ele
ctronics and
communications
equ
ipment,
computers and
peripherals w
e
have a
selective approach
both
in terms
of the customers we
serve, as
well
as in the
t
echnologies and products we
offer, while leveraging our
broad
portfolio to add
ress high
-volume applications.
7
2.3. Organizational structure
We
are
organized
in
a
matrix
stru
cture
with
geographic
regions
interactin
g
with
product
lines,
both
support
ed
by
shared technology and
manufacturing operations and by
centra
l f
unctions, designed to
enable us
to be
closer to our
customers and t
o facilitate communication among t
he R&D, p
roduction, marketing a
nd sales organizations
.
While
STMicroelectron
ics
N.V
.
is
our
parent
company,
we con
duct
ou
r
global
bu
siness
through
STMicroelectronics
International
N.V.
an
d
also
conduct
our
operations
through
service
activities
from
our
subsidiaries.
We
prov
ide
certain
administra
tive,
human
reso
urces,
legal,
treasury
,
strat
egy,
manu
facturing,
marketing
and
o
ther
overhead
services to our con
solidated subsidiaries p
ursuant to service agreements
for which we r
ecover the cos
t.
2.4. Products and activities
Our
diverse
product
portfolio
includes
dis
crete
an
d
general
purp
ose
components,
application
-specific
in
tegrated
circuits (“ASICs”),
full
-custom devices
and semi-custom
d
evices and application-
specific
standard
products
(“ASSPs”)
for
analog,
digital
an
d
mixed
-signa
l
application
s.
It
benefit
s
from
a
unique,
strong
f
oun
dation
of
prop
rietary
and
differentiated leading-
edge techn
ologies.
We use
all of
the prevalent function-oriented process technologies, including complementary metal-on silicon
oxide
semiconductors (“CMOS”),
bipo
lar
and
n
on
-vo
latile
memory
techn
ologies.
In
addition,
b
y
combin
ing
bas
ic
processes,
we
have
developed
advanced
systems-oriented
technologies
that
enable
us
to
produce
differentiated
and
application-sp
ecific
products, including
our pioneering
fully depleted
silicon
-
on
-
insulator (“FD
-
SOI”)
techno
logy
offering
superior
p
erformance
and
power
efficiency
compared
to
bulk
CMOS,
bipolar
CMOS
technologies
(“Bi
-
CMOS”)
an
d
radio f
requency s
ilicon
-
on
-
insulator (“RF
-
SOI”)
for
mixed
-signa
l
an
d high-fre
quency applications,
as we
ll
as
a
combination
of
Bipolar,
CMOS
and
DMOS
(“B
CD”),
vertically
integrat
ed
power
(“
VIPower”),
and
intelligent
integrated
gallium
nitride
(
STi
2
GaN)
technologies
for
smart
p
ower
applications,
Power
MOSFE
T,
silicon
carbide
(“SiC”)
and
gallium
nitride
(“GaN”)
f
or
high-effici
ency
systems,
Micro-Electro-
Mecha
nical
Systems
(“MEMS”)
technologies f
or
sensors and
actuators
,
embedded
me
mory
techn
ologies
for
o
ur
microcontro
llers
and diff
erentiated
optical sensing t
echnologies for our op
tical sensing solutions
.
Our product
groups are as follo
ws:
•
Automotive an
d Discrete
Group
(ADG),
comprised
of dedic
ated au
tomotive in
tegrated circuits
(“ICs”),
and
discrete and power tran
sistor products
.
•
Analog, MEMS
and Sensors Group (AMS
), comprised of
analog, smart power,
lo
w power
RF, MEMS sensors
and actuato
rs, and optical sensing so
lutions
.
•
Microcontrollers and
Digital ICs
Group (MDG),
co
mprised of
microcontroll
ers
(general
pur
pose and
secure),
memories (RF and EE
PROM), and
RF communications
.
2.5. Sales, Marketing and Distribution
Our
sales
and
marketing
is
organized
by
a
combination
of
regional
an
d
key
account
coverage
with
the
primary
objective
of
accelerating
sales
growth
and
gaining
market
share.
Emphasis
is
placed
on
strengthening
the
development
of
our
global
a
nd
major
local
accounts;
boos
ting
demand
creation
through
an
enhan
ced
focus
on
geographical
and
key
acco
unt
coverage
with
s
trong
techn
ical
an
d
app
lication
expertise
,
sup
ported
in
the
mass
market
b
y
our
distribution
ch
annel
and local
initiatives; and
establishing regional sales
an
d
marketing teams
that are
fully aligned
with our strategic
end
-markets: automotive, industrial, personal electronics
and communications
equipment, computers an
d peripherals.
We h
ave
three
regional
sales
organizations
repo
rting
to
a
global
h
ead
o
f Sales
&
Marketing:
Am
ericas;
Asia
Pacific
;
and
EMEA.
Ou
r
regional
sales
organ
izations
hav
e
a
similar
structure
to
enhan
ce
global
coordination
an
d
go-
to
-
market
activities.
The
sales
and
marketing
teams
are
stro
ngly
focused
on
profitable
revenue
growth
and
business
performance
as
well
as
on
fostering
demand
creation
,
expanding
the
customer
base,
maximizing
market
share,
developing
new
p
roduct
-roadmaps
and
providing
th
e
best
technical
and
application
support
in
the
field
for
our
8
customers.
T
he
sales
and
marketing
activities
ar
e
supp
orted
by
sales
engineers,
system
marketing,
prod
uct
marketing, application la
bs, field application
engineers and q
uality engineers.
We engage distributors and sales re
presentatives to distribute and promote our
products
around the
world.
Typically,
distributo
rs
handle
a
wide
v
ariety
of
products,
including
th
ose
that
compete
with
ours.
Our
dis
tributors
have
a
dual
role,
in
that
they
as
sist
in
fulfill
ing
the
demand
of
our
customers
by
servicing
their
orders,
while
also
supportin
g the
creation of
product
demand
and
business
development.
Most
of our
sales
to
distribu
tors are
made
under
specific
agreements
allowing
for
price
protection
and
sto
ck
ro
tation
for
unsold
merchandise.
Sales
representatives,
on
the
other
hand,
generally
do
n
ot
offer
prod
ucts
that
compete
direct
ly
with
o
ur
products
,
but
may
carry
complementary
items
manu
factured
by others.
Sales
representa
tives
do
not
maintain
a product
inventory
and their cus
tomers place large quantit
y orders directly with
us and are referred to distrib
utors for s
maller orders.
2.6. Research & Development
Since our formation,
we have mainta
ined a solid commit
ment to inn
ovation because we believe that mark
et driv
en
R&D based
on leading-edge
p
roducts
and
technologies is
critical
to
our
s
uccess.
We devote significant
effort to
R&
D
because we
believe s
uch in
vestment can
be leveraged
into competitive
advantages
: about
17.5% of ou
r employees
work
in
R&D
on
product
des
ign/development
and
technology
an
d,
in
2021,
we
sp
ent
approximately
1
0.9%
of
our
total
revenues on R&D
expenses
.
New developments in
semicon
ductor technology can
make end products
significantly cheaper, smaller,
faster, more
reliable
and
embedded
than their
predecessors,
with
differentia
ted
functionalit
ies.
They can
enab
le
significant
value
creation
opportun
ities
with
their
timely
appearance
on
the
market.
Our
innov
ations
in
s
emiconductor
technology
as well as in hardware
and software contribute to the creation of successful products that generate
v
alue for us and
our
cus
tomers.
Our
complete
design platforms,
including
a
large
s
election
of
IP
and
s
ilicon
-prov
en
models
an
d
design
rules,
enable
the
fast
develo
pment
of
products
designed
to
meet
customer
ex
p
ectation
s
in
terms
of
reliability,
quality, competitiveness in p
rice and time-
to
-market. Through our R&D
efforts, we
contribute to making
our
customers’ prod
ucts more efficient, more appealin
g, more reliable an
d safer
.
Our
technology R&D
s
trategy i
s based
on
the development
of
d
ifferentiated
techn
ologies, allowing
for
a unique
o
ffer
in
terms
of
new
products
and
enabling
new
applicat
ions
o
pportunities.
We
draw
on
a
ric
h
poo
l
of
chip
fabri
cation
technologies,
including
advanced
CMOS,
FD
-SOI,
RF-SOI,
optical
sens
ing, embedd
ed n
on-
volatile m
emories, mix
ed-
signal, analo
g, MEMS,
smart power, SiC and
GaN proces
ses.
This is
well embedded in ou
r strong packagin
g
technologies
portfolio
such
as
high
pin
count
BGA,
Wafer
level
packaging,
highly
integrated
s
ensor
packa
ges
and
le
adframe package p
ower pro
ducts.
We combine
both fron
t-end and b
ack-end
manufacturing and
technology R&D
under the s
ame organization to ens
ure a smooth flow of information b
etween our R&D an
d manufacturin
g
organizations
. We
leverage significant
sy
nergies an
d s
hared activities
between our
product
groups to
cross-fertilize
them.
We
also
use
silicon
foundries,
especially
for
advanced
CMOS
beyond
the
28
nm
node
that
we
do
n
ot plan
to
manufacture nor develop in
ternally.
We have advanced R&D and i
nnovati
on
centers which offe
r us a significant advantage in
quickly
and cost ef
fectively
introducing products. Furtherm
ore,
w
e
h
ave
established a
strong culture
of
partnerships
and through
the
years have
created
a
network
of
strategic
collab
orations
with
key
cus
t
omers,
supp
liers,
competitors,
and
leading
u
niversities
and
research
instit
utes
around
the
world.
We
also
play
lea
dership
roles
in
numerous
p
rojects
running
un
der
th
e
European
Union’s
IST
(Information
Society
Technologies)
p
rograms.
We
also
p
articipate
in
certain
R&D
programs
established by
the EU, individual coun
tries and local au
thorities in Europe (primarily in Fran
ce and Italy).
We cu
rrently
own
approximately
18,
500
patents
and p
ending p
atent
applications,
correspond
ing
to ap
prox
imately
9,
400 patent
families (each p
atent family
containing a
ll patents
originating fro
m the same in
vention), includin
g 5
43
original new patent ap
plications filed in 20
21.
9
3.
Report of the M
an
aging Boa
rd
In
accordance
with
Du
tch
law,
our
management
is
entrusted
to
our
Managing
Boa
rd
under
the
supervision
of
our
Supervisory Board. Mr. J
ean-Marc Chery was
re
appointed on May
27
, 20
21
, as sole member
o
f our Managing Board
with the
function
of
President and Chief
Executiv
e Office
r. Under our
Articles of
Associatio
n, the
s
ole me
mber of
our
Managing
Board
is
appo
inted
for
a
th
ree
-year
ter
m
at
our
Annual
General
Meeting
of
Shareholders
(by
a
simple
majority of
the votes cast), upon
a non
-binding proposal b
y
our Supervisory Board,
which
term may be
r
enewed one
or more times.
3.1. Statement of the sole member of the Manag
ing Board
The sole
member of th
e Managin
g Board
hereby
declares that,
t
o th
e best o
f his kn
owledge, the
statutory
financial
statements as at
December 31, 2021, and for
the year then
ended, prepared under
Title 9
of Part 2
of The
Netherlands
Civil
Code
in
accordance
with
IFRS as
ad
opted
by
the
European
Union,
provide
a
tru
e
an
d
fair v
iew
of
the
ass
ets,
liab
ilities,
financial
pos
ition
and
profit
or
loss
of
STMicroel
ectronics
N.V.
and
th
e
undertakin
gs
includ
ed
in the
cons
olidation taken as
a whole
and the report of
th
e Managing Board
in
cludes a
tr
ue and fair
view concerning
the
position
as
per
the
statement
of
finan
cial
position
date,
th
e
d
evelopment
and
p
erformance
of
STM
icroelectronics
N.V.
and
the
u
ndertakings
included
in
the
consolidatio
n
taken
as
a
whole,
together
with
th
e
principal
risk
and
uncertainties they face.
Jean-Marc Chery,
Sole member of the Managin
g Board,
President and Chief Executiv
e Officer
3.2. Business overview & performance
3.2.1. Results highlights
for the year 20
21
Our
total
available
market
is
defined
as
our
“TAM”,
while
our
serviceable
availab
le market
is
defined
as o
ur
“SAM”
and repres
ents the
market for
products s
old by u
s (
i.e..,
our TAM exclu
ding major
devices
such
as microprocess
ors,
dynamic
ran
dom-access m
emories, optoelectronics
devices,
flash
memori
es
and
wireless
application specific
m
arket
products, such
as baseband and ap
plication process
ors).
Based on industry data
published by World
Semiconduct
or Trade
Statistics (“WSTS”), semiconductor industry
revenues in 2021 increased on a year-over-year basis
by approximately 26% for the TAM and by approximately 29%
for the SAM, to reach app
roximately $556
billion an
d $261 billion, resp
ectively.
We closed 2021 with to
tal revenues of $12.76 bill
ion, gross
margin of 39.6% and operatin
g margin of 19.
2
%.
Our
effective
average
exchan
ge
rate
was
$1.18
for
€1.00
f
or
the
full
year
2021,
as
comp
ared
to
$1.13
for
€1.00
for
the full year 2020.
Our 2021 gross margin increased 630 basis points to 39.6% from 33.3% in 2020, principally driven by manufacturing
efficiencies
and
loadin
g
improvements,
favorab
le
p
ricing
mi
x,
and
lower
level
of capitalized
d
evelopment
costs
write
-
offs, partially offset by
negative currency effects, n
et of hedging.
Our
operating
expenses,
comprised
of
selling,
general
and
administrativ
e (
“SG&A”) an
d
research an
d
development
(“R&D”) expenses, amou
nted to $2,707 million in 2021, in
creasing from $2,395
million in the prior
year, mainly du
e
to higher cost o
f labor and n
egative currency effects.
Other income
and expenses, net, w
as $106 million in
2021 compared to
$228
million in 2020
, decreasing
main
ly due
to lower income from p
ublic fund
ing.
Operating
profit
in
2021
incr
eased
to
$2,45
2
million
com
pared
to
$1,233
million
in
2020
mainly
d
riven
by
the
combining
effect
of
higher
re
venues
and
impro
ved
gross
margin
p
rofitability,
partially
offset
by
higher
op
erating
expenses and lo
wer level of public fundin
g.
10
Combined finance
income
and
costs
resulted
in a n
et loss
of $428 million,
compared
to a
net
loss
of $439
million in
2020,
and
reflect
in
both
years
the
IFRS
accounting
of
o
ur
convertible
bonds.
The
2021
amount
included
a
loss
of
$
197
million for
the
fair value
adjus
tment
of the
embedded
bond
holders’
conv
ersion
options
on
outstanding
convertible b
onds
(compared
to
a los
s o
f $417 million
in
2020)
a
nd
a cos
t of
$190 million
related
to
the settle
ment
of Tranche B of our senior u
nsecured convertib
le bonds iss
ued on July 3,
2017.
Full
year
2021
our
net
profit
was
$1,7
11
million
or
$1.85
diluted
earnings
per
share
,
compared
to
net
result
of
$694
million, or $0.76 d
iluted earnin
gs per share for th
e full year 2020.
Capital
expenditure
p
ayments,
net
of
proc
eeds
from
sales
were $1
,828
million
du
ring
the
full
y
ear
2021
co
mpared
to $1,279 million d
uring the full year 2020.
During
2021,
our
net
cash
increased
by
$219
million,
with
n
et
cash
from
operating
activities
reachin
g
$3.46 b
illion.
During 2021,
we u
sed $
1.26 b
illion o
f cash
to
settle
Tranche
B of
the senior
uns
ecured co
nvertible
bonds
issu
ed on
July
3,
2017
(the
“20
17
S
enior
Unsecured
Convertib
l
e
Bon
ds”).
In
add
ition,
we
p
aid
$205
million
of
cas
h
div
idends
to
our
shareholders,
$134
million
for
long
-term
debt
repayment
and
$485
million
for
the
repurchas
e
of
ord
inary
shares,
partially
offset
b
y
$602
million
proceeds
from
the
drawdowns
of
o
ur
credi
t
facilit
y
s
igned
with
the
EIB
an
d
$182 million proceeds fro
m the drawdown of ou
r credit facility
signed with CDP.
Our free cash flow, a
non-GAAP meas
ure, amounted to $
1,
120 million in 2021 co
mpared
to $
627
million in
20
20
.
3.2.2. Business over
view
We
are
a
global
independent
s
emiconductor
company
that
designs,
develops,
manufactures
and
markets
a
broad
range
o
f
prod
ucts used
in a
wi
de
v
ariety
of
ap
plications for
the four
end
-markets w
e
ad
dress: automotive,
in
dustrial,
personal
electronics
and
com
munications equipment,
computers
and
p
eripherals.
For
the
automotive
an
d
indu
strial
markets
we
address
a
wide
c
ustomer
base,
particularly
in
industrial,
with
a
broad
and
deep
product
p
ortfolio.
In
personal ele
ctronics and
communications
equ
ipment,
comp
uters
and
peripherals w
e
have a
selective
approach both
in terms
of the customers we
serve, as
well
as in
th
e technologies and products we
offer,
while
leveraging our broad
portfolio to add
ress high
-volume applications
.
We design, develop, man
ufactur
e and market th
ousands o
f products which we sell to ov
er 200,000 customers.
We
emphasize
a
broad
an
d
balanced
product
portfolio,
in
the
applications
an
d
regional
markets
we
serve.
Our
major
customers
include
Apple,
Bosch,
Con
tinental,
Delta
Electronics,
H
P, Huawei,
Intel-Mob
ileye,
Samsung,
Seagate
an
d
Tesla. In addition
, our broad portfolio of dedicated Automotive ICs; Dis
crete & Power Transisto
rs; Analog, Industrial
&
Power
Conversion
ICs;
GP,
Connected
MCU,
MP
U,
Se
cure
MCU
&
EEPROMs
;
MEMS
&
Optical
Sensi
n
g
solution
s;
and
ASICs
based
on
ST
proprietary
technologies
helps
foster
closer,
strategic
relationships
with
customers.
This
broad product breadth provides opportunities to enable application solutions and to supply such customers’
requirements
for all
t
heir
product
an
d
techn
ology
needs.
We also
sell
ou
r
produ
cts
through
distrib
utors
and
retailers
.
Further information on o
ur business mod
el is included in chap
ter 2 above and
paragraphs 3.2.2.1.
et seq.
below.
3.2.2.1.
Strategy
At ST
, we
ar
e 48,000 creators
and makers
of semiconductor technologies
mastering the semiconductor supply chain
with
s
tate-
of
-the-art
manufacturing
facilities.
A
s
an
in
dependent
device
manufactu
rer,
we
work
with
more
than
200,000 customers and t
housands of partners to
design and build prod
ucts, solutions, and ecosystems that address
their challenges and opportunities, and the need to support
a more sustainab
le world. We develop industry
-leading
technologies
th
at
allow
us
to
provide
products
an
d
solutions
that
meet
an
d
e
xceed
the
needs
an
d
expectations
of
our customers n
ow and into the future.
Our
stra
tegy
focuses
on
long-term
value
cre
ation
for
the
Company
and
its
affiliated
e
nterprises
and
takes
into
account
the s
hort-,
medium-
and
longer-term
evolution
o
f the
markets
w
e serve
an
d th
e environ
ment and
opportunities we s
ee. It stems from key long
-term enablers: Smart Mo
bility, where we provid
e innovative solutions
to help our customers make driving safer, greener
and
more connected for everyone; Power & Energy: our
technology and solutions en
able customers
to increase energy
efficiency everywhere and
su
pport the
use of
11
renewable
energy
s
ources;
Internet
of
Things
(“IoT”)
&
5G
supportin
g
the
pro
liferation
of
smart,
connected
IoT
devices with produ
cts, s
olutions and
ecosystems to make d
evelopment fast and eas
y for our cus
tomers.
We
are focused
on application
areas which
are expected
to
experience
solid growth
rates driven
b
y
broad,
long
-ter
m
trends
in electronic
sys
tems.
These trend
s
require enab
lers
such
as
autonomous s
ystems
, ro
botics,
securely
connected machines and
personal devices, digitalization
and
electrification
of automobiles and
infrastructu
re,
advanced communications equipment
an
d networks
an
d more
power efficient
systems.
These
enablers drive in
turn
the demand for th
e electronic compon
ents we develop and
manufacture.
We
are
a
global
independent
s
emiconductor
company
that
designs,
develops,
manufactures
and
markets
a
broad
range
of
prod
ucts
u
sed
in a
wid
e
variety
of
application
s
for
th
e
four e
nd
-markets
we
ad
dress
:
auto
motive,
indu
strial,
personal
electronics
and communications
equ
ipment,
com
puters
an
d
peripherals
.
For the
au
tomotive
and
indus
trial
markets
we
add
ress
a
wide
customer
bas
e,
p
articularly
in
indus
trial,
with
a
bro
ad
and
deep
p
roduct
portfolio.
In
personal ele
ctronics and
communications
equipment,
computers and
peripherals we
h
ave
a selective
approach
b
oth
in terms
of the customers we
serve, as
well
as in
th
e technologies and products we
offer, while leveraging
our broad
portfolio to add
ress high
-volume applications.
3.2.2.2.
Employees
The
tables
below
set
forth
the
breakdo
wn
of
employees
by
geograph
ic
area
and
category
of
main
activity
for
the
past two years
.
2021
2020
France
11,312
10,840
Italy
11,334
10,765
Rest of Europe
1,044
991
Americas
759
766
Mediterranean (Malta, Moroc
co, Tunisia,
Egypt)
4,854
4,378
Asia
18,951
18,276
Total
48,254
46,016
2021
2020
Research and Developm
ent
8,355
8,145
Marketing and Sales
2,379
2,311
Manufacturing
31,780
30,134
Administration an
d General Services
2,582
2,464
Divisional Functio
ns
3,158
2,962
Total
48,254
46,016
Our
future
success
will
partly
depend
on
our
ability
to
c
ontinue
to
attract,
retain
and
motivate
highly
qualified
technical,
marketing,
engineering
and
man
agement
personnel,
as
well
as
on
our
ability
to
timely
ad
apt
the
s
ize
and/or
pro
file
of
our
pers
onnel
to
chan
ging
indu
stry
needs.
Unions
are
represented
at
almos
t
all
of
ou
r
manufacturing
fac
ilities
and
at
several
of
our R&D
s
ites.
W
e
us
e
temporarily em
ployees if
re
quired
d
uring
prod
uction
spikes
and,
in Eu
rope, du
ring summer vaca
tion. W
e hav
e n
ot exp
erie
nced
any
significant
s
trikes or
work s
toppages
in recent years.
3.2.2.3.
Alliances with Custo
mers and Industry Partn
erships
We
believe
that customer
alliances
and
in
dustry
partnersh
ips
are
critical
to
our
s
uccess
in
the
s
emiconductor market
.
Customer
allianc
es
pro
vide
u
s
with
valuable
systems
and
application
know
-how
and
a
ccess
to
markets
for
key
products, while
enabling
our
custo
mers
to
gain
access to
our process
technologies
an
d
ma
nufacturing
infrastructure.
We
are
act
ively
working
to
expand
the
number
of
our
customer
alliances,
ta
rgeting
k
ey
global
OEMs
as
w
ell
as
emerging, innovat
ive customers and
partners around
the globe
.
12
From
time
to
time
we
collaborat
e
with
other sem
iconductor
industry
companies,
research organizations,
universities
and
s
uppliers
to
further
our
R&D
efforts.
Such
collaboration
provides
us
with
a
number
of
important
benefits,
including
the
shar
ing
of
costs,
reductions
in
o
ur
own
capital
requirements
,
acquisition
s
of technical
kn
ow
-how
and
access to add
itional production capaci
ties.
3.2.2.4.
Customers and
Applications
We design, develop, man
ufacture an
d market thous
ands of products which
we sell to over 200,000 custo
mers. We
emphasize
a
broad
an
d
balanced
product
portfolio,
in
the
applications
an
d
regional
markets
we
s
erve.
Our
major
customers
include
Apple,
Bosch,
Con
tinental,
Delta
Electronics,
HP,
Huawei,
In
tel
-Mobileye,
Samsu
ng,
Seagate
and
Tesla. In addition
, our broad portfolio of dedicated Automotive ICs; Dis
crete & Power Transisto
rs; Analog, Industrial
&
Power
Conversion
ICs;
GP,
Connected
MCU,
MPU,
Secure
MCU
&
EEPROMs;
MEMS
&
Op
tical
Sensing
solutions;
and
ASICs
based
on
ST
proprietary
technologies
helps
foster
closer,
strategic
relationships
with
customers.
This
broad product breadth provides opportunities to
enable application solutions and to supply such customers’
requirements
for all
their
product
and
technology
n
eeds.
We
als
o
sell
our products
th
rough
distributo
rs
and
retailers
.
3.2.2.5.
Sales, Marketing and
Distribution
Our
sales
and
marketing
is
organized
b
y
a
combination
of
regional
and
key
account
coverage
with
the
primary
objective
of
accelerating
sales
growth
an
d
gain
ing
market
s
hare.
E
mphasis
is
placed
on
strengthening
the
development
of
our
global
a
nd
major
local
accounts;
boosting
demand
creation
th
rough
an
enhanced
focus
on
geographical
and
key
acco
unt
coverage
with
s
trong
techn
ical
an
d
app
lication
expertise
,
sup
ported
in
the
mass
market
b
y
our
distribution
ch
annel
and local
initiatives; and
establishing regional
sales and
marketing
teams
that
ar
e
fully aligned
with our strategic
end
-markets: automotive, industrial, personal electronics
and communications
equipment, computers an
d peripherals
.
We h
ave
three
regional
sales
organizations
repo
rting
to
a
global
head
of
Sales
&
Marketing:
Americas;
Asia
Pacific;
and
EMEA.
Ou
r
regional
sales
organ
izations
hav
e
a
similar
structure
to
enhan
ce
global
coordination
and
go-
to
-
market
activities.
The
sales
and
marketing
teams
are
stro
ngly
focused
on
profitable
revenue
growth
and
business
performance
as
well
as
on
fostering
demand
creation,
exp
anding
the
customer
base,
maximizing
market
share,
developing
new
p
roduct
-roadmaps
and
providing
th
e
best
technical
and
application
support
in
the
field
for
our
customers.
The
sales
and
marketing
activ
ities
are
supported
by
sales
engineers,
system
mark
eting,
p
roduct
marketing, application la
bs, field application
engineers and q
uality engineers.
We engage distributors and sales re
presentatives to distribute and promote our
products around the world.
Typically,
distributo
rs
handle
a
wide
v
ariety
of
products,
including
th
ose
that
compete
with
ours.
Our
dis
tributors
have
a
dual
role,
in
that
they
as
sist
in
fulfilling
the
demand
of
our
customers
by
servicing
their
ord
ers,
while
als
o
supportin
g the
creation
of pro
duct d
emand an
d bu
siness development.
Mos
t of
our s
ales
to d
istributors
are made
under
specific
agreements
allowing
for
price
protection
and
sto
ck
ro
tation
for
unso
ld
merchand
ise.
Sales
representatives,
on
the
other
hand,
generally
do
n
ot
offer
pro
ducts
that
compete
direct
ly
with
our
pro
ducts,
but
may
carry
complementary
items
manu
factured
by others.
Sales
representa
tives
do
not
maintain
a product
inventory
and their cus
tomers place large quantit
y orders directly with
us and are referred to distrib
utors for s
maller orders
.
At
th
e
reques
t
o
f
certain
customers,
we
also
s
ell
and
deliver
o
ur
pro
ducts
to
electronics
manufacturing
services
companies
(“EMS”)
, which, on
a contractual basis w
ith our
custo
mers, incorporate
o
ur products into the
ap
plication
specific
products
they
manufacture
for
o
ur
customers.
We
also
sell
pro
ducts
to
original
design
manufacturers
(“ODM”).
ODMs m
anufactur
e
products
for
our customers
much
like
EMS
companies
do,
but they
also
design
applications
for
our
customers,
and
in
doing
s
o
themselves
select
the
products
and
suppliers
that
they
wish
to
purchase from.
In
furtherance
of
our
stro
ng
commitment
to
quality,
our
sales
organization
s
include
pers
onnel
dedicated
to
close
monitoring and reso
lution of quality related iss
ues.
13
3.2.2.6.
Research and Developm
ent
Since our formation,
we have mainta
ined a solid commit
ment to inn
ovation because we believe that mark
et driven
R&D based on leading-edge products and technologies is critical to our success. We devote
significant effort to
R&D
because we
believe s
uch in
vestment can
be leveraged
into competitive
advantages
: about
17.5% of ou
r employees
work
in
R&D
on
product
design/development
and
techno
logy
and,
in
2021,
we
spent
approximately
1
0.9%
of
our
total
revenues on R&D
expenses
.
New developments in
semicon
ductor technology can
make end products
significantly cheaper, smaller,
faster, more
reliable
an
d
embedded than
their
p
redecessors,
with differentiated
functio
nalities. T
hey can
enable significant
value
creation
opportu
nities
with
their
timely
app
earance
on
the
market.
Our
in
novations
in
semiconductor
technology
as well as in hardware
and software contribute to the
creation of successful products that generate value f
or us and
our
cus
tomers.
Our
complete
design platforms,
includ
ing
a
large
selection
of IP
and
silicon
-prov
en
models
an
d
design
rules,
enable
the
fast
develo
pment
of
products
designed
to
meet
customer
expectatio
ns
in
terms
of
reliability,
quality, competitiveness in p
rice and time-
to
-market. Through our R&D eff
orts, we
contribu
te to
making our
customers’ prod
ucts more efficient, more appealin
g, more reliable an
d safer.
Our
technology R&D
s
trategy i
s based
on the
development
of
differentiated technologies,
allowing for
a unique
offer
in
terms
of
new
products
and
enabling
new
applications
opportunities.
We
draw
on
a
ric
h
poo
l
of
chip
fabri
cation
technologies,
including
advanced
CMOS,
FD
-SOI,
RF
-SOI,
optical
sens
ing,
embedded
non-
volatile m
emories, mix
ed-
signal,
analog,
MEMS,
smart
power Si
C an
d GaN
proc
esses.
T
his
is well
embedd
ed
in o
ur s
trong
packaging
technologies
portfolio
such
as
high
pin
count
BGA,
Wafer
level
packaging,
highly
integrated
s
ensor
packag
es
and
leadframe package
power pro
ducts
. We combine both
front
-end and b
ack-end
manufacturing and t
echnolo
gy R&D
under the s
ame organization to ens
ure a smooth flow of information b
etween our R&D an
d manufacturin
g
organizations.
We leverage
significant
synergies
and
shared activities
between ou
r product
groups
to cros
s
-fertilize
them. We
als
o
use
silicon
found
ries,
especially
for
advanced
CMOS
beyond
the
28
-nm
node
that
we
do
not
plan
to
manufacture nor develop in
ternally.
We have advanced R&D and i
nnovation
centers which offer
us a significant advantage in
qu
ickly and cost effe
ctively
introducing products.
Furthermore,
we
h
ave
established a
strong culture
of
partnerships
and through
the
years have
created
a
network
of
strategic
collab
orations
with
key
cus
tomers,
suppliers,
competitors
,
and
leading
univ
ersities
and
research
institutes
ar
ound
the
world
.
W
e
also
play
leadership
roles
in
n
umerous
projects
runn
ing
under
the
European
Union’s
IST
(Information
Society
Technologies)
p
rograms.
We
also
participat
e
in
certain
R&D
programs
established by
the EU, individual coun
tries and local au
thorities in Europe (primaril
y in France and Italy).
The total
amount
of our
R&D expenses
was
$
1,388
million
and
$
1,272
million in
2021
and 20
20
, respectively,
while
the
total amount
of R&D
expenses capitalized
amounted to
$
34
8
million
and $296 million in
2021 and
20
20
,
respectively.
3.2.2.7.
Property, Plants and E
quipment
We currently operate 14
main man
ufacturing sites a
round the world.
At
Dec
ember
31,
2021,
our
front-end
facilities
had
a
total
maxim
um
capacity
of
approximately
135,000
200mm
equivalent wafe
r
s
tarts per
week.
The
nu
mber
of wafer
s
tarts per
week
varies from
facility to
facility and
from
period
to period as a
result of chan
ges in product mix.
We
own
all
of
our
man
ufacturing
facilities,
but
certain
facilities
(Mu
ar,
Malaysia;
Shenzhen,
China;
and
Toa
Payoh
and Ang Mo Kio, Sin
gapore) are built on
land subject
to
long-term leases.
We
have
h
istorically
subcontracted
a
portion
of
to
tal
manufacturing
volumes
to
external
supp
liers.
In
2021,
we
subcontracted
appro
ximately
24
%
of
the
value
o
f
our
to
tal
silicon
production
to
external
foundries.
Our
plan
is
to
continue sou
rcing silicon from external found
ries to give us flexibility in
supp
orting our growth
.
At Decemb
er 31,
20
21,
we h
ad
approximately
$2,406
million
in
outstand
ing com
mitments
for p
urchases
of
equipment an
d oth
er assets
for delivery in
202
2.
In 2021,
our capita
l spending,
net o
f proceeds, was
$
1,828
million
compared
to
$
1,279
million
in
20
20
.
In
th
e
2019-
20
21
period
the
ratio
of
capital
investment
spending
to
net
revenues was abou
t 13.2
%.
14
3.2.2.8.
Intellectual property
Our success d
epends in p
art on our ability t
o obtain patents, licenses a
nd other
Intellectual Prop
erty
(“
IP
”)
rights
to
protect
our
proprietary
techn
ologies
and
processes.
IP
rights
th
at
apply
to
our
var
ious
products
include
patents,
copyrights,
tra
de
s
ecrets,
trademarks
and
mas
k
work
rights.
We
currently
own
approximately
18,
500
patents
and
pending
patent
applications,
corres
ponding
to
approximately
9,
400
patent
families
(each
patent
family
containing
all patents origina
ting from the same inventio
n), including 5
43
origina
l new patent app
lications filed in
2021.
We
believe
th
at
our
IP
represents
valuable
assets.
We
rely
on
various
intellectual
p
roperty
laws,
confidentiality
procedures
and
con
tractual
provisions
to
protect
our
IP
assets
and
enforce
o
ur
IP
rights.
To
op
timize
the
value
of
our
IP
assets,
we h
ave
engaged
in
licensin
g
our d
esign techno
logy
and
other
IP,
including
patents,
when
consis
tent
with
o
ur
competitive
pos
ition
an
d
ou
r
customers’
interests.
We
h
ave
also
entered
into
broad
-scope
cross-licenses
and
other
agreements
which
enable us
to
design,
manufac
ture
and
sell
semiconductor
products
using
the
IP
rights
of third parties a
nd/or operating within the s
cope of IP rights o
wned by third parties.
From
time
to
time,
we
are
invo
lved
in
IP
litigation
and
infringement
claims.
Regardless
of
the
v
alidity
or
th
e
successful
assertion
of
such
claims
,
we
may
incur
significant
costs
with
respect
to
th
e
defense
thereof,
which
cou
ld
hav
e
a
material adverse effect on
our results o
f operations, cash flow o
r financial condition.
3.2.2.9.
Backlog
Our
sales
are
made
primarily
pursuant
to
stand
ard
pu
rchase
orders
that
are
generally
booked
from
one
to
twelve
months
in
advance
o
f
delivery.
Quantities
actually
p
urchased
by cu
s
tomers,
as
well
as
prices, are
subject
to
variations
between
booking
and
delivery
an
d,
in
so
me
cases
,
to
cancellation
du
e
to
chan
ges
in
customer
needs
or
ind
ustry
conditions.
During
periods
of
economic
slowdo
wn
and/or
industry
overcapacity
and
/or
declining
selling
prices,
customer orders are not
generally made far
in advance of
the scheduled shipmen
t date. Such reduced lead time
can
diminish
management’s
ability
to
forecast
prod
uction
levels
and
revenues.
When the
economy
rebounds,
our
customers
may
strongly
in
crease
th
eir
demand
s,
which
can
result
in
capacity
constra
ints
due
to
a
time
lag
when
matching manufacturing ca
pacity with
such demand
.
In
add
ition,
our
sales
are
affected
by
seasonality,
with
the
first
half
generally
showing
lowest
revenue
levels
in
the
year,
and
the
third
or
fourth
qu
arter
h
istorically
generatin
g
higher
a
mounts
of
revenue
s
pa
rtly
as
a
result
of
the
seasonal dynamics for
smartphone ap
plications
dynamics
.
We
also
sell
certain
products
to
key
cus
tomers
pu
rsuant
to fram
e
contracts
.
Fra
me
contr
acts
are
annual
con
tracts
with
cu
stomers
setting
forth
quantities
and
prices
on
specific
products
that
may
b
e
ordered
in
the
future.
These
contracts allow us
to schedule production capacity in
ad
vance
and allow
customers to manage their
inventory
le
vels
consistent
with
just-
in
-time
principles
while
s
hortening
the
cycle
tim
es
required
to
prod
u
ce
ordered
products.
Orders
un
der
frame
contracts
are
also
s
ubject
to
a
high
degree
of
volatility,
becaus
e
th
ey
reflect
expected
market
conditions
which
may
or
may
not
materialize.
Thus,
they
are
su
bject
to
risks
of
price
redu
ction,
ord
er
cancellation
and modifications
as to quantities actu
ally ordered resulting in
inventory b
uild
-ups.
Furthermore, developing industry trends, including customers’ use
of outsourcing and t
heir deployment of new
and
revised supp
ly chain models, may reduce ou
r ability to for
ecast
changes in cus
tomer demand an
d may increase ou
r
financial requirements in
terms of cap
ital expenditures an
d inventory lev
els.
We
entered
2021
with
a
backlog
h
igher
than
we
had
enterin
g
2020.
For
2022,
w
e
entered
the
year
with
a
b
acklog
higher than what
we had entering 2021.
3.2.2.10.
Competition
Markets
for
our
products
are
inten
sely
competitive.
We
com
pete
with
major
internation
al
semiconducto
r
companies
and
while
only
a
few
compan
ies
compete
with
us
in
all
of
our
product
lines,
we
face
s
ignificant
competition
from
each
of
th
em.
Small
er
nich
e
compan
ies
are
a
lso
in
creasing
th
eir
par
ticipation
in
the
semiconductor
mark
et,
and
semiconductor
foundry
companies
have
expanded
significantly,
particularly
in
Asia.
Competitors
in
clude
manufacturers
of
standar
d
semiconductors,
ASICs
and
fully
cus
tomized
ICs,
including
both
chip
an
d
boar
d-level
products, as
well as custome
rs who develop
their own
IC pr
o
ducts and
foundry o
perations. Some
of our
competitors
15
are also
our cus
tomers
or suppliers.
We comp
ete in
different
product lines
to v
arious degrees on
the
basis of p
rice,
technical per
formance,
product
features,
prod
uct sy
stem compatib
ility, cus
tomized des
ign,
availability,
quality
and
sales and technical
support. In particular,
standard products may
involve greater risk of competitive pricing,
inventory
imbalances
and
severe
market
fluctuat
ions
than
differentiated
products
.
Our
ability
to
compete
successfully
depends
on
factors
both
within
an
d
outs
ide
our
control,
including
s
uccessful
and
timely
development
of new products and manufacturing processes, prod
uct performance and quality, manufac
turing yields and produ
ct
availability, cu
stomer service, pricing, ind
ustry trends an
d general economic trends.
The semiconductor
indus
try is charact
erized by
the high
costs associated
with developing mark
etable prod
ucts an
d
manufacturing
technologies
as
well
as
high
levels
of
investment
in
pro
duction
capabilities.
As
a
result,
th
e
semiconductor
indu
stry
has exp
erienced,
and
is
expected
to
continue
to
experience,
significan
t
vertical
and
horizontal
consolidation
among
our suppliers,
competitors
and customers, which
cou
ld
lead
to
erosion
of
our market
share, impact our
capacity to compete and require u
s to restructu
re our operations
.
3.2.2.11.
Public Funding
We
receive
public
funding
m
ainly
from
French,
Italian
an
d
EU
governmental
entities.
Such
fun
ding
is
generally
provided
to
encourage
R&D
activities,
industrialization
and
local
econ
omic
develop
ment.
Public
fundin
g
in
France,
Italy
and
Europe
is
generally
availab
le
to
all
companies,
regard
less
of
their
ownership
structure
or
country
of
incorporation. The con
ditions for th
e receipt of gov
ernment funding may
include eligibilit
y restrictions
, approval
by
EU authorities, annual bu
dget appropriations, compliance with EU
regulat
ions, royalties or contingent retu
rn
provisions
as well as
specifications
regarding
objectives and
results. The
approval p
rocess for
such fundin
g may
last
up
to
several
years.
Certain
sp
ecific
contracts
require
comp
liance
with
extensive
regulato
ry
requirem
ents
and
set
forth
certain
conditions relating
to the
fund
ed
programs. T
here
could
be
penalties if
th
ese
ob
jectives
are
not
fulfilled.
Other
contracts
contain
penaltie
s
for
late
deliveries
or
for
b
reach
of
con
tract,
which
may
result
in
repayment
ob
ligations.
Our
funding
programs
are
classified
under
four
general
categories:
Resear
ch
an
d
Development
(R&D),
Innovation
activities
(RDI),
Firs
t
Indu
strial
Deploy
ment
activit
ies
(FID)
and
capital
inv
estment for
pilot lines
and
loans.
We
also
benefit
fro
m
tax credits
for
R&
D
activiti
es
in
several
countries
which are
generally available
to
all
co
mpanies
.
The
main
programs
in
which
we
are
in
volved
includ
e:
(i)
Importa
nt
Project
of
Common
European
Interest
(IPCEI)
which
combines Research,
D
evelopment
and Inno
vation activities
(RDI)
as well
as First
Industrial Deployment
activities
(FID); (ii)
Key Dig
ital
Technologies
Initiative
(KDT, formerly
Electronic
Compo
nents
and Sys
tems for
European Lead
ership (ECSEL)
, which co
mbines all e
lectronics
related R&D act
ivitie
s
and
is operated by
joint
undertakings
formed
by
the
Eu
ropean
Union
,
certain
member
states
and
industry;
(iii)
EU
R&D
projects
within
Horizon 2020 (the
Euro
pean Union's research
an
d innovation framework); and
(iv) nation
al or
region
al programs for
R&D
and
for
in
dustrialization
in
the
e
lectronics
industries
involving
many
companies
a
nd
laboratories.
The
P
an
-
European
programs
cov
er
a
period
of
several
y
ears,
while
national
or
re
gional
programs
in
France
and
Italy
ar
e
subject mostly t
o annual bud
get appropri
ation.
In
December
20
18,
the
E
uropean Commission
announced the
approval of
the IPCEI,
a Pan-European project
initiated
to foster research an
d innovation in microele
ctronics to be fun
ded by Germany, Fran
ce, Italy and t
he U.K.
In
our
role
as
beneficiary
of
t
he
IPCEI
on
microelectronics,
we
hav
e
been
allo
cated
an
overall
fun
ding
bud
get
of
approximately
€340 mill
ion fo
r the
period
2016
-2022 in
Fra
nce (locally
referenc
ed as
Nano2022
which
is su
bject to
the conclusion of
agr
eements every year
with the
pub
lic autho
rities and
linked to
techn
ical objective and
as
sociated
achievements,
an
d
about
€720
million
for
th
e
period
2018
-2024
in
Italy.
The
IPCEI
program
is
highly
strengthenin
g
our
leadership
in
key
technologies.
It
contributes
to
anticipate,
accelerate,
an
d
s
ecure
ST's
technological
developments.
In December 2021,
ST submitted
a new IPCEI p
rogram, titled
IPCEI on Microel
ectronics
and Communication
Technologies
(IPCEI
–
ME/
CT).
This
new
pan
-Europ
ean
project
was
in
itiated
to
foster
research
and
innovation
and
k
ick
-start the first
industrialization of microelectronics. This
new IPCEI will involve ST in Fra
nce (from 2022 to 2026),
Italy (from 2023 to 2027) and Malta
(from 2021 to 2025), as well as abo
ut 100 other companies acros
s 15 European
countries.
In
2021
we
also
rec
ognized
€87.5
million
of
grant
s
related
to
ou
r
participation
in
IPCEI
in
Italy
and
€62.4
million related to ou
r participation in
IPCEI in the nat
ional and Horizon 2020 program in
France
.
16
3.2.2.12.
Suppliers
We
use
three
primary
critical
types
of
s
uppliers
in
our
b
usiness:
(i)
equipment
supp
liers,
(ii) material
s
uppliers
and
(iii)
external
silicon
foundries
and
b
ack-end
s
ubcontractors.
We
also
purch
ase
third
party
licensed
technology
from
a limited number of pro
viders.
In
the
front-end
process,
we
use
steppers,
scan
ners,
tracking
equipment,
strippers,
chem
o
-mechanical
po
lishing
equipment,
cleaners,
insp
ection
equipment,
etchers,
physical
and
ch
emical
vapor
-deposition
equipment,
implanters, furnaces, t
esters, p
robers an
d other specialized equ
ipment. The manufacturin
g tools
that we use in t
he
back-end
process
include
b
onders,
bu
rn
-in
ovens,
testers
and
oth
er
specialized
equip
ment.
The
quality
and
technology
of
equipment
used
in
the
IC
manufacturing
process
define
s
the
limits
of
our
technology.
Demand
for
increasingly smaller chip structures
means that semiconductor produ
cers must quickly incorporate the latest
advances in
process
technology
to
remain
competitive.
Advan
ces
in
process technology
cannot
occur
without
commensurate
advances
in equipment
technology,
and
equipment
costs
tend
to increase as
th
e equipment
becomes more soph
isticated.
Our
manufactu
ring
process
es
use
many
materials
,
including
s
ilicon
and
SiC
wafers,
lead
frames,
mold
compound
,
ceramic package
s an
d che
micals
and
gases.
The prices
of m
any
of these
materials
are v
olatile
due to
the
specificity
of
the
market.
We
hav
e
therefore
ad
opted
a
“multiple
so
urcing
stra
tegy”
designed
to
protect
us
from
the
risk
of
price
increas
es.
The
same
strategy
applies
to
supp
lies
for
the
materials
u
sed
by
us
to
av
oid
poten
tial
material
disruption
o
f
essential
m
aterials.
Ou
r
“multiple
s
ourcing
strategy”,
our
Financial
Risk
Monitoring
as
well
as
the
robustness of o
ur supply chain and
strong partnersh
ip with suppliers are
intended to mitigate these risks
.
Finally, we also use external subcontractors
to outsource wafer manufacturing and assembly and testing of finished
products.
3.2.3. Key announcem
ents
On November 18, we
announced the following changes in our Executive Com
mittee, effective as of January
1, 2022:
•
The
appointment
of
Marco Cassis,
as
President,
Analog,
ME
MS
and
Sensors
Group.
In
addition
to
his
Product
Grou
p
role,
Cas
sis
will
retain
a
numb
er
of
corporate responsibilities,
namely Strategy
Development,
System Research and Ap
plications an
d the Innovation Office;
•
The appointment of Remi El
-Ouazzan
e, as President of the Microcontroller and Digital ICs Grou
p, following
Claude Dardanne’s
decision
to retire at the end of the year
from this po
sition;
•
Lorenzo
Grand
i
is
confirmed
in
his
Chief
Financial
Officer
r
ole
and
will
be
ap
pointed
President
of
Finance,
Purchasing, E
RM and Resilience;
•
The
appointment of
Jero
me
R
oux,
cu
rrently
Executiv
e
Vice
Presi
d
ent,
Asia Pacif
ic
Region, as
Pres
ident,
Sales
& Marketing.
On August 18,
we published o
ur IFRS
2021 Semi
Annual Accounts for
the
six
-month period e
nded July
3, 2021 on
ou
r
website and filed them with t
he Netherland
s Authority
for the Financial
Markets
(Autoriteit Financiële Markt
en).
On
Augus
t
17, we
announced
the e
xpansion
of a
n
existing m
ulti
-year, long-term
silicon carbide
wafer
supp
ly
agreement
with
Cree.
The
amended
agre
ement,
which
calls for
C
ree
to
supp
ly
us
with
150mm
silicon
carbide
b
ar
e
and epitaxial wafers ov
er the next s
everal years, is no
w worth more than $800 million
.
On
July
1,
we
announced
the
launch
of
a
share
buy
-back
program
of
up
to
$1,040
mil
lion
to
be
executed
within
a
3-year period.
We
intend
to carry
out
the
buy
-back pro
gram and
hold
the shares
bought
back as
treasury
stock for
the purp
ose of
meeting
our
obligation
s in
relation
to o
ur employ
ee stock
award
plans
and
to
supp
ort th
e potential
settlement of our ou
tstanding convertib
le bonds.
On
June
25,
w
e
announced
a
strategic
cooperation
with
the
Renault
Group
on
advanced
power
semiconductor
products
for
electric
and
hybrid
vehicles
which
will
see
u
s
benefit
from
signif
icant
volumes
guaran
teed
of
power
modules and wide b
andgap power transis
tors to b
e supplied from 2026
-2030.
17
On
Ju
ne
24,
we
signed
an
agreement with
Tower
Semicon
ductor
(“Tower”) by
which
Tower
will
s
hare
a
portion
of
the
cleanroom
of
ou
r
ne
w
Agrate
R3
300mm
fab,
which
is
curren
tly
und
er
constru
ction,
in
order
to
accelerate
fab
ramp-up to reach a h
igh utilizatio
n level and s
cale.
On
June
9,
we
an
nounced
that
Benedetto
Vigna,
President
of th
e An
alog,
MEMS
an
d
Senso
rs
Group,
has
informed
the Company that
he will step down from his
position o
n August 31, 2021 to b
ecome CEO of anoth
er company.
On May
27, we held
our Annual
General
Meeting of
Shareh
olders (AGM)
in Schiphol, the Netherlands. T
he proposed
resolutions, a
ll approved by the Shareholders, were:
•
The
adoption
of
the
Compan
y's
Statuto
ry
Annual
Accoun
ts
for
the
year
ended
December
3
1,
2020,
prepared
in accordance
with International Financial
Reportin
g Standards
(IFRS)
and filed
with the Dutch
Authority for
the Financial Markets (AFM) o
n March 25,
2021;
•
The
distribu
tion
of
a
cash
div
idend
of
$0.24
per
outstand
ing
share
o
f
the
Compan
y’s
com
mon
sto
ck
to
be
distributed
in
quarterly
instalments
of
$0.06
in
each
of
the
second
,
third
and
fourth
quarters
of
2021
and
first quarter of 2022;
•
The
reappointment
of
Mr.
Jean
-Marc
Chery
as
sole
member
of
the
Ma
naging
Board
for a
three
-year
term
to expire at the end o
f the 202
4 AGM;
•
The reappointment of Mr. Nicolas
Dufourcq, as member of the Supervisory Board, for a three
-year term to
expire at the end of the 202
4 AGM;
•
The
ad
option
of
an
amended
remuneration
policy
for
the
Managing
Board,
in
line
with
recent
changes
in
Dutch co
rporate la
w and the EU’s
Shareholder Rights Direc
tive II (SRDII);
•
The approval of th
e stock
-based portion of the compens
ation of the President
and CEO;
•
The adoption of a n
ew 3-year Unv
ested Stock Award Plan fo
r Management
and Key Employ
ees;
•
The authorizatio
n to the Man
aging Board, u
ntil the end of
the 2022 AG
M, to repurchas
e shares
, subject to
the approval
of the Supervisory Board;
•
The
del
egation
to
th
e
Supervisory
Board
of
the
authority
to
issue
n
ew
co
mmon
shares,
to
grant
rights
to
subscribe for
such
shar
es,
and
to limit
and/or exclude
existing shareholders’
pre
-emptive rights
on
common
shares, un
til the end of the 2022 AGM;
•
The discharge of the sole
member of the Managing Boar
d; and
•
The discharge of the
members of the Su
pervisory Board
.
On
May
19,
we
announced
the
acq
uisition
o
f
the
assets
of
Cartesiam,
a
French
software
compan
y
sp
ecialized
in
artificial
intelligence
development
tools,
and
the
trans
fer
and
integration
o
f
its
employees.
The
tra
nsaction
was
closed on Ju
ly 6, 2021.
On May 5, we ann
ounced th
e publication of ou
r 24th sustainability repo
rt detailing the 2020 perfor
mance.
3.2.4. Financial outloo
k: Capital investment
Our
policy
is
to
modu
late
our
capita
l
spending
accordin
g to
the
evolutio
n
of
the
semicon
ductor
market.
To further
increase our production capacity
and to support our strategic initiatives, we plan to invest about $3.4 billion to
$3.6
billion
in
cap
ital
expenditures
in
2022.
A
portion
of
th
ese
capital
expenditures
will
be
devoted
to
su
pport
capacity
additions
and
mix
change
in
our
manufacturing
footp
rint,
in
particular
for
our
fabs:
(i)
digital
300mm
in
Crolles,
18
France,
optimizing existing
in
frastructu
res
and e
xtending the
cleanroom to
supp
ort
production ramp
up on
our main
runner technologies; (ii)
certai
n selected programs of
capacity
growth
an
d infrastructure preparation in
s
ome
of our
most
advanced
200mm
fabs,
including
th
e
analog
200mm f
ab
in
Singapo
re and
(iii)
increase
capacity
for
SiC p
ower
mosfet
in
o
ur
Catania
and
Singapore
fabs
.
The
mos
t
importan
t
2022
cap
ital
investments
for
our
back-end
facilities
will
be: (i) capacity growth
on certain package
families, including the SiC
technology and automotive
related
packages,
next
generation
optical
sensing
technologies
and
the
new
generation
of
Intelligent
Power
Mod
ule
s
for
Automotive
and
Indu
strial
applications
and
(ii)
specific
investments in
innovative
assembly
processes
and
test
operations.
A
portion
of
our
cap
ital
expenditu
res
will
be
devote
d
to
stra
tegic
initiatives
which
include:
(i)
the
first
industrializatio
n
line
of
ou
r
new
300m
m
wafer
fab in
Agrate,
Italy
,
to
suppo
rt
next
generation
mixed
signal
and
power
technologies;
(ii)
Gallium
nitri
de
(“GaN”)
power
technologi
es
in
our
200mm
fab
in
Tours,
Fran
ce,
and
prototyp
ing
for
GaN
RF
devices
in
our
150mm
fab
in
Catania,
Italy,
and
(iii)
inv
estments
for
Silicon
Carbide
(“SiC”
)
s
ubstrates
activities.
The
remaining
part
of
our
capital
investment
plan
covers
the
o
verall
maintenan
ce
and
efficiency
improvements
of
our
manu
facturing
operations
and
infrastr
ucture,
as
well
as
our
Ca
rb
on
Neutrality
execution
program in both
150mm, 200mm front
-end fabs
and back
-end plants
.
We
will
continu
e
to
inv
est
to
support
revenues
growth
and
new
p
roducts
introduction,
taking
into
consideration
factors such as trends in
th
e semiconductor industry and capacity utilization. We expect
to need
significant financial
resources in the coming y
ears for capital expenditures a
nd for our investments in man
ufacturing and R&D. We p
lan
to fund
our
capital
requirements
with
cash
provided
by
operating
activities,
available
fund
s an
d s
upport from
third
parties, and may
have recourse to borrowings u
nder available credit lines and
, to the extent necess
ary or attractive
based
on
market
con
ditions
prevailing
at
the
time,
the
issuance
of
debt,
con
vertible
bonds
or
add
itional
equity
securities. A substantial deterioration of our economic
results
, and consequently of our pr
ofitability, could generate
a
deterioration of
the
cash generated
by
our operating
act
ivities.
Therefore,
th
ere
can be
no
ass
uran
ce
that,
in
future
periods, we will
generate the same
level of cash as
in prior years to
fund our capital expenditure
plans for
expanding/upgrad
ing our
p
roduction facilities,
ou
r w
orking capital re
quirements, our R&D
and manufacturing costs.
We believe that w
e have the f
inancial resources n
eeded to meet o
ur currently projected
bus
iness requirements for
the
next
twelve
months,
includ
ing
capital
expenditures
for
our
manufactu
ring
activities,
working
capita
l
requirements,
approved d
ividend payments and th
e repayment of our
debt in line with
maturity dates
.
Our
capita
l
expenditures
plan
and
the s
trong
cus
tomer
demand
expected
in
2022,
will
allow
us
to
drive
the
Grou
p
based on a
plan for 2022 revenues in
the range of $14.8 bill
ion to $15.3 billion.
3.2.5. Liquidity and finan
cial position
We
maintain
an
adequ
ate
cash
position
and
a low
d
ebt-
to
-equity ratio
to
provide
us
with
adequate f
inancial
flexibility.
As
in
the
pas
t,
our
cash
management
policy
is
to
finance
our
investment
ne
eds
mainly
with
net
cash
generated from operating a
ctivities.
During
2021,
our
net
cash
increased
by
$
219
million
.
The
components
of
the
net
cash
increase
for
202
1
and
the
comparable periods a
re set forth b
elow:
In millions of USD
2021
2020
Net cash from operatin
g activities
3,462
2,458
Net cash us
ed in investing activities
(1,865
)
(2,339
)
Net cash from (used in
) financing activities
(1,369
)
279
Effect of change in exchan
ge rates
(9
)
1
Net cash incre
ase
219
399
19
Net cash from
operating activities
Net
cash
from
operating
acti
vities
is
the
sum
of
(i)
net
pr
ofit
adjusted
for
non
-cash
ite
ms
and
(ii)
changes
in
n
et
working
capital.
The
net
cash
from
operating
activities
in
2021
was
$3,462
million,
increasin
g
comp
ared
to
$2,458
million in the prior year, main
ly due to h
igher net profit.
Net cash used
in investing activities
Investing
activities
used
$1,865
million
of
cash
in
2021,
main
ly
as
a
result
of
pay
ments
for
purchas
e
of tangible
ass
ets,
net of
proceeds, for a
total of $1,828
million and investment in
intan
gible assets
of $444
million, of
which the
largest
part
is
related
to
the
cap
italization
of
development
cos
ts,
p
artially
offset
b
y
proceeds
from
matured
marketabl
e
securities of $132 million a
nd net proceeds r
eceived from net in
vestments in s
hort
-term deposits
of $290 million.
Net cash from
(used in) financing activities
Net
cash
used
in
financing
activities
was
$1,369
million
for
2021,
compared
to
$279
mil
lion
in
2020,
and
consisted
mainly of
$
1.22 billion
cash used to
s
ettled Tranche B
of our 2017 Senior U
nsecured Convertible Bonds, $485
million
repurchase
of
common
sto
ck,
$205
million
o
f
dividends
paid
to
our
sto
ckholders
and
$134
million
repayment
of
long-term debt,
partially offset
by proceeds f
rom the
partial $602
mil
lion drawdown
of our
credit facility signed
with
the EIB and $182 m
illion proceeds from the drawdown of our credit facility signed with Cassa Depositi e Prestiti SpA
(“CDP”).
Free cash flow (no
n-GAAP mea
sure)
Free
Cash
Flow,
a
n
on-GAAP
measure,
is
d
efined
as
(i)
net
cash
from
operating
activities
plus,
(ii)
net
cash
used
in
investing activities, excluding payment for purchase of (and p
roceeds from matured) marketab
le securities, and net
investments
in
sh
ort-term
deposits,
which
are
considered
as
temporary
financial
investments.
The
result
of
th
is
definition
is
ultimately
net
cas
h
from
operating
activities
plus
payment
for
purchases
(and
proceeds
from
sale)
of
tangible,
intangible
and
financial
assets
,
and
net
cash
paid
for
business
acqu
isitions.
We
believe
Free
Cas
h
Flow,
a
non-GAAP
measure,
provides
useful
information
for
investors
and
management
because
it
measures
ou
r
capacity
to generate
cash from our
ope
rating and investing
activities to
sus
tain our
o
perations. Fre
e Cash
Flow is a
non
-GAAP
measure
and
does
not
represent
to
tal
cash
flow
since
it
does
n
ot
include
the
cash
flows
generated
by
o
r
used
in
financing
activities
to
sus
tain
ou
r
o
perations.
Free
Cash
Flow
reconciles
with
the
net
cas
h
increase
(de
crease)
by
including
th
e
payment
for
purchase
of
(and
proceeds
from
matured)
marketable
securiti
es
an
d
net
investments
in
short-term
deposits
,
the
net
cash
from
(used
in)
finan
cing
activities
and
th
e
effect of
chan
ges
in
exchange
rates.
In
addition, ou
r definition of Fre
e Cash Flow may
differ from definitions
used by
other companies. Ou
r Free Cash Flow
is
derived
from
ou
r
US
GAAP
Conso
lidated
Statements
of
Cash
Flows,
which
differs
from
o
ur
Consolidated
20
Statements
of
Cash
Flows
u
nder
International
Financial
Reporting
Standards
(“IFRS”).
A
reconciliation
with
the
Consolidated Stat
ements of Cash Flo
ws under IFRS is p
rovided in the table b
elow:
In millions of USD
December 31,
2021
December 31,
2020
Net cash from
operating activities as
repor
ted
3,462
2,458
Excluding U.S. GAAP/IFRS d
ifferences:
Payment for withholding tax
on vested shares
49
31
Payment for lease liabilities
(64
)
(59
)
Interest on settled convertible bonds
(40
)
(41
)
Net cash from
operating activities adjusted
3,407
2,389
Net cash used
in investing activities as repor
ted
(1,865
)
(2,339
)
Excluding:
Payment for purchase of (and p
roceeds from matured)
marketable
securities and net inves
tments in short
-term deposits
(422
)
577
Payment for pu
rchase (and procee
ds from sale) of tangible,
intangible and financial ass
ets, and net c
ash paid for business
acquisitions
(1)
(2,287
)
(1,762
)
Free Cash Flow (no
n-GAAP measu
re)
1,120
627
(1)
Reflects
the total
of the
following l
ine ite
ms r
econciled
with our
C
onsolida
ted Statements
of Cash
Flows relating
to investi
ng ac
tivities:
Payment
for
purchase
of t
angible
assets,
P
roceeds
from
sale
of
tangible
assets,
Payment
for
purchase
of
intangible
assets,
Net
payment
for fi
nancial assets, Proce
eds from sale of f
inancial assets
and
Payment
for business
acquisitions, net
of cash acquired.
Our Free Cash Flo
w was $1,120
million in 2021, co
mpared to $
627
million in 20
20
.
Financial position (non
-GAAP measu
re)
Our
Net
Financial
Position
represents
the
difference
between
our
total
liquid
ity
and
our
tota
l
finan
cial
d
ebt.
Our
total liquidity includes
cash and cash
equiv
alents, short-term deposits and
q
uoted debt
securities; our
total financial
debt
includes
interest
-bearing
loans
and
borrowings
,
including
current
portion,
as
represented
in
our
consolida
ted
statement
of
f
inancial
position.
Net
Financial
Position
is
a
non
-GAAP
measure
but
w
e
believe
it
prov
ides
useful
information
for
investors
an
d
management
because
it
gives
evidence
of
our
global
pos
ition
either
in
terms
of
net
indebtedness
or
net
cas
h
by
measuring
our
capital
resources
based
on
cas
h
and
cash
equivalents,
restricted
cash,
short-term
deposits
and
quoted
debt
securities
and
the
total
level
of
our
financial
indebtedness.
Our
definition
of
Net
Financial
Position
may
d
iffe
r
fro
m
definitions
used
by
other
companies
and
th
erefore
comparab
ility
may
be
limited. Our
Net Financial Position is
derived from
o
ur US GAAP
Con
solidated Balance Sheets, which
differs from the
Consolidated
Statements
of
Financial
Position
under
IFRS.
A
reconciliation
with
the
Cons
olidated
Statements
of
Financial Position u
nder IFRS is pro
vided
in the table below:
21
In millions of USD
December
31,
2021
December
31,
2020
Cash and ca
sh equivalents
3,225
3,006
Short-term depos
its
291
581
Government bond
s issued by the U.S. Treasury
—
133
Total liquidity
3,516
3,720
Funding program loan
s from Euro
pean Investment Ban
k
(990
)
(579
)
Credit Facility from CDP
(156
)
—
Dual tranche senior
unsecured conv
ertible bonds
(1,382
)
(2,034
)
Other funding pro
grams loans
(6
)
(4
)
Total financial debt as r
eported
(2,534
)
(2,617
)
U.S. GAAP/IFRS differenc
es on senior
unsecured conv
ertible bonds
(5
)
(4
)
Total financial debt ad
justed
(2,539
)
(2,621
)
Net financial position (non
-GAAP measur
e)
977
1,099
Our Net
Fina
ncial Position as of
December 31, 2021 was
a net
cash position of
$977
million, decreasing compared to
the net cash p
osition of $1,099 million a
t December 31,
2020.
At
December 31,
2021, our
financial debt
was $2,534
million, composed
of (i)
$143 m
illion of
cu
rrent
portion of
long-
term
debt
an
d
(ii)
$2,391
million
of
long-term
debt.
The
breakdown
o
f
o
ur
total
financial
debt
includ
ed:
(i)
$1,382 million
in
senior
unsecured
convertible
b
onds
issued
in
2020,
(ii)
$990
million
in
Europ
ean
In
vestment
Bank
loan
s
(the
“EIB
Loans”),
(iii)
$156
million
in
the
CD
P
loan
and
(iv)
$6
million
in
loans
from
other
fundin
g
programs.
The
EIB Loans are
comprised of
two long-term amortizing credit
facilities as part
of
ou
r p
ublic f
unding programs. The
first,
signed in
Augu
st
2017,
is
a €500
million loan,
in
relation
to
R&D
and capital
exp
enditures
in
th
e
European
Union,
fully drawn in Euros, of which $424
m
illion was outstanding as at December 31, 2021.
The second, signed in 2020, is
a
€500
million
credit
facility
agree
ment
with
EIB
to
su
pport
R&D
and
capital
e
xpenditu
re
programs
in
Italy
and
France. It was fully dra
wn in 2021, of which $5
66 million outs
tanding as at December 31,
2021.
In 2021, we signed a new Faci
lity Agreement with CDP for a
n amount of €150 million, fu
lly drawn in Euros
, of which
$156 million was outs
tanding as at
December 31, 2021.
On
July 3,
2017,
we
issued
$1.5
billion
offering
of
s
enior
unsecured
conv
ertible
bonds
(Tranche
A
for
$750
million
and
Tranche
B
for
$750
million), originally
due
2022
and
2024,
respectively.
Tranche
A
bonds we
re
issued
at
101.265%
as
zero-coupon
bonds
while
Tranche
B
bonds
were
issued
at
par
and
bear
a
0.25%
p
er
annum
nominal
interest,
pay
able
semi-ann
ually.
The
conversion
price
at
issuance
was
$20.5
4,
equivalent
to
a
37.5%
pre
mium
on
both
tranches,
which
corresponds
to
9,737
equivalent
shares
per
each
$200,000
bond
par
value.
The
bonds
are
convertible by the bondhold
ers or are callable by us, following contractual terms an
d schedule, if certain conditions
are satisfied, on a net-share settlement basis, except if we elect a full-cash
or full-share conversion as an alternative
settlement. The net pro
ceeds from the bon
d offering were
$1,502
million, after dedu
cting iss
uance costs
.
The call op
tion av
ailable to
us
for th
e early
redemption
of Tran
che A
was exercis
ed in
July
2020. As
a
consequence,
bondhold
ers
exercised
their
conv
ersion
rights
on
th
e
full
Tranche
A.
As
we
elected
to
n
et
-share
settle
the
bonds
,
each conv
ersion exerc
ised by
the
bondhold
ers followed
the
process
defined in
the o
riginal
terms and
cond
itions
of
the
s
enior
unsecured convertible bonds,
which
d
etermined the
actual number
of shares
t
o
be
tra
nsferred
upon each
conversion.
We
settled
th
e
bonds
upon
conversion
by
redeeming th
rough
cas
h
th
e
$750
million
principal
amount,
and
by
settling
the
residual
consideration
through
the
delivery
of
app
roximately
11.4
million
treasury
sh
ares.
The
net-share settlement was
fully completed as
of October 1,
2020.
22
The call op
tion av
ailable to
us
for th
e early
redemption
of
Tranche
B was
exercised
in Ju
ly 2021.
As a
cons
equence,
bondholders
exercised th
eir
con
version
rights
on th
e full
Tranche
B. E
ach con
version
exercised
by
the bo
ndholders
followed the process
defined i
n the original terms a
nd condi
tions of th
e senior unsecured co
nvertible bonds
, which
determined
th
e
actual
consideratio
n
to
be
trans
ferred
to
bo
ndholders upon
each
conv
ersion.
Out
o
f
the
3,75
0
bond
s
composing T
ranche B,
we elected
to
settle
1,238 bonds
on a
net
-share
basis for
a total
con
sideration of
$479
million,
through
the
payment of
the $248
million
no
minal
value
in
cash and
the
delive
ry of
appro
ximately
5.8
million
treas
ury
shares.
The
remaining
2,512
bo
nds
were
settled
on
a
full
cash
basis
for
a
total
cons
ideration
of $1,015
million.
The
settlement was fully comp
leted during t
he second half of 2021.
On August 4,
2020, we
iss
ued
$1.5 billion offering of
s
enior unsecured
convertible bonds (
Tranche A
for $750
million
and
Tranche
B
for
$750
million),
due
2025
and
2027,
respectively.
Tranche
A
bonds
were
iss
ued at
105.8%
as
zero
-
coupon
bonds and
Tranche B bon
ds were iss
ued at
104.5% as
zer
o-coupon
bonds.
The conversion
price
at issuance
was
$43.62
for Tranche
A
equiv
alent
to
a
47.5%
con
version
p
remium
and
$45.10
for Tranche
B,
equivalent
to
a
52.5%
conversion
premium.
These
c
onversion
features
corresp
ond
to
an
equivalent
of
4,585
shares
per
each
Tranch
e
A
bond $200,000 par value
and an equivalent of
4,435 shares per e
ach Tranche B bond
$200,000 par value. The
bonds
are
convertible by
the bondholders
or
are callable
by
us following contractual
terms and
schedule, if
certain
conditions
are satisfied, o
n a net-share settlement
basis, except if w
e elect a full
-cash o
r full-sh
are conversion as
an
alternative settlement. T
he net
proceeds from
the bond offering
were $1,567
million, after deducting issuance cost
s
paid by th
e Company.
Our long
-term debt
contains
standard
conditions
but do
es not impose
minimum fin
ancial ratios
. We
had
unutilized
committed m
edium-term credit
facilities with
core
relationship banks
totaling $
910
million as
at De
cember
31, 2021.
Our
current
ratings
with
the
three
major
rat
ing
agenci
es
that
report
on
us
on
a
s
olicited
basis,
are
as
follows:
Standard
&
Poor’s
(“S&P”):
“
BBB
”
with
stable
outlook;
Moody’s
Investors
Service
(“Mo
ody’
s”):
“Baa2”
with
stable
outlook; Fitch Ratin
gs (“Fitch”):
“
BBB
”
with s
table outlook.
3.2.6. Financial risk manage
ment
We are exposed to changes in financial mark
et conditions in the normal cou
rse of business due to our operations in
different
fore
ign
currencies
and
ou
r
on
-going
investing
and
financing
activities.
Market
risk
is
t
h
e
un
certainty
to
which
future
earnings
or
asset/liability
values
are
exposed
du
e
to
operating
cash
flows
denominated
in
foreign
currencies
and
various
financial
instruments
used
in
the
normal
course
of
op
erations.
Th
e
major
financial
risks
to
which
we
ar
e
expos
ed
are
th
e
foreign
exchange
risks
relat
ed
to
the
fluctuations
of
the
U.S.
do
llar
exchan
ge
rat
e
compared to the Eu
ro and the other major currencies in which
costs are incurred, th
e variation of the interest rates
and
the
risks
associated
to
the
investments
of
our
available
cash.
We
have
es
tablished
policies,
procedures
and
internal
pro
cesses
gov
erning
our
management
of
market
risks
and
the
use
of
financial
in
struments
to
manage
our
exposure to su
ch risks.
Financial
risk
manage
ment
is
carr
ied
out
by
a
central
treas
ury
department
(
“
Corpo
rate
Treasury
”
).
Additionally,
a
Treasury
Committee,
chaired
by
our
C
hief
Financial
Officer,
s
teers
treas
ury
activities
and
ensures
compliance
with
corporate
po
licies.
Treasury
activities
are
thus
regulated
b
y
our
po
licies,
which
d
efine
procedures,
objectives
an
d
controls.
The policies
focus
on
the man
agement of
financial
risk
in terms
of
exposure to
market
risk,
credit risk
and
liquidity risk. Treas
ury controls
are subject to in
ternal audits
. Most treas
ury ac
tiv
ities are centralized, with an
y local
treasury
activities
su
bject
to
oversight
from
Corpora
te
Treas
ury.
Corporate
Treas
ury
identifies, e
valuates and
hedges
financial
risks
in
close
coo
peration
with
the
Company’s
subsidiaries
.
It
pro
vides
written
princip
les
for
overall
ris
k
management,
as
well
as written
policies
covering
sp
ecific
areas
,
such a
s
foreign
exchan
ge
ri
sk,
interest
rate
risk,
price
risk, credit risk, use of
d
erivative financial instruments, and i
nvestments of excess liquidity. The
majority of
cash and
cash
equ
ivalents
is
held
in
U.S.
dollars
and
Euros
and
is
placed
with
financial
institution
s
rated
at
least
a
single “A”
long-
term rating
from two
of the major
rating agencies, me
aning at least
A3 from
Moody’s and A
- f
rom S&P
or
Fitch,
or better.
These ratin
gs are
closely
and con
tinuously monitored
in order
to
manage exposu
re to
the cou
nterparty’s
risk.
Hedging
trans
actions
are
performed
only
to
h
edge expo
sures
deriving
from
operating,
in
vesting
and
finan
cing
activities conducted
in the normal cour
se of bus
iness.
23
Foreign exchange risk
We condu
ct our
busin
ess on
a glob
al bas
is in
variou
s major in
ternational
currencies. As
a
result,
we ar
e expos
ed to
adverse
movements
in
foreign
currency
exchan
ge
rates,
primarily
with
respect
to
the
Euro.
Foreign
ex
change
risk
mainly arises from recogniz
ed as
sets and liabilities a
t our subsidiaries an
d future commercial trans
actions.
Cash flow and fair value inte
rest rate risk
Our
interest
rate
risk
aris
es
from lon
g-ter
m b
orrowings.
Borrowings
issued
at
var
iable
rates expo
se
us
to
cash
flow
interest rate risk. Borrowings
iss
ued at fixed rates expos
e us to fair value interest
rate risk.
Credit risk
We s
elect b
anks
and
/or
financial
in
stitutions
that
operate
with
the
Group
based
o
n
the
criteria
of
long
-term
rating
from
at
least
two
major
Rati
ng
Agencies
and
keeping
a
maximum
outsta
nding
amount
per
instrument
with
each
bank not
to
exceed
20%
of
th
e
tota
l. For
derivative
financial
instruments
,
management
has established
limits
so that,
at any time, the fair v
alue of contracts o
utstanding is not concentrated with
any ind
ividual counterparty.
We monitor the cre
ditworthiness of our customers to
which we grant cre
dit terms in t
he normal course of business.
If
certain
customers
are
independ
ently
rated,
these
rating
s
ar
e
used.
Otherwise,
if
th
ere
is
no
independ
ent
rating,
risk control as
sesses th
e credit quality of th
e customer,
con
sidering its
financial position
, past exp
erience and other
factors.
The
utilization
o
f
cr
edit
limits
is
regularly
m
onitored.
Sales
to
cus
tomers
are
primarily
s
ettled
in
cash.
At
December 31,
2021
and
2020,
n
o
customer
represented
more
than
10%
of
trad
e
accounts
receivable,
net.
Any
remaining
concentra
tions
of
cred
it
risk
with
respe
ct
to
trade
rec
eivables
are
li
mited
du
e
to
the
larg
e
number
o
f
customers and t
heir dispersion acros
s many geograph
ic areas.
Liquidity risk
Prudent
liqu
idity
risk
management
includes
maintaining
sufficient
cas
h
and
cas
h
equivalents,
short
-term
deposits
and
marketable
securities,
th
e
av
ailability
of
funding
from
committed
credit
facilities
a
nd
the
ability
to
close
out
market
position
s.
Our objective
is
to m
aintain a
s
ufficient
cas
h
pos
ition
an
d
a
low
debt
-
to
-equity
ra
tio,
which ensures
adequate
financial
flexibility.
Ou
r
liquidity
management
po
licy
is
to
finance
ou
r
investments
with
net
cas
h
from
operating activities.
Management monitors
rollin
g forecasts
of Group’s liq
uidity reserve based o
n expected cas
h flows.
3.3. Risk management and Internal control
3.3.1. Risk Management
3.3.1.1.
Our Risk Manag
ement approach
As
a
compan
y
operatin
g
globally
in
the
semiconducto
r
market,
we
are
expo
sed
to
risks,
particularly
in
the
current
environment of increased volatility, uncertainty and complexity. For
a descrip
tion of ST’s
ris
k factors, please refer
to
the section 3.3.1.2.
Our
embedded approach
to
enterprise
risk management
(
“
ERM
”
)
is
formalized in
a
specific policy
and
is
aligned with
ISO 31000. It enables u
s to:
•
Set and enable our
Company strategy,
manage our performan
ce, and capita
lize on opportunities; an
d
•
Systematically identify, evalu
ate and treat s
pecific risk scenarios.
Our
ERM improvement
road
map
includes
,
in particular,
deploying our
Risk
framework which
is
bas
ed
on the
following principles:
•
Taking into cons
ideration the interests
of our stakeh
olders
•
Addressing un
certainty explicitly
24
•
Pragmatic and tailored to ST
•
Integral part of ST pro
cesses and d
ecision-making
•
Proactive, structu
red, dynamic, iterative and r
esponsive to chan
ge
•
Based on the b
est available information
Our risk framework is des
cribed in th
e following chart:
RISK FRAMEWORK
Our
risk
approach
is
man
aged
by
our
Chief
Audit
&
Risk
Executive
under
the
direct
respon
sibility
of
ou
r
Ma
naging
Board
an
d
the
oversight
of
our
Sup
ervisory
Board.
The
content
of
this
ov
ersight
role
is
detailed
in
our
Supervisory
Board Charter.
Our Risk governan
ce is described in t
he following char
t:
Risk oversight and governance
Risk functions and communities
Risk culture
Risk appetite
Governance,
organisation
and culture
Risk processes (definitio
n and methodologies)
Risk tools
Risk reference documentation (policies & procedures)
Risk
Enablers
Response to- and monitoring of-
risk & opportunity
(enabling strategy and performance)
Managing
risk &
opportunity
25
Risk governance
3.3.1.2.
Risk Factors
Below is a list of the main ris
ks factors we believe ar
e related to the s
emiconductor indus
try and specifically related
to our
operations
, which
may
affect
our res
ults an
d p
erformance an
d the
ability
of
our
management
to
predict
the
future:
Risks Related to th
e Semicondu
ctor Industry wh
ich Impact Us
We,
and
th
e
semiconducto
r
i
ndustry
as
a
wh
ole,
may
be
impacted
by
change
s
in,
or
uncertainty
about,
g
lobal,
regional and local econom
ic, political, legal
, regulatory and social environmen
ts as well a
s climate c
hange
Changes in, and uncertain
ty about, economic, political, legal, regulatory
and social condition
s pose a risk as
consumers
an
d
bu
sinesses
may
postpo
ne
spendin
g
in
res
ponse
to
factors
su
ch
as
curtailment
of
trade
an
d
other
business
restrictions,
financial
market
v
olatility,
in
terest
rate
fluctu
ations,
shifts
in
inflationary
and
deflationary
expectations,
lower
capital
and
pro
ductivity
growth,
unemployment,
negative
news,
declines
in
income
or
asset
values
an
d/or
other
factors
.
Such
g
lobal,
regional
and
local
con
ditions
could
have
a
m
aterial
adverse
effect
on
customer
and
end
-market
de
mand
for
our
produ
cts,
th
us
materially
adversely
affecting
our
busines
s
and
financial
condition.
The ins
titution
of
trade
tariffs
globally
,
as
well
as
th
e th
reat
thereof,
cou
ld
negatively
imp
act
economic
con
ditions,
which
cou
ld
have
negative
repercussions
f
or
our
business.
In
particular,
trad
e
protection
and
nat
ional
s
ecurity
policies of the U
.S. and Chines
e governments, including tariffs, trade restrictio
ns, export restrictions and the placing
of companies on restrict
ed en
tity lists, h
ave and may contin
ue to limit or pr
event us from
transacting b
usiness with
certain
of
ou
r
Chinese
cu
stomers
or
suppliers;
limit,
prevent
or
d
iscourage
certain
of
our
Chines
e
customers
or
suppliers from tran
sacting business with us; or make it more expensiv
e to do so. If disputes were to arise und
er any
of our agreements with other
parties conducting business in China, the resolution of
su
ch dispute may be
subject to
the
exercise
of
discretion
b
y
the
Chinese
government,
or
agencies
of
the
Chinese
government,
which
may
have
a
material
adverse
effect
on
our
business.
In
ad
dition,
we
could
face
increas
ed
competition
as
a
result
of
Chin
a's
programs
to
promote
a
domestic
semicondu
cto
r
industry
and
supp
ly
chains
(including
the
Made
in
China
2025
campaign).
26
Trade policy
changes
could
trigger r
etaliatory
actions
by
affected countries,
which
could
have
a
negative impact
on
our
ability
to
do
business
in affected
countries
o
r
lead
to
reduce
d
p
urchases
of
our
products
b
y
foreign
customers,
leading to
increas
ed costs
of components contained
in
our
products, increased manufacturing
costs
of our
products
,
currency
exchange
rate
volatility,
and
higher
prices
for
our
products
in
foreign
markets.
F
urther,
protectionist
measures, laws or gov
ernmenta
l policies may encourag
e our custo
mers to relocate th
eir manufacturing cap
acity or
supply
chain
to
th
eir o
wn
respective
countries
or
require
t
heir
respective
contractors
,
subcontra
ctors
and
relevant
agents
to
do
so,
which
could
impair
o
ur
ability
to
sus
tain
our
current
level
of
productivity
and
manufacturin
g
efficiency.
We,
and
the
semiconductor
indus
try
as
a
whole,
face
greater
risks
due
to
th
e
internation
al
nat
ure
of
the
semiconductor bus
iness, including
in th
e countries where we, our cu
stomers or our s
uppliers operate, such as
:
•
instability
of
foreign
governments,
in
cluding
the
threat
of
war,
military
conflict
(including
the
military
conflict
between Russia
and Ukraine)
, civil unrest, r
egime changes, mass
migration a
nd terrorist attacks
;
•
natural events
such as severe weather, earthquak
es and ts
unamis, or the effects of climat
e change;
•
epidemics and
pandemics such
as disease
outbreaks
or more
recently COVID
-
19
and
o
ther health
related issues;
•
changes in, or
uncertainty a
bout, laws, regulations
(including executive orders) and
policies affectin
g trade and
investment,
including
following
Brexit
an
d
including
through
the
imposition
of
trade
and
travel
restrictions,
government sanction
s, local practices which fav
or local co
mpan
ies and constra
ints on investment;
•
complex
an
d
varying
government
regulations
and
legal
standard
s,
p
articularly
with
resp
ect
to
export
con
trol
regulations
and
restrictions,
custo
ms an
d ta
x require
ments,
data
privacy
, intellectual
property
an
d
anti-
corruption; and
•
differing
practic
es
of
regulatory,
tax,
judicial
and
administrative
bo
dies,
i
ncluding
with
regards
to
the
interpretation of laws, go
vernmental approv
als, permits and licenses.
The
semiconductor
industry
is
cyclical
and
downturns
in
the
semiconductor
industry
can
negatively
affect
our
results of operations an
d financial condition.
The s
emiconductor
ind
ustry
is
cyclical
and
h
as
been
subject
to
significant
downturn
s
from
time
to
time,
as
a
result
of
global
economic
con
ditions,
as
well
as
industry-specific
factors
,
such
as
bu
ilt-in
excess
capacity
,
fluctuation
s
in
product
supply,
product
obsolescence
and
ch
anges
in
end
-customer
preferences.
The
COVID
-19
pandemic
has
caused
a
significant
con
traction
in
the
global
economy,
and
there
is
consi
derable
uncertainty
as
to
its
severity
and
duration.
Downturns are typically
ch
aracterized by
redu
ction in
o
verall demand, accelerated e
rosion of
selling prices, re
duced
revenues and high inventory levels, any of which could result in a
significant deteri
oration of our results of
operations.
Such
macroecon
omic
trends
typically
relate
t
o
the
semiconductor
indu
stry
as
a
whole
rather
than
to
the
in
dividual
semiconductor
markets
to
which
we
sell
our
p
roducts.
To
the
extent
that
industry
downturns
are
concurrent with
the timing
of new
incr
eases in
production capacity or introduction of
new
ad
vanced technologies in
our industry, the
negative effects on
our business from
such industry downturns may
als
o
be m
ore severe.
We have
experienced
revenue
volatility and
market
d
ownturns in
the
pas
t
and expect
to experie
nce them
in
the
futu
re,
which
could have a mat
erial adverse impact on o
ur results o
f operations and financial cond
ition
.
The
duration
and
the
sev
erity
of
th
e
global
outbreak
of
COVID
-19
has
impacted
and
may
continue
to
impact
the
global economy and also co
uld adversely affect our bu
siness, financ
ial condition and results o
f operations.
The C
OVID-19
pan
demic
ha
s
resulted
in
authorities
im
posing,
an
d
businesses
and
individuals
implementing,
numerous
meas
ures
to
try
to
con
tain
th
e
virus
,
includin
g
travel
bans
an
d
restriction
s,
s
helter
-
in
-plac
e
and
stay
-
at
-
home
orders,
quarantines
and
social
distancing
guidelines.
While
to
date
we
have
n
ot
seen
a
s
ignificant
impact
on
our manu
facturing facilities
or ou
r supply
chain
–
the ability of
our suppliers
to deliver on
their commitments
to
us,
27
our ability to ship our
prod
ucts to our
customers and general consumer demand f
or our products may be
n
egatively
impacted by the pan
demic and/or government resp
onses thereto.
Many
of o
ur
prod
ucts
an
d
s
ervices
are
consid
ered
to
be
es
sential
un
der
nation
al
and
local
guidelines.
As
such,
we
have
generally
continued
to
operate
in
each
of
the
ju
risdictions
where
we
are
present.
H
owever,
certain
of
our
facilities h
ave
not
been
able
t
o
op
erate
at
optimal
capacity
an
d
any
futu
re restrictiv
e
measures
may
h
ave
negative
impact on our op
erations, supply chain
and transpo
rtation networks. In additio
n, our cus
tomers and suppliers h
ave
experienced,
an
d
may
in
the
future
experience,
dis
ruptions
in
th
eir
operations
and
supply
chains,
which
can
result
in
delayed, re
duced,
or cancelled
orders,
or colle
ction
risks
,
and
which
may
ad
versely
affect
our
results
of operations.
The
COVID
-19
p
andemic
has
ad
versely
affected
and
may
continue
to
advers
ely
affect
the
economies
and
financial
markets of many
countries, an
d may result in a
further prol
onged period of r
egional, nati
onal, an
d global economic
slowdown.
In
respon
se
to
the COVID
-19
pan
demic,
governments
across
the
world
hav
e and
are exp
ected to
spend
significant
amounts
to
fun
d
disease
control
meas
ures,
support
healthcare
infras
tructure,
suppo
rt
businesses
and
revive
th
eir
econo
mies.
Gove
rnments
could
look
to
re
-direct
resources
and
implement
austerity
meas
ures
in
the
future to
balance
public
finances, whic
h cou
ld resu
lt in reduced
economic act
ivity. An
y furth
er economic d
ownturn
could re
duce
overall demand
f
or
our
products,
accelerate the
erosion
of
selling
prices, lead
to reduced
r
evenues
and
higher inventory levels
, any of which could resu
lt in a signific
an
t deterioration of our
results of operation
s.
The COVID-19 pan
demic has caused u
s to modify our business
practices, including with resp
ect to work
-from
-home
policies, employee travel, the cancellation
of physical participat
ion in meetings, events, and co
nferences, and social
distancing
measures.
Although
these
changes
have
not
led
to
a
significan
t
impact
on
our
business
or
results
of
operations,
we
could
be
negativ
ely
affected
in
the
future
if
government
po
licies
furth
er
restrict
th
e
ability
of
our
employees
to
perform
th
eir
functions
or
if
ou
r
employees
con
tract
or
are
exposed
to COVID
-19.
In
addition
,
work-
from-home
and
other
measu
res
introduce
additional
operational
ris
ks,
including
cy
bersecurity
risks.
There
is
no
certainty
th
at
such
measures
will
be
s
uf
ficient
to
mitigate
the
risks
posed
by
the
virus,
and
illness
and
workforce
disruptions cou
ld lead to unavailability o
f key personnel an
d harm our ability to p
erform critical functions.
The
pan
demic
has
led
to
increas
ed
d
isruption
an
d
volatility
in
capit
al
markets
and
cred
it
markets.
Unanticipated
consequences
of
the
pand
emic
and
resulting
economic
uncertainty
could
adversely
affect
our
liquidity
and
capital
resources in the futu
re.
The degree to
which
COVID-19
impacts
our results
will depend on
future d
evelopments, which are
highly
uncertain
and cannot be predicted,
including, bu
t not limited to, the duration and severity o
f the pandemic, the actions taken
to contain the virus or treat its impact, other actions taken by governments, bus
inesses, and indiv
idu
als in response
to the virus and resulting economic
disruption
, and how qu
ickly and to what extent normal
economic and operating
conditions
can
resume.
We
are
unable
to
predict
the
extent
of
the
impact
o
f
the
pandemic
on
our
customers,
suppliers,
vend
ors,
and
other
partners,
and
their
financial
condition
s,
but
a
material
effect
on
these
parties
could
also materially adv
ersely affect us.
Given
the
continued
and
substantial
economic
uncertainty
and
volatility
created
by
the
pan
demic,
it
is
difficult
to
pr
edict
the
nat
ure
and
extent
of
impacts
on demand
for
our
products. For
example,
th
e
increased
demand f
or
certain
of
our
p
roducts
th
at
benefited
as
a
result
of
work
-
and
learn-from-home
d
ynamics
may
not
continue
as
the
pan
demic
progresses
or
su
bsides.
Similarly,
ev
en
as
the
pandemic
progresses
o
r
s
ubsides,
products
for
which
s
ales
have
declined or where costs
have increased could co
ntinue to experience lo
wer sales or high
er costs.
The
impact
of
COVID-19
can
also
exacerbate
oth
er
risks di
s
cussed herein,
which could
in
turn
have
a
material
ad
verse
effect
on
u
s.
Developm
ents
rel
ated
to
COVID-19 have
b
een
un
predictable,
an
d
add
itional
impacts
and
ris
ks
may ari
s
e
that we are not aware of or a
ble to resp
ond to appropriat
ely
.
We may not be able t
o match
our production capac
ity to demand.
28
As a
resu
lt of
the cyclicality and
v
olatility of
th
e semiconductor
industry,
it
is difficult
to predict future
dev
elopments
in
th
e
markets
we
s
erve,
and,
in
tu
rn,
to
estimate
requirements
for
production
capacity.
If
o
ur
mark
ets,
major
customers
or
certain
prod
uct
designs
or
technologies
do
n
ot
perform
as
well
as
w
e h
ave
anticip
ated,
or
if
demand
is
impacted
by
factors
outs
ide
of
our
or
our
cu
stomers’
co
ntrol,
such
as
th
e
COVID
-19
p
andemic,
we
risk
u
nused
capacity
charges,
write-offs
of
inventories
and
losses
on
produ
cts,
and
we
could
b
e
required
to
un
dertake
restructuring
and
transformation
me
asures
that
may
involv
e
significant
charges
to
our
earnings.
Furthermor
e,
during ce
rtain periods,
we
have
also
experienced
increas
ed
demand in
certain
market segments
and product
technologies, which
has led
to a shortage
o
f capacity,
an increase in
the lead times of
our delivery to
customers and,
in
certain
instances,
b
eing
required
to
enter
into
agreements
with
our
supp
liers
with
on
erous
terms,
such
as
take-
or
-pay arrangements.
The global
supply
of s
emiconductor
indus
try fab
rication capacity
is
currently
not s
ufficient to
meet the
demand
for
semiconductor prod
ucts. Any shortage of our
capacity and the capacity of our sub
-contractors may lead to us being
unable
to
service
some
of
our cus
tomers,
which
may
result in
adverse
affects
on
our cu
stomer relations
hips
and
in
liability
claims.
Further,
as
a
result
of
th
is
supply
imbalance,
the
industry
in
general
has
exp
erienced a
high
level
o
f
profitability and
gross margins, which may
not be susta
inable over the long
-ter
m.
Competition
in
the
semiconductor
industry
is
intense,
and
we
may
no
t
be
able
to
compete
successfully
if
o
ur
product design techno
logies, process technologies and
products do
n
ot meet market requirements. Furthermore,
the
compe
titive
environmen
t
of
the
industry
has
resu
lted,
and
is
expected
to
con
tinue
to
result,
in
vert
ical
and
horizontal
consolidation
am
ong
our
supp
liers,
com
petitors
and
custo
mers,
which
m
ay
l
ead
to
erosion
of
our
market share, impact our abi
lity to compete
and require us to re
structure our operations.
We
compete
in
di
fferent
pro
duct
lines
to
various
degrees
on
certain
characteristics,
for
example,
price,
technical
performance, product features, product design
, product availability, process technology,
manu
facturing capabilities
and
sales
and
technical
support.
Given
the
intense
comp
etition
in
the
semiconductor
industry,
if
our
p
roducts
do
not meet
market requirements
based
on any
of these characteristics,
o
ur business, financial
condition and results o
f
operations
could
b
e
materiall
y
adversely
affected.
Our
com
petitors
may
have
a
stronger
p
resence
in
key
markets
and geographic regions
, greater name r
ecognition, larg
er customer bas
es, greater govern
ment supp
ort and greater
financial,
research
and
development,
sales
and
marketing,
manufactu
ring,
distrib
ution,
technical
and
other
resources
than
we d
o.
The
se
competitors
may
b
e
able
to
adapt
more q
uickly
to
chan
ges
in
the
bu
siness
environment, to new or em
erging
technologies and
to changes in cus
tomer requirements.
The semiconductor industry is intensely competitive and characterized
by the high costs a
ssociated with developing
marketable products and manufacturing technologies as well
as
high levels of
investmen
t in production capabilities.
As
a
result,
the
semiconductor
industry
has
experienced,
and
is
expected
to
continue
to
experie
nce,
significant
vertical
and
horizo
ntal
con
solidation
among
ou
r
sup
pliers,
comp
etitors
an
d
cus
tomers.
Con
solidation
in
the
semiconductor
industry
cou
ld
erode
our
market
s
hare,
negatively
impact
our
ability
to
com
pete
an
d
require
us
to
increase our R&D effort,
engage in mergers a
nd acquis
itions and/or restru
cture our operations
.
Risks Related to Our Op
erations
Our high fixed costs co
uld adversely impact
our results.
Our operations are characterized by high fixed
or other costs which are
d
ifficult to reduce, including costs related to
manufacturing,
particularly
as
we
operate
ou
r
own
man
ufacturing f
acilities,
and
the employment
of
our highly
skilled
workforce. Wh
en de
mand
for our
produ
cts decreases,
competition
increases
or
we
fail to
forecast
deman
d
accurately,
we
are driven
to
redu
ce
prices
an
d
we
are
not
always
able
to
decrease
ou
r
total
cos
ts
in line
with
resulting
revenue declines.
As a
result,
th
e costs
associated with
o
ur
operations may not
be
fully absorbed, leading
to unuse
d
capacity charges, h
igher average unit cos
ts and lower gross margin
s, advers
ely impacting our results
.
29
Our
capital
needs
are
high
c
ompared
to
those
competitors
wh
o
do
not
manufacture
their
own
prod
ucts
and
we
may
n
eed
additional
funding
i
n
the
coming
years
to
finance
our
investments,
to
purchase
other
companies
or
technologies developed b
y third parties or to ref
inance our mat
uring indebtedn
ess.
As
a
result
of
o
ur
choice
to
maintain
contro
l
of
a
large
portion
of
our
manufacturing
technologies
an
d
capab
ilities,
we
may
require
significant
capital
expenditure
to
maintain
or
upgrade
our
facilities
in
the
event
that
our
facilities
become
inad
equate
in
terms
o
f
cap
acity,
flexibility
and
location.
We
monitor
o
ur
capital
expenditures
taking
into
consideration
factors
such
as
trends
in
the s
emiconductor
market,
customer
requireme
nts
and
capacity
utilizatio
n.
These
capital
expenditures
may
increase
in
the
future
if
we
decide
to
upgrade
or
e
xpand
the
capacity
of
our
manufacturing facilities, purchase or build new facilities or incre
ase investments suppo
rting key strategic
initiatives.
For
instance,
we
may
b
e u
nable
to
success
fully
maintain
and
op
erate
large
infrastru
cture
projects.
Such
increas
ed
capital
expend
itures
as
sociated
with
larg
e
infras
tructure
projects
and
strategic
initiativ
es
might
not
achieve
profitability
o
r
we
may
be
unable
to
utilize
infrastructu
re
projects
to
full
cap
acity.
There
can
also
b
e
no
as
surance
that future market demand and products required by our customers will meet our
expectations
. We
also may need
to
invest
in
other
companies,
in
IP
and
/or
in
technology
developed
either
by
us
or
by
third
parties
to
mainta
in
or
improve
our
position
in
th
e
market
or
to
reinfor
ce
our
existing
business.
Failure
to
invest
approp
riately
and
in
a
timely manner or
to successfully integrate any recent or future business acquisitions may
prevent us from achieving
the anticipated benefits a
nd coul
d hav
e a material adverse effect on o
ur busines
s and results of operation
s.
The foregoing may requir
e us to s
ecure additional finan
cing, including th
rough the issuan
ce of debt, equity or both.
The
timing and the
size of any
n
ew
share or
b
ond offering
woul
d depend upon market
condition
s as w
ell
as a
variety
of other
factors. In
ad
dition, the
capital markets may
from time to
ti
me offer
ter
ms of f
inancing that are
particularly
favorable.
We
cannot exclude
that w
e m
ay access
the capital
markets
opportun
istic
ally to
ta
ke
ad
vantage of
market
conditions.
Any
such
tran
saction
or
any
announcement
con
cerning
such
a
trans
action
could
materially
impact
the
market
p
rice
o
f
ou
r
com
mon
sh
ares.
If
we
are
unable
to
acces
s
capital
on
acceptable
terms,
th
is
may
adversely
affect our business
and results of op
erations
.
Our
operating
resu
lts
depend
on
our
ability
to
obt
ain
quality
s
upplies
on
commerc
ially
reasonable
te
rms.
As
we
depend
on
a
lim
ited
number
of
su
ppliers
for
materials,
e
quipment
and
technology,
w
e
may
experien
ce
supply
disruptions
if
suppliers
interr
upt
supply,
increase
prices
or
experience
material
adverse
changes
in
th
eir financ
ial
condition.
Our
ability to
meet
our customers’
demand to
manufacture our
prod
ucts
d
epends u
pon
ob
taining adequate
supplies
of quality materials o
n a timely bas
is and on commercially reasonab
le terms. Certain mat
erials are available from a
limited n
umber
of s
uppliers
or
only
from
a
limited n
umber
of
suppliers
in
a
particular
region.
We
purchase
certain
materials whose prices on t
he world markets have f
luctuated significantly in the
past and m
ay fluctuate significantly
in
the
future.
Although
supplies
for
most
of
the
materials
we
currently
u
se
are
adequate,
sh
ortages
could
occur
in
various
essential
materials
d
ue
to
in
terruption
of
s
up
ply
or
increased
demand
in
the
industry.
For
in
stance,
the
COVID-
19
outbreak could
cau
se disruptions from
th
e tem
porary closure of
s
uppliers’ facilities
or delays
and reduced
export or shipment of various materials
,
and the current military conflict between Russia and the Ukraine, including
indirect
im
pacts
as
a
result
of
sanctions
and
economic
disruption,
may
also
create
or
exace
rbate
supply
chain
disruptions
.
In
addition,
the
costs
of
certain
materials
may
increas
e
due
to
market
pressures
and
we
may
not
be
able to pass
on such cost increases to o
ur customers.
We
also
purchase
semiconductor
manu
facturing
equipmen
t
and
third
party
lice
nsed
technology
from
a
limited
number
of
s
uppliers
an
d
pro
viders
and, because
s
uch
equ
ipment
and
techn
ology
a
re
complex, it
is diff
icult
to
replace
one supplier or provider with
another or to substitute one piece
of equipment or type of
t
echnology for another. In
addition,
suppliers
an
d
prov
iders
may
extend
lead
times,
limit
our
sup
ply,
increase
prices
or
change
con
tractual
terms
related to
c
ertain
manufacturing e
quipment and
third party
licens
ed
techn
ology, an
y
of
which could
ad
versely
affect
our
results.
Furth
ermore,
suppliers
an
d
technology
prov
iders
tend
to
focus
their
investments
on
p
roviding
the
most
technologically
ad
vanced
equipment,
mat
erials
and
technology
and
may
no
t
be
in
a
position
to
ad
dress
our requirem
ents for
equipment,
materials
or techn
ology o
f older
generations
.
Although
we
work closely
with o
ur
suppliers
and
providers
to
avoid
s
uch
shortages
,
there
can
be
no
assurance
that
we
will
not
encounter
these
problems in the futu
re.
30
Consolidation
among
our
su
ppliers
or
vertical
integration
among
our
co
mpetitors
may
limit
our
ab
ility
to
obtain
sufficient
quantities
of
materi
als,
equipment
and
/or
techno
logy
on
commercially
reasonab
le
terms
and
engage
in
mergers
and acquisitions.
In
certain instances,
we
may be
re
quired to
enter into
agreemen
ts with
our suppliers
with
onerous
terms,
su
ch
as
take-
or
-pay
arrangements.
If
we
are
unable
to
obtain
supplies
o
f
materials,
equipment
or
technology
in
a
tim
ely
manner
or
at
all,
or
if
su
ch
mat
erials,
eq
uipment
or
technology
prove
inadequate
or
too
costly,
our results o
f operations could be ad
versely affected
.
Our financial results can be
affected by flu
ctuations in
exch
ange rates, principally in th
e value o
f the U.S. dollar.
Currency
exchange
rate
fluctu
ations
affect
our re
sults
of
operations
because
our
reportin
g
currency
is the
U.S.
dollar,
in
which
we r
eceive
th
e
major
portion
o
f
our
revenues,
while,
more
i
mporta
ntly,
we
in
cur
a
limited
portion
of
ou
r
revenue and
a
s
ignificantly higher
portio
n of
our costs
in
currencies
other than
the
U.S. dollar.
A
s
ignificant variation
of the value of th
e U.S. dollar
agains
t the principal cu
rrencies that h
ave a material i
mpact
on us (primarily th
e Euro,
but als
o certain
other
currencies
of coun
tries
where w
e hav
e operations
, su
ch as
the
Singapo
re dollar)
could
result
in a favorable im
pact, net of h
edging, on our net profit in
the case of
an
appreciation of th
e U.S. dollar, or
a n
egative
impact, net of hedging, on
our net
profit if the U.S. d
ollar depreciates relativ
e to these currencies, in p
articular with
respect to the Euro
.
In
order
to
reduce
the
exposure
of o
ur
financial
results
to
the
fluctuations
in
exchange
rates,
our prin
cipal
strategy
has
been to
balance
as much
as
possible th
e proportio
n of
sales
to ou
r custo
mers denominated in
U.S.
dollars
with
the
amou
nt of
purchases from
our suppliers
denominat
ed
in
U.S. dollars
and to
reduce the
weight
o
f
the other
costs,
including
depreciation,
denominated
in
E
uros
and
in
o
ther
currencies.
In
ord
er
to
further
reduce
our
exposure
to
U.S. d
ollar
exchange
rate
flu
ctuation
s,
we
have
hedged
certain
line items
o
n
our
Consolida
ted
Income
State
ments
,
in
p
articular
with
respect
to
a
portion
of
the
cost
of
sales,
the
majority
of
the
R&D
expenses
an
d
certain
SG&A
expenses
located
in
the
Euro
zone.
We
also
hedge
certain
manufacturing
costs,
included
within
the
cost
of
sales,
denominated
in
Singapore
dollars
.
There
can
be
no
assurance
that
our
hedging
transactions
will
prevent
us
from
incurring
higher
E
uro-deno
minated
manufacturing
costs
and/or
operating
expenses
when
translated
into
our
U.S.
dollar-based accou
nts.
Our
operating
results may
va
ry
signi
ficantly from
quarter to
quarter
and
annually
and
m
ay
also
differ
significant
ly
from our expectations or gu
idance.
Our
operating
res
ults
ar
e
affected
by
a
wide
variety
of
factors
that
could
materially
and
adversely
affect
revenues
and profitability
or lead to significan
t variability o
f our
operat
ing results from on
e period
to the next.
These factors
include
chan
ges
in
d
emand
from
our
key
customers,
capital
requirements
,
inventory
man
agement,
availability
of
funding,
competition,
ne
w
product
d
evelopments,
start
of
ado
ption
of
our
new
product
s
by
customers,
techno
logical
changes, manufacturing or supplier issues and effective tax rates. In addition, in
periods of industry overcapacity or
when
our
key
customers
encounter
difficulties
in
their
end
-markets or
pro
duct ra
mps,
orders
are
more expos
ed
to
cancellations,
reductions,
price
renegotiation
or
postponements,
which
in
turn
reduce
our
ab
ility
to
forecast
the
next quarter
o
r full
year production
levels, revenues
an
d m
argins. As a
result, we
may not
meet our
finan
cial targets,
which
could
in
tu
rn have
an
impact
on
ou
r reputatio
n
or brand.
For
these
reasons
and
others
th
at we
may
not
yet
have
identified,
our
revenues
and
operating
results
may
differ
materially
from
our
expectations
or
guidance
as
visibility is redu
ced.
If
our external silicon
foun
dries or
back-end subcontractors fail
to perform,
this could
ad
versely affect
ou
r
bu
siness
prospects.
We currently us
e external silicon foundries an
d back
-end subcontra
ctors for a portion of our manufacturin
g
activities.
Our
external
sili
con
foun
dries
o
r
back-end
su
bcontractors
ar
e curren
tly
unable
to
sat
isfy
our
demand
as
a result
o
f
an increase
in demand across
our industry
an
d di
s
ruptions
d
ue to
the COVID
-19 pandemic,
and we
exp
ect
such limitation in
capacity
to
contin
ue through 2022
. This
li
mitation on our ability
to satisfy
ou
r demand
may
extend
beyond
2022
and
our
external
s
ilicon
foundries
an
d
back
-end
s
ubcontracto
rs
may
experience
further
inability
to
satisfy our demand as a result of
competing orders, disruptio
ns due to the COVID-19 pan
demic or otherwise or may
experience
manufacturing
difficulties,
delays
or
reduced
y
ields.
Any
limitation
on
the
ability
of
our
external
silicon
31
foundries
an
d
back-end
subcontractors
to
satisfy
our
demand
may
cause
our
results
of
operation
s
and
ability
to
satisfy
the
demand
of
our
cus
tomers
to
suffer.
Like
wise,
if
we
are
unable
to
me
et
our
commitm
ents
to
silicon
foundries
an
d
back-end
subcontractors
,
our
res
ults
of
operations
could
suffer.
Prices
for
thes
e
services
also
v
ary
depending
on
capacity
utilization
rates
at
our
external
silicon
foundries
and
back
-end
s
ubcontractors
,
quantities
demanded and pro
duct and
process technology.
Such
outsourcing costs can
vary materially
an
d, in
cases
of industry
shortages, th
ey can increase significantly, n
egatively impacting o
ur
bus
iness prospects.
Our
manufacturing
proces
ses
are
highly
comple
x,
costly
and
pote
ntially
vulnerable
to
im
purities,
disruptions
or
inefficient
implemen
tation
of
prod
uction
changes
or
interruptions
that
can
significan
tly
increase
ou
r
costs
an
d
delay product shipments
to our custo
mers.
Our
manufacturing
process
es
are
highly
complex,
require
advanced
an
d
increasingly
costly
equipment
and
ar
e
continuous
ly modified
or maintain
ed in
an
effort to
improve yields
and
produ
ct performance
and
lower the cos
t o
f
production.
Furthermore, i
mpurities or
other
difficulties
in the
manufactu
ring pro
cess can
lower y
ields,
interrupt
production
or
result
in
scrap.
As
system
co
mplexity
and
produ
ction
chan
ges
have
increased
and sub
-micron
t
echnology
has
become
more
ad
vanced, manufacturing
tolerances
have been
reduced and
requirements
for precision
hav
e
become
even
more
demanding.
We
have
from
time
to
time
experienced
bottlenecks
and
production
difficulties
that
have
caused delivery
delays and
quality control
problem
s. T
here can
be no
assurance that
we w
ill
not experience
bottlenecks or pro
duction, transition
or other difficulties in th
e future.
In addition,
we are exposed t
o risks
related to interru
ptions of ou
r manufacturing
process
es. If any o
f our pro
perty
or equip
ment is
damaged
or
otherwise rend
ered unu
sable o
r inoperab
le due
to accident
, cy
berattack o
r otherwise
this could result in interruptions which could have a material
adverse effect on our business, financial condition and
results of operation
s.
We
may
experience
qua
lity
problems
from
time
to
time
that
can
result
in
decreased
sales
and
operating
m
argin
and product liability or wa
rranty claims.
We
sell
complex
products
that
may
not
in
each
case
comply
with
s
pecifications
or
customer require
ments,
or
may
contain
design
or
manu
facturing
defects
,
that
could
caus
e
personal
injury,
p
roperty
damage
or
security
risks
that
could be exploited by
unauth
orized third parties
hacking, corru
pting or otherwise obta
ining access to o
ur products
,
including
the
softwar
e
loaded
thereon
by
us,
our
suppliers
or
ou
r
customers.
Althoug
h
our
general
practice
is
to
contractually
limit
our
liab
ility to
th
e repair,
replacement
or
refund
of
defective pro
ducts,
we
occasionally
agree
to
contractual
terms
with
key
cus
tomers
in
which
we
prov
ide
e
xtended
warranties
and
accordingly
we
may
face
product liab
ility, warranty,
delivery failure, and/or oth
er claims relating
to our pro
ducts th
at could res
ult in
significant
expenses
r
elating
to
compens
ation
payments
,
product
recalls
or
oth
er
actions
r
elated to
su
ch
extended
warranties
and
/or
to
maintain
good
customer
relationships,
which
cou
ld
result
in
decreased
sales
and
o
perating
margin
and
other
material
adverse
effects
on
our
busines
s.
Costs
or
pay
ments
we
may
make
in
connection
with
warranty
and
other
claims
or
pro
duct
recalls
may
ad
versely
affect
our
results
of
operations
.
There
can
be
no
assurance
that
we
will
be
successful
in
maintain
ing
our
relat
ionships
with
cu
stomers
with
whom
we
incur
quality
problems.
Furthermore, if
liti
gation occurs
we
could incur
significan
t
costs and
liabilities to
d
efend
ou
rselves against
such
claims
.
The
industry
has
experi
enced
a
rise
in
p
remiums
and
deductib
les
with
regards
to
insurance
policies.
These may
continue
to increas
e and
insurance
coverage may
also corre
s
pondingly
decrease.
If litigation
occurs
and
damages are
awarded against us, t
h
ere
can be
no assurance that
o
ur
insurance policies w
ill be
availab
le
or adequate
to protect us
against such claims
.
Disruptions
in our
relationsh
ips wi
th any
one
of our
key customers
or
distributo
rs,
and/o
r
material changes
in their
strategy or financial condit
ion or bu
siness prospects, coul
d adversely affect our
results of operations.
A s
ubstantial
portion
of
our
sales is
derived
from
a
limited
number
of
customers
and
distribu
tors.
There can
b
e n
o
assurance
that
our
customers or
distributo
rs will
continue
to book
the s
ame level of
sales
with
us
that
they have
in
the
past,
will
continue
to
succeed
in
th
e
markets
th
ey
s
erve
and
will
not
purch
ase
competing
products
over
our
products
.
Many
of
our key
cu
stomers
an
d
distributors opera
te in
cyclical businesses
that
are
also highly
competitive,
32
and
th
eir
own
market
positions
m
ay
var
y
cons
iderably.
In
recent
years,
some
of
our
customers
h
ave
vertically
integrated
their
bu
sinesses.
Such
vertical
integrations
may
impact
ou
r
business.
Ou
r
relationships
with
the
newly
formed
entities could
b
e
eith
er
reinforced
or
jeopardized by
the
integration.
I
f
we
ar
e
unab
le
to
maintain
or increase
our market
share
with our
key
customers
or distributo
r
s, or
if they
were to in
crease pro
duct
returns
or fail
to meet
payment
ob
ligations,
our
results
of
operations
cou
ld
be
materially
adversely
affected.
Certain
of
our
produ
cts
are
customized to ou
r customers’ specifications. I
f customers do not purchas
e pr
oducts made sp
ecifically for them, we
may
not
be
able
to
recover
a
can
cellation
fee
from
our
cus
tomers
or
resell
such
produ
cts
to
other
customers.
In
addition,
the
occurrence
of
epidemic
or
pandemic
ou
tbreaks
such
as
COVID-19
could
affect
our
customers.
Wh
ile
the
geographic
spread
of
CO
VID-19
canno
t
be
predicted
a
nd
its
future
developm
ents
are
uncertain,
if
its
s
everity
increases, the adv
erse public health impact on o
ur customers cou
ld negatively affect our results
.
We
may
experience
delays
in
delivering
our
product
and
technology
roadmaps
as
well as
transformation
initiatives.
Our
industry
adap
ts
to
technological
advancements
and
it
is
likely
th
at
new
pro
ducts,
equipment,
processes
an
d
service
methods,
including
transformation
initiatives
related
to
d
igit
alization
,
are
in
the
process
of
being
implemented.
Any
failure
by
us
to
manage
our
data
governance
pro
cesses
could
un
dermine our
initiativ
es
related
to
digitalization
and
any
failure b
y
us
to
react
to
ch
anges
or
advan
ces
in
existing
technologies
an
d
proc
esses
as
we
develop and in
v
est in
our product, technology
and transformation
ro
admaps could mater
ially
delay
th
e introduction
of
n
ew
solu
tions.
If
we
ar
e
no
t
able
to
execute
on
these
road
maps
on
a
timely
b
asis
or
at
an
acceptable
cost
th
is
could result in
loss of competitiv
eness of our s
olutions, decreased revenue and a
loss of market s
hare
.
Our
computer
systems,
including
h
ardware,
s
oftware,
information
an
d
cl
oud
-based
initiatives,
a
re
subject
to
attempted
security
breaches
and
other
cybersecu
rity
threats
,
wh
ich,
if
successful,
could
adversely
impact
our
business.
We
have,
from
time
to
time,
detected
and
experienced
attempts
by
oth
ers
to
gain
unauthorized
access
to
our
computer
sys
tems
and
networks
.
T
he
reliability
and
security
of
our
information
technolo
gy
in
frastructure
an
d
software,
and
our
ability
to
expand
an
d
continually
update
technologies,
includ
ing
to
tran
sition
to
cloud
-bas
ed
technologies,
in
respons
e
to
our
changing
needs
is
critical
to
our
business.
In
the
curren
t
environment,
there
are
numerous
and
evolving
risks
to
cybersecurity,
includ
ing
criminal
hackers,
state
-sponsored
intru
sions,
terrorism,
industrial
espionage,
employee
malfeasance,
vandalism
an
d
human
or techn
ological
error.
Computer
hackers
and
others
rou
tinely
attempt
to
breach
th
e
security
of
techn
ology
products,
services,
and
sy
stems,
an
d
thos
e
of
our
customers,
suppliers
and providers
of
third party
licensed
technology,
and s
ome of
those
attempts
may be
successful.
Such
breaches
could
res
ult
in,
for
example,
un
authorized
access
t
o,
disclosure,
modificat
ion,
misuse,
loss,
or
destruction
o
f ou
r,
our
customer,
or
other
third
p
arty d
ata
or s
ystems,
theft
of
our
tra
de
secrets
and
other
sensitive
or
confidential
data
,
includin
g
personal
information
and
intellectual
property,
sys
tem
disr
uptions,
an
d
denial of service.
The
attempts
to
breach
our
systems,
includ
ing
cloud
-based
systems,
and
gain
unauthorized
access
to
our
information technology
systems are beco
ming increasin
gly more sophis
ticated. These attempts
may includ
e
covertly
intro
ducing
malware to
our
computers,
including th
ose
in
our
manu
facturing
operation
s,
and
impersonating
unauthorized users, among others. For
instan
ce, employees and
former employees, in particular
former employees
who
b
ecome
em
ployees
of
our
competitors
or
c
usto
mers,
may
mis
appropriate,
use,
publish
or
provide
to
ou
r
competitors
or
cu
stomers
our
intellectual
p
roperty
and/or
proprietary
or
confidential
business
information.
Also,
third
parties
may
attempt
to
register
domain
names
similar
to
o
ur
brands
or
webs
ite, which
could
cause
confusion
and
divert
online
cus
tomers
away
from
our
products
.
In
the
event
of
such
breaches,
w
e,
our
customers
or
other
third parties could be exposed to potential liability, litigation, and regulatory action, as well as the loss of
existing or
potential customers, damage
to our reputation,
an
d other
financial loss and
such
breaches
cou
ld also
result in losing
existing or potential customers in connection with any
actual or perceived
security vulnerabilities in our systems. In
addition,
th
e
cost
an
d
operational
cons
equences
of
responding
to
breaches
and
implementing
re
mediation
measures could be
significant.
As these
threats continue
to develop and
grow, we
have been adapting
and
strengthening our
security measures.
33
As
a
result
of
the
social di
stancing
measures
and
regulat
ions
enforced
by
governments in
con
nection
with
the
COVID
-
19
pandemic,
and
th
e
resulting
work-from-home
policies
that
we
have
undertaken,
there
has
been
ad
ditional
reliance p
laced
on
our
IT
s
ystems
and
reso
urces.
Th
e
result
ing
reliance
on
th
ese
resources,
an
d
the
added
need
to
communicate by electronic
means
, could increase ou
r risk of cybersecurity inciden
ts.
We continu
e to
increase
the r
esources
we allocate
to
implementing,
maintaining
and/or
u
pdating
security
syst
ems
to
p
rotect
data
and
infrastructure
and
to
raising
security
awareness
among
th
ose
hav
ing
access
to
our
sys
tems.
However, these
security
measures cannot provide
abso
lute
security and there can
be no assurance that our
employee
trainin
g,
operational,
and
other
techn
ical
security
measu
res
or
o
th
er
controls
w
ill
detect,
p
revent
or
remediate security or data
breaches in a timely
manner or
otherwise prevent unauthorized access to, damage
to, or
interruption of ou
r systems and o
perations.
We
regularly
evalu
ate
our
IT
sy
stems
and
b
usiness
continuity
plan
to
make
enhan
cements
an
d
periodically
implement
new
or
upgraded
systems,
as
for
in
stance
the
t
ransition
and
migration
of
our
dat
a
s
ystems
to
cloud
-
based platforms and
critical sy
stem migration.
Any
d
elay in the implementation of,
or disruption in the
trans
ition to
different
systems
cou
ld
adversely
affect ou
r
ability
to
recor
d
and
report
finan
cial an
d
management in
formation
on
a timely
and
accurate bas
is an
d cou
ld impact
our
operations
and
financial
position.
In
addition, a
miscalculation
of
the
level of
investment
needed to
ensure
our
technology solutions
are current
and up
-
to
-date
as technology
advances
an
d
evolves
could
resu
lt
in
disruptio
ns
in
our
business
s
hould
the
so
ftware, h
ardware
or
maintenan
ce
of
such
items
become
out-
of
-date
or
obsolete
and
the
costs
of up
grading
ou
r
cybersecurity
systems
and
remediating
damages could be s
ubstantial.
We
may
als
o
be
ad
versely
af
fected
by
security
breaches
related
to
our
equipment
prov
iders
and
providers
of
IT
services
or
third
party
licensed
technology
.
As
a
global
enterprise,
we
could
also
be
impacted
by
existin
g
and
proposed
laws
and
regulations,
as
well
as
government
policies
and
practices
related
to
cybersecurity,
priv
acy
and
data
protection.
Additionally,
cy
beratt
acks
or
other
catastrophic
events
resulting
in
disruptions
to
or
failures
in
power, information technolog
y, communication s
ystems or other critical infrastru
cture could result in interrup
tions
or
delays
to
us,
our
customers,
or
other
third
party
operat
ions
or
services,
f
inancial
loss,
potential
liability,
an
d
damage our reputation
and affect our relations
hips with ou
r customers and
suppliers
.
We
may
be
subject
to
theft,
loss,
or
misuse
of
perso
nal
data
about
our
employees,
customers,
or
other
third
parties, which could in
crease our expe
nses, damage o
ur reputation, or result in
legal or regulatory proceed
ings.
The
theft,
los
s,
or
misuse
of
perso
nal
dat
a
collected,
u
sed,
stored,
or
transferred
b
y
us
to
run
ou
r
business
cou
ld
result
in
significantly
in
creased
security
costs
or
costs
related
to
defending
legal
claims.
Global
priv
acy
legislation,
including
various
EU
regulations
and
directives
re
gulating
data
privacy
and
security,
such
as
the
G
eneral
Data
Protection
Regulation
(“GDPR”)
and
the
trans
mission
of
content
usin
g
the
Internet
involving
residents
of
the
EU,
enforcement,
and
policy
activity
in
this
area
are
rapidly
expanding
an
d
creating
a
complex
compliance
r
egulatory
environment.
In
particu
lar,
the
requirements
of
the
GDPR
impose
a
highe
r
compliance
burden
on
us
an
d
materially
increase
the
maximum level of
fines for co
mpliance failures
from their c
urrent
levels relatin
g to, amo
ng other th
ings, consent
to
process
personal
data
of
individuals,
the
in
formation
provided
to
individuals
regarding
th
e
processing
of
th
eir
personal
data, the s
ecurity and
confidentiality
of pers
onal data,
and notification
s in the
ev
ent of dat
a breaches
and
use
of
third
par
ty
process
ors.
Costs
to
comply
with
and
implement
these
p
rivacy
-related
an
d
d
ata
protection
measures
may
increase
and
may
necessitate
changes
to
our
business.
In ad
dition,
our
failure to
comply
with
local
and
internat
ional
privacy
or
data
p
rotection
laws
and
regulations
cou
ld
result
in
proceedings
agains
t
us
by
governmental entities or oth
ers. Failure to comply with
the GDPR or other data privacy regimes could s
ubject us to
significant fines and
reputational h
arm.
Further,
privacy
-related
legislation
is
rapidly
evolving
which
may
hav
e
a
negative
impact
on
our
business
if
interpreted
o
r
i
mplemented
in
a
manner
that
is
inconsistent
from
country
to
cou
ntry
and
incon
sistent
with
the
current
policies
an
d
practices
of
our
customers
or
bus
iness
partners.
We
may
also
have
to
chan
ge
th
e
mann
er
in
which
we con
tract
with
our
business
partn
ers, s
tore
and
transfer in
formation
and
otherwise
conduct
ou
r
business,
which could increase
our costs
and reduce ou
r revenues. I
n parti
cular, the requirements of th
e GDPR will imp
ose a
34
higher
compliance
burden
o
n
us
and
materially
increase
the
maximu
m
level
of
fines
for
complian
ce
failures
from
their current levels.
Costs to comply with and imple
ment these privacy-related and data protection measures could
be
significant.
In
addition,
our
failure
to
co
mply
with
local
and
international
privacy
or
dat
a
protection
laws
an
d
regulations could r
esult in proceedings agains
t us by gov
ernmental entities or others
.
Our
business
is
dependent
in
large
part
on
continued
growth
in
the
industries
and
segments
into
which
our
products are sold and on our
ability to retain existing customers and attract new ones.
A market decline in
any of
these industries, our
inability
to retain and at
tract
customers
, or customer de
mand for o
ur products which
differs
from our projections, could h
ave a mat
erial adverse effect on
our results of operations
.
The
de
mand
for
our
products
d
epends
significantly
on
the
demand
for
our
custo
mers’
end
produ
cts.
Grow
th
of
demand
in
the
indus
tries
and
segments
into
which
our
products
are
s
old
fluctuat
es
significantly
and
is
driven
by
a
variety
of
factors,
includ
ing
consumer
s
pending,
consumer
preferences,
the
developmen
t
and
accepta
nce
of
new
technologies and prevailin
g economic
condition
s. Changes in our
customers’ markets and in our cu
stomers’
respective
shares
in
such
markets
could
result
in
slower
growth
and
a
decline
in
demand
for
our
prod
ucts.
In
addition,
if
projected
ind
ustry
growth
rates
do
n
ot
materialize
as
forecasted,
our
spending
on
process
and
product
development ahead o
f marke
t acceptance cou
ld have a ma
terial adverse e
ffect on our b
usines
s, financial cond
ition
and results
of operations.
Our
business
is
dependent
upon
our
ability
to
retain
exis
ting
custo
mers.
In
2021
our
largest
cu
stomer,
Apple,
accounted
for
20.5%
o
f o
ur
revenues.
Wh
ile
we
do
not
believe to
b
e
dependent
on
any
one
custo
mer or
group
of
customers,
th
e
loss
of
key
customers
or
important
so
ckets
at
key
cus
tomers
could
h
ave
an
adverse
effec
t
on
ou
r
results of operation
s.
Our
existing
customers’
p
roduct
strategy
may chan
ge from
time to
time
and/or
prod
uct
specifications
may
ch
ange
on
short-time
produ
ct
life
cy
cles
an
d
we
have
no
c
ertainty
that
our
business,
financial
position
and
results
of
operations
will
no
t
be
affected.
Our
business
is
also
d
ependent
up
on
ou
r
ability
to
attract
new
cus
tomers.
There
can
be
n
o
assurance that
we
will be
successful in
attracting and
retain
ing
n
ew
cus
tomers,
or
in
ad
equately projecting
customer
demand
for
ou
r
pr
oducts
.
Ou
r
failure
to
do
s
o
could
materially
adversely
affect
ou
r
bus
iness,
finan
cial
position an
d results of operations
.
Market dynamics have d
riven, and continue
to drive us, to
a strategic repositioning
.
In
recent
y
ears,
we
have
undertaken
several
initiatives
to
reposition
our
bu
siness.
Our
s
trategies
to
improve
our
results
o
f
operations
and
financial
condition
hav
e
led
us,
and
may
in
the
future
lead
us, to
acquire
bus
inesses
that
we
be
lieve
to
b
e
co
mplementa
ry
to
our
own,
or
to
div
est
ourselves
o
f
or
wind
d
own
activities
that
we
believe
do
not
serv
e
our
longer
term
business
p
lans.
Our
potential
acquisition
strategies
d
epend
in
part
o
n
our
ab
ility
to
identify
suitable
acquisition
targets,
finance
their
acquisition,
ob
tain
ap
proval
by
our
sharehold
ers
and
ob
tain
required
regulatory and other
app
rovals.
Our potential divestiture
s
trategies depend
in part
on our ability
to
compete
an
d to
identify
the
activities
in
which
we
s
hould
no
longer
engage,
obtain
th
e
relevant appro
vals
pursuant
to
our
governance process
and then determine an
d execute appro
priate methods t
o divest of them.
We
are
constantly
monitoring
our
product
portfolio
and
cannot
exclude
that
additional
steps
in
this
reposition
ing
process may be required. Furthermore,
we cannot assure that
any strategic repositioning of our
business, including
executed
and
possible
future
acquisitions
or
dispositions,
will
be
success
ful
and
will
not
resu
lt
in
impairment,
restructuring charges a
nd other related closure cos
ts.
Acquisitions and divestitures
in
volve a
number of
risks that
could
adversely
affect
our operating
results and
financial
condition,
including:
we
may
be
unable
to
success
fully
inte
grate
b
usinesses
or
teams
we
acqu
ire
with
our
culture
and strategies o
n a timely basis or at all; an
d we may be required t
o record charges related
to the goodwill or oth
er
long-term assets
associated with
the acq
uired businesses.
There
can be
n
o
assurance that
we will
be able to
achieve
the
full
scop
e
of
the
benefits
we
expect
from
a
particular
acquisition,
div
estitu
re
or
inv
estment.
Ou
r
business,
financial cond
ition an
d results
of operations
may s
uffer if w
e fail to
coordinat
e our
resources effectively
to man
age
both
our
existing
businesses
an
d
any
acquired
businesses.
In
addition,
the
financing
of
futu
re
acq
uis
itions
or
35
divestitures
may
n
egatively
impact
our
financial
pos
ition,
including
our
ability
to
pay
a
dividend
and/or
repu
rchase
our shares, and
credit rating and we could b
e required to raise additio
nal funding.
Other
risks
as
sociated
with
acquisitio
ns
i
nclude:
assumption
of
potential
liabilities,
disclosed
or
u
ndisclosed,
associated
with
the
bus
iness
acquired,
which
liabilities
may
exceed
the
amount
of
indemnification
availab
le
from
the seller; potential in
accuracies in
the financials of th
e bus
iness acq
uired; and our ability t
o retain customers o
f an
acquired
entity,
its
business
or
indu
strialize
an
acquired
process
or
techno
logy.
Identified
ris
ks
associated
with
divestitures
include:
loss
of
activities
and
technologies
that
may
have
comp
lemented
our
r
emaining
businesses
or
operations; and
loss of important s
ervices provided by k
ey employees that are as
signed to divested a
ctivities
.
We
depend
on
co
llaboration
with
other
semiconductor
industry
com
panies,
res
earch
organizations,
univers
ities,
customers and
suppliers to furthe
r our R&D effo
rts, and our bu
siness and pros
pects could be
materially adversely
affected by the failure or te
rmination of such
alliances.
Our success d
epends on o
ur ability to introd
uce innovative new products
and techn
ologies to the
marketplace on
a
timely basis
. In
light of the
high levels
of investment
required for
R&D act
ivities, we depend
in
certain instan
ces on
collaborations
with
oth
er
semicond
uctor
ind
ustry
companies,
res
earch
organizatio
ns,
u
niversities,
cu
stomers
an
d
suppliers t
o develop or access new technologi
es.
Such collaboration provides u
s with
a number of
importan
t benefits,
includ
ing the
s
haring of
costs
, reductions
in our
own capital
requirements, acquisitions
of
technical know-how and access
to additional production capacities.
However,
there
can
be
no
assuran
ce
that
our
collaboration
efforts
will
be
successful
an
d
allow
us
to
develop
and
access n
ew technologies
in
due
time,
in a
cost
-effectiv
e m
anner an
d/or
to meet
custom
er demands.
If a
particular
collaboration terminates
befo
re
our intended
goa
ls
are
accomplis
hed
we
may incur
additio
nal
unforeseen
costs, and
our
business
and
prosp
ects
could
be
adversely
affected.
Furthermore,
if
we
are
unabl
e
to
develop
or
otherwise
access
new
technologies,
whether
independently
or in
collaboration
with
another
industry
particip
ant,
we may
fail
to
keep
pace
with
the
rapid
technology
advan
ces
in
th
e
semiconductor
industry,
ou
r
participation
in
th
e
overall
semiconductor indu
stry may decrease and we
may also lo
se market share
.
We
de
pend
on
patents
to
protect
our
rights
to
our
technology
an
d
may
face
claims
of
infringing
the
IP
rights
of
others.
We
depend on
patents and
other
IP
rights to
protect o
ur products
and our
manufacturing processes against
misappropriation
by
others. The
proc
ess of
seeking
patent protection
can
be long
and expensiv
e, and
there can
be
no assu
rance that we will receive p
atents from curr
ently pending o
r future applications
. Even if p
atents are iss
ued,
they may
not
be o
f su
fficient
scope
or stren
gth to
provid
e me
an
ingful
protection
or an
y
commercial
advan
tage.
In
addition, effective
IP protection may be
unav
ailable or
limited in some
countries
.
Our ability to
enforce
one or
more
of o
ur
patents
cou
ld
be
adversely
affected
by
changes
in
patent
laws
,
laws
in
certai
n
foreign
juris
dictions
th
at
may
not
effectively
protect
ou
r
in
tellectual
property
rights
or
by
ineffective
enforcem
ent
of
laws
in
such
jurisdiction
s.
Competitors
may
also
d
evelop
technologies
that
are
protected
by
p
atents
and
oth
er
IP
and
therefore
eith
e
r
be
unavailable to us or b
e made available to us subject to adverse terms and co
nditions. We have in the past used ou
r
patent
portfolio
to
negotiate
bro
ad
patent
cross
-licenses
with
many
of
ou
r
comp
etitors
enabling
u
s
to
design,
manufacture and s
ell semiconductor p
roducts, without concern of infringing pat
ents held by such competitors. We
may
not
in
the
future
be
able
to
o
btain
such
licenses
or
other
rights
to
protect
necessary
IP
on
favorable
terms
for
the
condu
ct
of
ou
r
busin
ess,
and
s
uch
failure
may
a
d
versely
impact
our
resu
lts
of
operations.
Such
cross
-license
agreements expire from ti
me to time and t
here is no ass
urance that we can or we
will extend them.
We have from time to time received, a
nd may in t
he future receive, communications a
lleging poss
ible infringement
of
th
ird
party patents
and
o
ther
IP rights.
Som
e
o
f
those claims
are made
by so
-called non-practicing entities
agains
t
which
we
are
unable
to
assert
our
own
patent
p
ortfolio
to
lever
licensing
terms
and
conditions
.
Competitors
with
whom
w
e
d
o
n
ot
have patent
cross
-license
agreem
ents m
ay also
develop technologies
that are
protected
by patents
and other IP rights
an
d which
may be unavailable to u
s or o
n
ly made available on
unfavorable terms and conditions.
We may
therefore
become
inv
olved
in
costly
litigation
brought
agains
t us
regarding
patents
and
other
IP
rights
.
IP
litigation m
ay
also
involve our
cus
tomers
who in
turn
may seek
indemnification from
us
s
hould
we
not prevail
an
d/or
36
who
may
decide
to
curta
il
their orders
for
those
of
our products
over
which
claims
h
ave
been
asserted.
Such
lawsuits
may therefore have a material
ad
verse effect on our business. We
may be forced to stop
producing substantia
lly all
or some o
f our produ
cts or
to license
the underlying
technology
upon econo
mica
lly unfav
orable terms and
conditions o
r we may be required to pay
damages for the p
rior use of third p
arty IP and/or face an injun
ction.
The
outcome of
IP litigation is
in
herently uncertain
and may
divert the
efforts and
at
tention of
our management and
oth
er specialized
technical
personnel.
Such
litigation can
result in
significant
costs an
d, if not
resolved in
our fav
or,
could materially and a
dversely affect our bu
siness, finan
cial condition and resu
lts of operations
.
We
ope
rate
in
man
y
jurisdictions wi
th
highly
complex and
varied tax
regimes.
Changes in
tax
rules,
new or
revised
legislation or the ou
tcome of tax asses
sments and audits co
uld cause a material advers
e effect on ou
r results.
We operate
in
many
jurisdictions
with
highly
comp
lex and
v
aried tax
regimes.
Chang
es in
tax
rules,
new or
revised
legislation or the outco
me of tax ass
essments and au
dits could have a material ad
verse effect on our resu
lts.
In
2019,
th
e
Organization
for
E
conomic
Cooperation
and
Developm
ent
(OECD)
lau
nc
h
ed
an
initiative
to,
amongst
others, minim
ize
p
rofit
s
hifting by
working towards
a global
tax f
ramework
that ensures
that corporate
income
taxes
are paid where consumption takes place, introduces a new tax dispute resolution process (Pillar I) and also
in
troduces a
global standard on minimum taxation (Pillar
II). The tax impact of the resp
ective proposals
is currently
being evaluated and
such proposals co
uld have a material adv
erse effect on our results
.
Our tax
ra
te i
s variable and
depends
on
changes in the
level of
operatin
g results
within
various local
jurisd
ictions and
on changes in
the applicable taxation rates of th
ese jurisdictions, as well as changes in estimated tax p
rovisions du
e
to
new
events
.
We
curren
tly
receive
certain
tax
benefits
or
b
enefit
from
net
operating
los
ses
cumulated
in
prior
years
in
s
ome
countries,
and
these
benefits
may
not be
available
in
the
future
due
to
chan
ges
in
the
local
jurisdictions
or credits
on
net op
erating
loss
es being
no
longer availa
ble d
ue to
either
full
utilizat
ion o
r expirat
ion of
th
e statu
te
of
limitations
in
such jurisdictions.
As
a
result, our
effective
ta
x
ra
te
cou
ld
increase
an
d/or our
benefits f
rom
carry
ing
forward
net
operating
loss
es
could
affect
ou
r
deferred
tax
as
sets
in
certain
countries
in
the
comin
g
years.
In
ad
dition,
the acquisition o
r divestiture of bus
inesses in certain j
urisdictions could materially affect o
ur effective tax rate.
We
evaluate
our
deferred
tax
asset
position
on
a
regular
bas
is.
The
ultimate
real
ization
of
deferred
tax
assets
is
dependent
upon,
among
other
things,
our
ability
to
generate
futu
re
taxa
ble
in
come
that
is
sufficient
to
utilize
in
certain
jurisd
ictions
los
s
carry
-forwards
or
tax
credits
b
efore
their
expiration
or
ou
r
abili
ty
to
implement
pru
dent
and feasible tax op
timization s
trategies. The recorded a
mount o
f total deferred tax ass
ets could be reduced, wh
ich
could have a
material adverse e
ffect on
ou
r results
of operations
and financial position,
if our estimates
of projected
future
taxable
income
an
d
benefits
from
av
a
ilable
tax
strategies
ar
e
reduced
as
a
result
of
a
change
in
business
condition or in
management’s plans
or due to other factors, su
ch as changes in
tax laws and regulations
.
We are
subject
to the
p
ossibility of
loss
con
tingencies arising
out of
tax clai
ms, assessment
of uncertain tax
p
ositions
and
provisions
for
specifically
identified inco
me tax
exposures
. We
are als
o s
ubject
to
tax
audits
in
certain
jurisdictions
. There can b
e no as
surance that we
will be su
ccessful in r
esolving potential t
ax claims t
hat r
esult from
these
audits,
which
could res
ult
in
material
adjustments
in
our
tax
pos
itions.
We
record
provisions
on
the
basis
of
the best current understanding; however, we could be required to record additional provisions in future periods for
amounts that cannot currently be
assessed. Our
failu
re to
do so and/or the
need to
increase our provisions f
or such
claims could hav
e a material adverse effect on o
ur results of o
perations and
our financial position
.
Our
operating
results
can
als
o
vary
significantl
y
due
to
impairment
of
goodw
ill
and
other
intangible
asset
s
incurred
in
the
course
of
acquisitions
and
equity
investme
nts,
as
well
as
to
impairment
of
tangible
assets
due
to
changes in the bu
siness environment.
Our
operating
results can
v
ary
significantly
due
to
impairment
of
goodwill,
other
intangible
assets an
d
equity
investments
booked
p
ursuant
to
acquisitions
and
th
e
timeframe
required
to
foster
and
realize
syn
ergies
th
ereof,
joint venture agreements and
th
e purchase of
technologies and licenses from third parties, a
s well as
to
impairment
of
tan
gible
as
sets due
to change
s in
the
business environment.
Be
cause the
market
for our
products is
characterized
by rapidly changing technologies,
significant chan
ges in the semiconductor industry, and the pote
ntial failure of our
37
business
initiatives, our future cas
h flows may no
t supp
ort the valu
e of goodwill, t
angible ass
ets and o
ther
intangibles registered in ou
r Conso
lidated
Statements of Finan
cial Position
.
We
receive public
funding, and
a reduction
in the
amount avail
able
to
us
or
de
mands
for repayment
could increase
our costs and impact o
ur results of operations.
To support our proprietary R&
D for technology investments and investments in
cooperative R&D ventures, we
have
in the
past obtained public
fundi
ng and
expect to
obta
in
public f
unding in t
h
e
future, mainly
from
French, Italian
and
EU
governmental
entities.
The
public
fund
ing
we
receive
is
subject
to
period
ic
review
by
the
relevant
authorities
and there
can be
no
ass
urance
th
at
we
will
continue
to benefit
from
such
p
rograms
at current
levels or
that
su
fficient
alternative funding will be av
ailable if
we lose such s
upport. If any o
f the public fundin
g programs we participate in
are
curtailed
or
discontinued
and
we
do
not
redu
ce
the
rele
vant
R&D
expenditures
,
this
could
have
a
material
adverse
effect
on
our
b
usiness.
Furthermore,
to
receive
public
funding,
we
enter
into
agreements
which
require
compliance
with
extensive
reg
ulatory
requirements
and
set
forth
certain
conditions re
lating
to
th
e
funded
p
rograms.
If
we
fail
to
meet
the
regulatory
requirements
o
r
applicable
con
ditions,
we
may,
under
certain
circumsta
nces,
be
required
to
refund
previously
received
amoun
ts,
which
cou
ld
have
a
material
ad
verse
effect
on
our
r
esults
of
operations. If there are changes in
the public funding we re
ceive this could increase the net
cos
ts for us to continue
investing in R&
D at current levels an
d could result
in a material adverse effect on our results
of operations.
A change in t
he landscape in
public funding may
also affect our business. For
example, there
are currently propos
als
within Europe to enact a European Chips Act, which may
provid
e public funding towards manufacturing activities of
semiconductors.
It
is
yet
to
be
seen
whether
this
would
impact
the
amount
o
f public
funding
currently
available
to
us for our R&D investments and ventures, but any reduction in said funding could result i
n a material adverse effect
on our results
of operations.
Some
of
our
production
processes
and
materials
are
environmen
tally s
ensitive, wh
ich
could
expose
us to
liability
and increase our costs due
to
environmental, health
and safety laws and regulations or
because of damage to th
e
environment.
We are s
ubject to
environ
mental,
health an
d safety
laws and
regulations
that
govern v
a
rious
asp
ects, including
the
use,
storage,
discharge
and
disposal
of
chemicals,
gases
and
oth
er
haz
ardous
su
bstances
u
sed
in
our
operatio
ns.
Compliance
with
such
laws
and
regulations
could
adv
ersely
affect
our
manu
facturing
costs
or
prod
uct
sales
b
y
requiring
us
to
acquire
costly
equipment,
materials
or
gr
eenhouse
gas
allowances,
or
to
incur
other
significant
expenses
in
adap
ting
ou
r
man
ufacturing
processes
or
w
aste
and
emission
disposal
processes.
Furthermore,
environmental
claims
or
our
failure
to
comply
with
present
or
future
regulations
could
result
in
the
as
sessment
of
damages
or
impos
ition
of
fines
against
us,
suspension
of
production
or
a
cessation
of
operations.
Failure
by
u
s
to
control
the
use
of,
or
adequately
restrict
the
dis
charge
of,
chemicals
or
haz
ardous
s
ubstances
could
subject
us
to
future liabilities.
Climate
change
and
related
sustainability
regulations
and
initiatives,
including
our
commitment
to
be
carbon
neutral by 2027, could p
lace additional burden
on us and o
ur
operations.
As
climate
change
iss
ues
become
more
pronou
nced,
we
may
correspon
dingly
face
increas
ed
regulation
and
also
expectations from
ou
r stakeholders to
take actions beyond
existing regulatory requirements to m
inimize our
impact
on
the
environment
and
mitigate
climate
change
related
effects.
The
semiconductor
manufacturing
pro
cess
has
historically contrib
uted to direct gr
eenhouse gas em
issions by
utilizing perfluorocarbo
ns, which may l
ead to n
ew or
increased
regulation
of
such
compou
nds.
In
order
to
ad
d
ress
such
regulation,
we
may
be
required
to
adapt
our
production processes or
pu
rchase additional
equipment or
carbon offsets, leading
to increased
cos
ts. On December
9,
2020,
we ann
ounced
our
goal
to
b
ecome carbo
n
neutral
by
2027
in
ou
r
ambition to
addre
s
s
climate
change
and
to
res
ponsibly
mitigate
the
impact
of
our
activities
on
the
environment.
As
of
the
en
d
o
f
2021,
we
are
on
track
against
our
trajectory
towards
carbon
neutrality
which
includes
two
specific
targets:
compliance
with
the
1.5°C
scenario
defined
at
the
Paris
COP21
by
2025,
implying
a
50%
reduction
of
direct
and
indirect greenhouse
gas
emissions compared to
2018, and
the sourcing o
f 100% renewable energy by 2027.
38
To m
eet these
ad
ditional requirements, we
will
need
to continue to
deploy additional equipment, introduce
process
changes, utilize alterna
tive suppliers and materials, a
nd take other similar actions, some or all o
f which may require
us
to
incur
additional
costs
which
could
result
in
a
material
adverse
effect
on
ou
r
resu
lts
of
operati
ons
and
our
financial position. In addition, if
we fail to meet these expectations, or foster additional sustainability initiatives, we
may
experience
repu
tational
risk
which
could
impact
our
ability
to
attract
and
retain
customers,
employees,
and
investors.
Further,
our
sites,
as
well
as
those
of
our
partn
ers
along
the
supply
chain,
may
be
exposed
to
changing
and/or
increasing
physical
ris
ks
resulting
from
climate
change
that
are
either
chronic
(indu
ced
by
longer
-term
shifts
in
climate
patterns,
such
as
sea
level
ris
e,
or
changing
temperatu
re,
wind
or
precipitation
patterns)
or
acute
(event
-
driven
such
as cy
clones, h
urricanes or
heat wav
es). In
the
context
of the
transition
to
a lower
-carbon
economy,
we
will likely be
exposed
to furth
er policy,
legal, tech
n
ology, and
market tra
nsition ris
ks. We have
already
seen furth
er
policy
developments
in
this
area
in
the
form
of
Regulation
(EU)
2020/
852
of
the
Europe
an
Parliament
and
of
the
Council
of
J
une
18,
2020
on
the
es
tablishment
o
f
a
framework
to
facilitate
su
st
ainable
investment
and
amending
Regulation
(EU)
2019/2088
(t
he
“EU
Taxonomy
Regulation
”),
which
entered
into
force
o
n
July
12,
2020.
As
a
result
of
the EU
Taxonomy
Regula
tion, we
must
disclose information
on how
and
to what
extent
our activities
are
associated
with econ
omic activ
ities that
qualify
as env
ironmentally su
stainable. If
our d
isclosure metrics
relating to
climate chang
e are low
er than
thos
e of
our peers
in
the industry
, this
may lead
to
reputational
risk which
may
lead
to onward financial rep
ercussion
s such as a
decrease in share price or difficulty in
raising capital
.
Loss
of
key
employees
and
the
inability
to
continuously
recruit
and
retain
qu
alified
employees
could
hurt
ou
r
competitive position.
Our
success depends
to
a
significant
extent
upon our
key
executives
and R&D,
engineering,
marketing,
sales,
manufacturing,
sup
port
and
other
perso
nnel.
Ou
r
success
also
depend
s
upo
n
our
ability
to
continue
to
identify,
attract, retain and motivate highly trained and skilled engineering, technical and pr
ofessional personnel in a
competitive
recruit
ment
environment, as
well
o
ur
ability
to
ens
ure
the
s
mooth
s
uccession
and
con
tinuity
of
bus
iness
with newly hired and
p
romoted personnel. For
insta
nce, in
highly
specialized areas, it
may become
more difficult
to
retain employees. As
a result of the COVID
-19 pandemi
c, work
-from-home arrangements
and a limitation
on social
and profession
al interaction has exp
anded the competition
in employee recruitment
and retention.
Our
employee
hirin
g
and re
tentio
n
also depend
on o
ur
ability
to
build an
d
maintain a
d
iverse
and
inclus
ive
workplace
culture
and
be
viewed
as
an employer
of
choice.
We
inten
d
to
con
tinue
to
devote
significant
res
ources
to
recruit,
train
an
d
retain
qualified
employees,
however,
we
may
not
be
able
to
attra
ct,
obta
in
and
retain
these
employees,
which
may
affect
our
growth
in
future
years
and
the
loss
of
the
services
of
any
of
these
key
personnel
without
adequate replacement or
th
e inability to
attra
ct new
quali
fied personnel could
have a material
ad
vers
e e
ffect on
u
s.
The
interests of
our
controlling shareholder,
which is
in
turn indirectl
y
contro
lled
by the
French and
Italian
governments,
may
conflict
w
ith
other
investors’
interests
.
In
addition,
our
controlling
shareh
older
may
sell
our
existing common sh
ares or issu
e financial instruments e
xchangeable into o
ur common shares
at any time.
We
have
been
informed
that
as
at
December
31,
202
1,
STMicroelectro
nics
Holding
N.V.
(“ST
Holding”),
o
wned
250,704,754
shares,
or
ap
proximately
27.5%,
of
our
is
sued
comm
on
shares.
ST
Holding
may
therefore
b
e
in
a
position
to
effectively
control
the
outcome
of
decisions
submitted
to
the
vote
at
our
shareholders’
meetings,
including but
not limited to the appointment
of the members o
f our Managing an
d Supervisory Boards
.
We
have
been
informed
that
ST
Holding’s s
hareholders,
each
of
which
is
ultimately
controlled by
the
French
or
Italia
n
government,
are
party
to
a
sharehold
ers
agreement
(the
“S
TH
Shareholders
Agre
ement”),
which
governs
relations
between them. We
are not a party to the ST
H Shareholders Agreement. The
STH Shareh
olders Agreement includes
provisions requiring the
unanimous approval by
the shareholders
of ST
Holding
b
efore
ST Holding can
vote its
shares
in
our
share
capital,
which
may
give
rise
to
a
conflict
of
interest
betw
een
our
interests
and
investors’
interes
ts,
on
the one
hand, and
the (political) in
terests of
ST Holdin
g’s shareholders, o
n the o
ther hand.
Our ability
to issu
e new
shares or other s
ecurities giving access to our sh
ares may be limited by
ST
Holding’s d
esire to maintain its
shareholding
at
a
certain
level
and
our
ability
to
buy
back
shares
may
b
e
limited
by
ST
H
olding
d
ue
to
a
Dutch
law
39
requiring
one
or
more
s
hareholders
acq
uiring
30%
o
r
more
of
ou
r
v
oting
rights
to
launch
a
tender
offer
for
o
u
r
outstand
ing shares.
The
S
TH
Sh
areholders
Agreement
also
permits
our
respective
French
and
It
alian
indirect
s
hareholders
to
cause
ST
Holding
to
dispose
of
its
stake
in
us
at
any
time,
ther
eby
reducing
the
curr
ent
level
of
their
resp
ective indirect
interests in our common shares. Sales of
our common shares or the
issuance of financial instruments exchangeable
into
our
common
shares
or
any
annou
ncements
concernin
g
a
potential
sale
by
ST
Holdi
ng
cou
ld
materially
impact
the market price of our
comm
on shares d
epending on th
e timing and size of such s
ale, market con
ditions as
well as
a variety of other factors
.
Our shareholder structu
re and ou
r preference shares may
deter a chan
ge of control.
We
hav
e
an
option
agreemen
t
in
place
with
an
independe
nt
foundation,
whereby
the
foundation
can
acquire
preference
sh
ares
in
the
event
of
actions
which
the
board
of
th
e
independent
foundation
d
etermines
would
be
contrary to
our
interests, ou
r
shareho
lders
and o
ur othe
r stakeholders a
nd w
hich in
the event
of
a
creeping
acquisition
or
offer
for
our
co
mmon
shares
are
not
s
upported
by
our
Managing
Board
an
d
Supervisory
Board
.
In
addition, our
shareholders have
auth
orized us
to issue
additional capital
within the
limits of
th
e authorization
by our
General
Meeting
of
Shareholders
(“AGM”),
s
ubject
to
the
requirements
of
our
Articles
of
Association,
without
the
need to
seek a
spec
ific s
hareholder resolu
tion for
each
capi
tal increase.
A
ccordingly,
an
iss
ue of
preference s
hares
or new shares
may make it more difficult
for a shareho
lder to obtain con
trol over our General Meeting of
Shareholders.
These
anti
-takeover
prov
isions
cou
ld
substantially
impede th
e
ability
of
our
shareho
lders
to
b
enefit
from
a
change
in
control
and,
as
a
result,
may
materially
adversely
affect
t
he
mark
et
price
of
our
ordinary
s
hares
and our inv
estors’ ability to realize any p
otential change of con
trol premium
.
Any
decision
to reduce
or discontinue
paying
cash
dividends
to
our
shareholders
could ad
ve
rsely
impact
the market
price of our common shar
es.
On an annual basis, our Supervisory Board, upon the proposal of
the Managing Board, may propose the distribution
of
a
cas
h
dividend
to
the
General
Meeting
of
Shareholders.
Any
reduction
or
discontinuance
by
us
of
the
pay
ment
of cash divid
ends at histor
ical levels could cause th
e market price of our com
mon shares
to decline
.
We
are
required
to
prepare
financial
state
ments
under
IFRS
an
d
we
also
prepare
Con
solidated
Financial
Statements u
nder U.S. GAAP, and such
dual reporting may imp
air the clarity of ou
r financial reporting.
We
u
se
U.S.
GAAP
as
ou
r
primary
set
of
reporting
s
tandards.
App
lying
U.S.
GAAP
in
our
fina
ncial
reporting
is
d
esigned
to
ensure
the
comparab
ility
of
our
results
to
tho
se
of
our
co
mpetitors,
as
well
as
th
e
continuity
of
our
reporting
,
thereby providing our stakeholders and
p
otential investors w
ith a clear understanding of
our f
inancial performance.
As we are
in
corporated in The Netherlands and our
s
hares are listed on
Euronext Paris and on the Borsa
Italiana, we
are
subject to
EU
regulation
s
r
equiring
u
s
to
also
report our
results of
operation
s
and
financial
statements using
IFRS.
As
a
result
of
th
e
ob
ligation to
re
port our
financial statements
und
er
IFRS, we
prepare
our
results of
operations using
both
U.S.
GAAP
an
d
IFRS,
which
are
c
urrently
not
con
sistent.
Such
d
ual
reporting
can
m
aterially
increase
the
complexity
of
our
finan
cial
communications
.
Our
finan
cial
condition
an
d
results
of
operations
reported
in
accordance
with
IFRS
will
differ
fro
m
our
financial
con
dition
and
results
o
f
operations
reported
in
accordance
with
U.S. GAAP, which could giv
e rise to con
fusion in th
e marketplace
.
There are inherent limitation
s on the
effectiveness of our controls.
There can
b
e
no assurance that a
system of
in
ternal control over financial reporting, including one
determined to be
effective,
w
ill
p
revent
or
dete
ct
all
misstatements
.
A
control
system,
no
matter
how
well
d
esigned
and
operated,
can
provide
only
reasonable,
not
absolu
te,
assurance
regardin
g
finan
cial
statement
prepar
a
tio
n
and
presenta
tion.
Projections
o
f
the
r
esults
of
any e
valuation of
the
effectiveness
of
intern
al
control over
fina
ncial
reportin
g
into
future
periods are
s
ubject to
inherent
risk.
The relevant controls m
ay become inadequate
d
ue to
changes in circumstan
ces
or the degree of complianc
e with the underlyin
g policies or procedures
may deteriorate
.
40
Because we
are
subject to
the
corporate
law of
The
Netherlands, U.
S.
investors might have
more
difficulty
protecting their interes
ts in a court of law or oth
erwise
than if we
were a U.S. company
.
Our
corpo
rate
affairs
are
g
overned
by
ou
r
Articles
of
As
sociation
and
b
y
the
laws
governing
corporations
incorporated in The
Netherlan
ds. U.S. inves
tors may hav
e more di
fficulty in prot
ecting their inter
ests in t
he face o
f
actions by
our
management,
members
of
ou
r
Ma
naging
and
Supervisory Boards
or o
u
r
controlling shareholders tha
n
U.S. investors wou
ld have if we were incorporated
in the Un
ited States.
Our
executive
offices
and
a subs
tantial
portion
of
our
assets ar
e
locat
ed
outside
the
United States
.
In ad
dition,
ST
Holding
and
most
members
of
our
Managin
g
and
Supervisory
Boards
are
residents
of
jurisdictions
oth
er
than
the
United States.
As a
result, it
may be
difficult or
impos
sible fo
r shareholders
to effect
s
ervice within the
United States
upon
us,
ST
Holding,
or
memb
ers
of
our
Managing
or
Sup
ervisory
Boards
.
It may
als
o
be difficu
lt
or
impossible
for
shareholders
to
enforce
outs
ide
the
United
States
jud
gments
ob
tained
against
s
uch
persons
in
U.S.
courts,
or
to
enforce in
U.S.
cou
rts
judgmen
ts
obtained
against
such
person
s
in cou
rts
in
jurisdictions ou
tside
the
United
States.
This could be true in
any legal action, includ
ing actions predicated upon the civil liability provisions of U.S. securities
laws.
In
addition,
it
may be
difficult
or
impossible
for
sh
areholders
to
enforce,
in
original
action
s
brought
in
courts
in jurisdiction
s located outside the United States,
rights predicated u
pon U.S. securities la
ws.
We have
been ad
vised by
Dutch cou
nsel th
at the Un
ited Sta
tes
and
The Netherlands
do not
currently
have a
treaty
providing
for
reciprocal
recognition
and
enforcement
of
judgments
(other
than
arbitration
awards)
in
civil
and
commercial matters. With
respect to choice of cou
rt agreements in civil o
r commercial mat
ters, it is noted th
at the
Hague
Conv
ention
on
Choice o
f
Court
Agreements
entered
into
force
in
the N
etherlands,
but
has
not
entered
into
force in
th
e United
States.
As
a
consequence,
a
final
ju
dgment
for
the
payment
of
money
rend
ered b
y
any
federal
or
s
tate court
in the
United St
at
es
b
ased
on civil
liability,
whether
or not
predicated
solely
upo
n
the
federal
securities
laws
of
the
United
States,
will
not
be
enforceable
in
The
N
etherlands.
However,
if
the
party
in
whose
favor
su
ch
final judgment is rendered brings a new
s
uit in a compe
tent court in The Netherlands, such party may
s
ubmit to The
Netherlands
court
the
final
judgment
that
has
been
rendered
in
the
United
States.
If
The
Netherland
s
court
finds
that the jurisdiction of the federal or state court
in the United States has
been based on grounds
that are
internationally
acceptable
and
that
proper
legal
procedures
th
at
are
in
accordance
with
the
Dutch
standards
of
proper administratio
n of justice including sufficient safegua
rds (behoo
rlijke rechtspleg
ing) hav
e been observed, the
court
in
The
Netherlands
would,
under
current
p
ractice,
in
principle
give
b
inding
effect
to
the
fin
al
judgment
th
at
has been
rendered
in
the U
nited States
unless
such jud
gment
contradicts
The Netherlands’
public
policy and
provided
that
the
judgment
by
the
foreign
court
is
not
in
compatible
with
a
decision
rendered
between
the
s
ame
parties
by
a
Dutch
court,
o
r
with
a
previous
d
ecision
rendered
b
etween
the
same
parti
es
b
y
a
foreign
cou
rt
in
a
dispute that
concerns
the
s
ame
subject
and
is
bas
ed
on
the
same
cause, provided
that
the
prev
ious decision
qualifies
for
ackn
owledgment
in
the
Netherlands.
Ev
en
if
such
a
foreign
ju
dgment
is
given
binding
effect,
a
claim
bas
ed
thereon may, however, still b
e rejected if the foreign
judgment is
not or no longer formally
enforceable.
3.3.1.3.
Managing risk according to
our risk
appetite st
rategy
Risk
management
activities
are
governed
by
our ris
k ap
petite strategy,
which
is d
iscussed
at the
Sup
ervisory
Board
and Audit Committee levels
annually.
We
determine
th
e
amount
of
risk
we
are
willing
to
purs
ue
or
retain,
depending
on
associated
expected
re
wards,
opportunities,
and costs.
Our risk appetite strategy depends on the nature of risks. As an illustration, we strive to eliminate or mitigate to the
lowest
possible
level
throu
gh
well
-designed
and
effective
internal
controls
risks
pertain
ing
to
the
f
ollowing
categories:
•
Corporate governance
•
Product qualit
y
•
Operations resilience (inte
rnal events)
•
Protection of intellectu
al property an
d other sens
itive information
•
People health & s
afety
•
Adherence to our Code of
Condu
ct and complyin
g with applicable law
s & r
egulations
41
•
Protection agains
t cyber threats
ERM PROCESS
The emb
edded
ERM
pro
cess
takes
a ho
listic v
iew, combin
ing
both
company
-wide top
-down
and
bottom
-
up
perspectives,
to
ensure
th
at
s
pecific
risk
scenarios
ar
e
addr
essed
at
the
right
level.
The
process
is
implemented
as
described in the following cha
rt:
During 2021, we upd
ated our Company risk
assessment with
our
management. The outp
ut from this exercise was a
risk map linked to
our strategic objectives, in
cluding 12 priority
1 risk areas.
Risk
owners
(members
of
our
Senior
Man
agement,
which
c
onsists
of
our
E
xecutive
Committee
and
Executive
Vice
Presidents as described in paragraph 5.4. below) were appointed for each priority risk area to
develop risk response
plans,
adapt
to
ch
anging
external
conditions
and
enhance
monitoring
capabilities.
The
ris
k
response
plans
are
regularly
reviewed
by
our
Executive
Co
mmittee
and
perio
dically
discuss
ed
with
our
Supervis
ory
Board
and
Audit
Committee.
In
addition
each
organizational
unit
throughout
the
Company
completes
its
own
ris
k
assessment.
This
includes
marketing
and
sales
regions,
p
roduct
groups,
manufacturing
an
d
technology,
corporate
fun
ctions
as
well
as
large
transformation in
itiatives.
3.3.1.4.
Illustrative risk man
agement meas
ures
Corporate gover
nance
Our
commitment
to
the
good
prin
ciples
of
corporate
governance
is
outlined
in
s
ection
5.1.
The
Supervisory
Board
and its comm
ittees, and the
Managing Board, through their
structures, charters and
activities ensure proper
corporate governance as
described in ch
apter 5.
Product quality
Quality
is
a
key
priority
in
ST
and
our
vis
ion
is
to
elevate
ST
to
th
e
highest
level
of
quality
a
s
an
asset
for
our
customers.
We
can
achieve
a
high
level
of
qualit
y
because
our
employees
and
management
are
committed
to
quality, focus
ed on customer
’
s
targets, and
improvement programs are effective.
42
Product
Quality
&
Reliability
(
“
PQR
”
)
is
organized
at
a
Compan
y
level
and
embedded
in
all
our
organiza
tions.
The
PQR
leadership
team
brings
together
quality
directors
fro
m
across
our
entire
bus
iness
o
perations:
front
-end
and
back-end
manufacturing,
product
grou
ps,
sales
regions
and
corporate
o
rganizations
to
deploy
our
q
uality
s
trategy
and quality
programs throughout th
e Company
.
ST
is
continuo
usly
adapting
to
have
the
necessary
infrastructure
and
organization
to
ensure
ST
products
meet
the
highest quality
and reliability requirements o
f custo
mers in th
e markets we address.
Our
qualit
y
governance
is
based
on
our Q
u
ality
Management
Sys
tem
(
“
QMS
”
),
as
documented in
our
Qu
ality
Manual.
Our
manual
details
ho
w
we
imple
ment
p
rocesses
to
guarantee
that
our
pro
ducts
an
d
processes
meet
th
e
highes
t
customer and s
tandards requirements.
We adhere to internationally recognized quality management standards.
We
received our first companywide
ISOTS16949
certification
in
2003
and
this
certification
was
renewed
every
three
years
since
that
time.
Since
2018,
we
ha
ve been certified IATF 16949:2016 and ISO
9001:2015 demonstra
ting our robust quality governance, effective
QMS and qualit
y compliance across
the
Company.
Operations resilience
We
have
extended
our
risk
approach
to
encompass
a
d
edicated
resilience
management
s
ystem
(
“
RMS
”
),
includ
ing
both business
continuity and crisis managem
ent,
and add
ressing the following dimension
s:
•
Continuity of th
e main sites
•
Manufacturing flexibility acro
ss in
ternal and/or external
sites
•
Continuity of full
supply
chain including third parties
•
Managing the bus
iness continuity and
crisis communication to clients
and other stakeho
lders
•
Improving company
-wide capability
to respond
to crises
In
2021,
as
per
our
multi
-year
improvem
ent
roadmap,
we
have
further
emb
edded
th
e
RMS
in
our
main
sites
an
d
selected
organ
izational units,
leveraging our corporate
resilience competence center
and a
global network
of
resilience
champions.
We
d
eployed
incrementa
l
improvements
to
our
RMS
(refreshed
pro
cedural
framework,
fully
al
igned method
ologies
and
toolkit
s
across
ERM,
resilience,
bus
iness
continuity
and
crisis
management).
It
pro
vides
a consistent
methodology to address
potential busines
s disruptions of ou
r resources:
•
Site unavailability
•
People unavailability
•
IT system disru
ptions (e.g. cyber-atta
cks)
•
Critical sourcing and
logistics/trans
portation disrup
tions
As
such,
we
address
scenarios
that
may
affect
our
sup
ply chain
an
d op
erations
such
as p
andemics, n
atural
hazards
(such
as
earthqu
akes,
floods,
s
nowstorms,
volcanic
erup
tions
or
tsunamis
),
industrial
accidents
(such
as
fires
and
explosions),
facilities/energy
interruptions
and
major
impacts
related
to
human
activities
(such
as
geo
-political
tensions, t
errorism or strikes). This leads u
s to continuously
improving our conti
nuity plans.
In
2021,
we
developed
and
rolled-out
an
ST-specific
methodology
un
derpinning
a
global
dashboard:
a
range
of
relevant
indicato
rs based
on internal
or e
xternal standards, covering
dimensions such
as exposure
to
natu
ral
hazards,
loss
prevention
characteristics,
facilities
rob
ustness,
equip
ment
moderniza
tion
and
redun
dancy,
IT
infrastructure
quality
and
cyber
protection.
For
every
significan
t
site,
those
indicators
are
compiled
in
our
site
43
resilience
index
(
“
SRI
”
),
which
is
updated
an
d
improved
on
a
quarterly
basis.
An
nually,
site
management
teams
prepare and up
date a s
ite improvement plan accordin
gly.
We
hav
e
b
een
ISO 22301
certified
since
2016.
Throughout 2021,
ou
r
con
tinuous improvements
hav
e
b
een
s
ubjected
to
both
surveillance
audits
from
the
ce
rtification
body
and
internal
aud
its.
Recertification
audits
are
schedu
led
to
take place in 2022.
Protection o
f intellectual property and o
ther sensitive information
We
hav
e
p
rocesses and
procedures in
place
to
protect our
intellectual
prop
erty
and other sensitive
information. This
includes
a
dedicated
team
of
global
patent
attorneys
a
nd
patent
enginee
rs
who
harvest
and
collect
inventio
ns
generated throu
gh our
R&D
efforts, chair
and
manage p
atent committees
to determine
patent
filing strategies
and
oversee
the
filing
and
issuance
of
our
approximately
18,
500
patents
and
patent
applications
around
the
world.
As
part of
this
process,
we
offer i
ncentive award
s to
our
invent
or com
munity to
help
ensure
their
active and
on
-going
participation in
protecting
this innovation.
The patent
committees also
regularly make
decisions on
which
inventions
are
better
maintained
as
o
ur
confidential
or
s
ensitive
information.
For
any
information
which
we
dee
m
as
confidential or
s
ensitive, we
h
ave processes and
procedures which restrict any disclosure
o
f such
in
formation to
an
y
third
party
without
having
in
place
appropriate
measures
such
as
a
non
-disclosure
agreement.
We
further
secur
e
our
intellectual
property
an
d
sens
itive
information
throu
gh
the
administration
of
our
cor
po
rate
IT s
ecurity
policies
and procedures
.
People health
&
safety
We listen
to cu
stomers, in
vestors, p
artners, employees
and management’
s feedback
before
identifying,
prioritizing
and
managing
our
environmental,
health
and
safety
(
“
EHS
”
)
risks.
Based
o
n
feedback
from
all
stakeh
olders,
we
maintain
a
regular
materiality
exercise
on
all
related
top
ics
and
u
pdate
ou
r
sustain
ability
strategy
accordingly.
For
each
sustainab
ility d
omain,
we d
efine pr
ecise
ambitions
an
d
long
-term
goals,
an
d
deploy
the
relevant
p
rog
rams
to
manage the related risks
.
We
have
a
Company
sus
tainability
council
that
reviews
the
progress
of
these
programs
and
related
KPIs
together
with our stakeholders’ continuous feedback. EHS risks are reviewed annually through our E
RM
an
d business
continuity
process
es.
All
our
plan
ts
run
their
own
EHS
specific
ris
k
analyses
and
follow
-
up
both
on
Compan
y
and
local programs.
Our
aim
is
to
prev
ent
employee
and
env
ironmental
risks
,
including
s
ocial,
chemicals,
fir
e, ergon
omics,
mechan
ical,
handling, radiation,
movements
and
work
at height,
nanomaterials,
wastes,
water
or
air
emission.
We
take
a
precautionary approach
when assessing new
p
rocesses, chemicals and products, as set out
in
principle 15 of the
Rio
Declaration.
We constantly review
our policies and rules,
d
eploy certified management
s
ystems such as ISO45001 and
IS
O14001,
reinforce our culture, strengthen j
ob hazard analysis and training p
lans, deploy industry standard
s such as RBA, and
audit
all of
our sites. Ou
r EHS performanc
e and
management
systems
are regularly
evaluated an
d certified th
rough
internal
and
th
ird-party
audits.
Moreover,
to
limit
any
risks related
to
ou
r
license
to
operate, we
hav
e a
three
-year
program to conduct third-party EHS legal
compliance audits. This program covers all
our m
anufacturing sites, all our
warehouses and a
ll our sites wit
h more than 150 e
mployees.
We
pro
mote
and
recogn
ize
shared
v
igilance
an
d
drive
contin
uous
improvements
in
behaviors.
Everywhere
we
practice
early
d
etection
of
h
azards
,
unsafe
acts
and
conditions.
We
systematically
implement
adequ
ate
actions
to
address weak points and avoid
recurrence of
near misses. We
share all data transparently and
ad
apt our prevention
and practices to
the highest standards
.
Adherence t
o our Code of Conduct
and complying with applicable laws &
regulations
We believe that conducting our bu
siness with the highest standard of integrity is essential to our long term success,
and that co
mpliance and ethics is everyon
e’s job and respons
ibility.
44
Our
Code
of
Conduct
is
all
about
our v
alues an
d th
e
principles con
tained
therein,
which
are
shared
th
roughout
the
Company, are the top
level reference for guiding o
ur behavior, d
ecision making and
activities.
•
Integrity
:
we conduct
our busines
s with the highes
t ethical
standards,
honor our commit
ments, deliver on
our promises, are loy
al and fair, and s
tand
up for what is right.
•
People
:
we
behave
with
opennes
s,
tru
st
and
simplicity;
we
are
ready
to
share
our
knowledge,
encourag
e
everyone’s
contribu
tion, d
evelop ou
r people
throu
gh
empowerment, team
work
and
training;
each
one
of
us is committed and
perso
nally involved in the contin
uous improvement
process.
•
Excellence
:
w
e
s
trive
for
q
uality
an
d
customer
satisfaction
an
d
create
v
alue
for
all
our
par
tners;
we
ar
e
flexible,
encourage
innovation
,
develop
our
competences,
s
eek resp
onsibility
an
d
are
accounta
ble for
ou
r
actions; we act with dis
cipline, bas
e our decisions on
facts, and focus o
n the priorities.
In
2021
,
we
con
tinued
to
push
forward
and
refreshed
our compliance
&
ethics
awareness
and
communication
campaign
(brand
ed
“Building
Trust
Together”),
focusing
on
the
importance
of
integr
ity
and
ethical
con
duct.
This
initiative establishes clear
expectations throughou
t the
Comp
any and invites
all em
ployees to speak
up without f
ear
of retaliation.
We use a v
ariety of tools
to engage w
ith employees, manage
rs and third parties,
s
uch as: f
ace-
to
-fac
e and town-hall
meetings,
e-learning
modules
,
dedicated
intranet
webpage,
articles,
posters, t
argeted
emails
and
short
videos
(available in 10 langu
ages). We hav
e also developed a
dedicated mob
ile appli
cation, o
ur ST Integrity Ap
p, which we
use
to
provide
our
employees
with
qu
ick
and
easy
access
to
important
and
useful
information
,
push
n
otifications,
fun quizzes, t
raining materials, and a link to our miscon
duct reporting hotline a
nd other useful contact
information.
We have
a zero-tolerance approach to
bribery and corruption,
regardless
of
the identity or
po
sition of
th
e originator
or recipient of any
bribe. It is
als
o strictly forbid
den for anybo
dy to us
e Company funds
or assets
to make a political
contribution.
Our
Code
of
Condu
ct
and
Anti
-Bribery
and
Corruption
policy,
which
are
als
o
available
in
the corpo
rate
governance
section of
our website at
http://investo
rs.st.com, provide clear
definitions regarding instances of bri
b
ery and
corruption,
and
incl
ude
detailed
descriptions
o
f
the
Company’s
ru
les
for
engagin
g
with
third
-parties.
They
also
explain h
ow to
report actu
al or
suspected
violations and
outline
the potential d
isciplinary
actions
and legal
consequences of an
y non
-compliance.
We
encourage
ev
eryone,
including
external
bus
iness
partners,
to
express,
in
good
faith,
any
concerns
they
might
have
regarding
poss
ible
violations
of
our
Code
of
Conduct,
the
Company’s
policies,
or
the
law.
Managers
are
accountable
for
maintaining a
working
atmosphere
where e
mployees
are
comforta
ble
about speaking
up
and
expressing their concerns
freely.
Our
miscond
uct
reporting
process
is
communicated
to
all
employees
th
rough,
inter
alia
,
our
Code
of
Conduct,
dedicated
intranet
web
page
and
our
ST
Integrity
App.
In
ad
dition
to
Company
reporting
chann
els,
we
hav
e
an
independent multilingual mis
conduct
reporting hotline
.
The
Company
applies
a
high
s
tandard
of
confidentiality
when
h
andling
reports
of
misconduct
(received
either
through
management
or
th
rough
the
h
otline)
to
ensu
re
that
no
employ
ee
who
reports
a
concern
in
good f
aith
suffers
retaliation in the form of har
ass
ment, adverse employment
or career consequences.
Protection against cybe
r threats
Information
security
risk
management
is
aligned
to
the
ov
erarching
E
RM
proce
ss,
ensuring
Executive
Committee
governance and Au
dit Committee oversight.
We have an information security organization
(“InfoSec”)
which has defined a dedicated comprehensive framework
and covers t
he following:
•
Program definition and s
teering
;
•
Awareness and train
ing campaigns;
•
Architecture and engine
ering;
•
Business ap
plications;
•
R&D solutions
;
•
Manufacturing an
d industrial solutions
;
45
•
IT infrastructures;
•
InfoSec operations (risk
-based v
ulnerability management,
privileged access
management);
•
Detection and reactions
to InfoSec incidents,
as part o
f the wider crisis management proc
ess.
3.3.1.5.
Risks having had a s
ignificant financ
ial impact
during
2021
In
2021
,
our
activities
were
impact
ed
by
s
ome
risks.
These
included
in
p
articular
the
global
COVID
-19
pandemic
generating
in
cremental
expenses
and
reduced
man
ufacturing
operations.
Ov
erall,
those
risks
were
offset
and
did
not have a mat
erial impact on the Company
’s financial resu
lts.
3.3.2. Internal Co
ntrol
Our
Managing
Board
is
resp
onsible
for
ensuring
that
we
comply
with
all
applicable
legis
lation
and
regulation
s.
As
such, under the guidance
of our CF
O, we have e
stablished and implemented internal f
inancial risk management and
control s
ystems.
These con
trols
and p
rocedures ar
e based
on identified
risk
factors th
at cou
ld poten
tially influence
our operations a
nd financial objectives a
nd contain a
system of monitoring, reporting an
d operatio
nal reviews.
We
re
gularly
evaluate
the
effectiveness
of
o
ur
internal
controls
and
pro
cedures
and
correspondingly
advise
our
Audit
Committee
on
the
res
ults
o
f
such
evalu
ations,
any
changes
to
such
internal
contro
ls
and
pro
cedures,
as
well
as
any
significant
deficiencies
an
d
material
weaknesses
in
the
des
ign
or
operat
ion of
internal
control o
ver
financial
reporting,
which
are
reasonably
likely
to
affect
our
ability
to
record,
process
or
su
mmarize
and
report
finan
cial
information to our auditors and to our Audit Committe
e. Likewise, any fraud, whether or not material,
t
hat involves
management,
or
other
employees
who
have
a
significant
role
in
our
in
ternal
contro
l
over
financial
reporting,
are
disclosed to o
ur external auditors an
d to our Aud
it Committee and a
pproved b
y our Sup
ervisory Board.
We
hav
e
esta
blished
policies
and
procedures
which
set
forth
principles
,
b
usiness
rules
of
behavior
an
d
conduct
which
are
considered
to
be
consistent
with
proper
b
usiness
management,
in
line
with
our
miss
ion
and
strategic
objectives.
We h
ave
adopted
po
licies an
d
p
rocedures
to
describe
the
operatio
nal
flow
of
actions
to
perform
a
task
or activity
,
or to
implement a
policy
within
a given
functional
field. We
have
over two
hundred s
tandard
operating p
rocedures
which
cover
a
wid
e
range
of
activities
such
as
ap
provals,
authorization
s,
verifications,
reconciliations,
review
of
operating performance, s
ecurity of a
ssets and s
egregation of duties, which
are deployed throu
ghout the Company
.
Our
Corporate
Audit
organ
ization
is
strictly
independent
of
corporate
and
local
managem
ent.
Its
pri
mary
objective
is to
enh
ance and
protect organizational value by
p
roviding risk-bas
ed and
o
bjective assurance,
advice, and insights.
The
internal
au
dit
plan
is
developed
by
our
Corpora
te
Aud
it
organization
and
applies
a
risk
-based
approach
.
It
is
reviewed
ann
ually
by
our
Aud
it
Committee
an
d
approv
ed
by
our
Sup
ervisory
Board.
Each
year,
the
internal
audit
plan includes a
udit assignments co
vering a variety o
f organizational units
, processes and risks.
Our
Corporate
Audit
organization
p
erforms
its
activities
in
accordan
ce
with
the
I
nternational
Standards
for
the
Professional Practice of Intern
al Auditin
g, published by t
he Institute of Internal Au
ditors.
Based on th
e outcome of the aforementioned
measures, th
e Managing Board states that
to the best of its
knowledge:
(i)
the
internal
risk
management
and
control
systems
in
p
lace
provide
a
reasonab
le
assurance
th
at
STMicroelectronics’
finan
cial
reporting
does
no
t
include
any
errors
of
mat
erial
importance
as
of
and
for
th
e
2021
financial
year;
(ii) in
relation
to
STM
icroel
ectronics’
finan
cial
repo
rting
these
systems
operated
effectively
during
2021
;
(iii)
it
is
justified
that
the
financial
reporting
is
prepared
on
a
going
concern
basis;
and
(iv)
the
report
states
those
material
risks
an
d
un
certainties
that
are
relevan
t to
the e
xpectation of
the
Company’s
contin
uity
for
the
period
of twelve months a
fter the preparation of th
e report.
46
Our
internal
ris
k
managemen
t
and
control
systems,
including
the
structure
and
operation
thereof,
were
discussed
and evaluated o
n several o
ccasion
s with our Au
dit Committee, and a
lso discus
sed by ou
r Supervisory Board, d
uring
2021
(in accordance
with best practice p
rovision 1.4.1 of th
e 2016 Dutch Corporate
Governan
ce Code
(“DC
GC”)
).
3.4. Sustainability
Sustainability
h
as
been
a
guiding
principle
for
ST
for
more
than
25
years.
In
line
with
our
vision
to
be
everywhere
microelectronics
make
a
positive
contrib
ution
to
people’s
lives,
susta
inability
is
deeply
embedded
in
all
of
our
activities.
We believe
that
sustainab
ility is fun
damental to
our bu
siness, brings
new opp
ortunities,
improves
efficiency,
redu
ces
ris
ks and
secures long-term
pro
fitability. It
also brings
benefits to
our e
mployees and
our external
stakeholders.
Our approach to sustainability is to
create technology for a
susta
inable world, prioritizing
people and the
planet and
generating
long-ter
m
value
for
all
sta
keholders.
This
appro
ach
is
detailed
in
our
Cod
e
of
Conduct
(available
on
www.st.com/cod
e
of
cond
uct
),
our
policies
an
d
supported
by
our
sus
tainability
strategy
and
our
sustainability
charter (available on
www.st.com/su
stainabilitych
arter).
As
is
apparent
from
our
sustainability
charter,
at
the
heart
of
our
susta
inability
strategy
is
an
unceasing
focus
on
what really matters for
us and our stakeholders. We identify the most material
topics for our stakeholders and their
impacts
on
our
business
by
carry
ing
out
an
ext
ensive
materiality
exercise
every
three
years
,
followed
by
yearly
review
throu
gh
various
stakeholder’s engagem
ent
channels
. In
2021,
the
mos
t
material
topics identified
were
health
and
safety,
greenhouse
gas
(“
GHG
”)
emissions,
ethics,
a
nd
human
rights
.
In
addition,
we
continued
to
focus
on
important topics in
cluding energy e
fficiency, water re
cycling, waste re
cycling, talent at
traction a
nd
engagement, as
well as diversity, equ
ity and
inclusion.
We
are
includ
ed
in
man
y
of
th
e
main sustainability
in
dices,
such
as Dow
Jones
Sustainability
Index
Wo
rld
and
Europe,
FTSE4Good, Eth
ibel, Euronext Vigeo, ISS ES
G Prime and Blo
omberg Gender Equ
ality index.
We received A- scor
e for
CDP
Cli
mate
Change.
In
ad
dition,
as
a
member
of
th
e
R
esponsib
le
Bus
iness
Alliance
(
“
RBA
”
),
we
participat
e
in
the
collective
efforts
of
the
industry
to find
solutions
to our
global
sustainability
challenges.
We
hav
e
been
a
signa
tory
of the UN Global Compact s
ince 2000. Our su
stainab
ility programs are aligned with its
ten principles an
d contribute
to
11
of the 17 UN Susta
inable Development Goals
:
•
SDG
3
- Good h
ealth and well
-being
•
SDG 4 - Ensu
re inclusive and quality edu
cation for all and
promote lifelong learning
•
SDG 5 - Achieve gender equ
ality an
d empower all women a
nd girls
•
SDG 6 - Clean water an
d sanitation
•
SDG 7 - Ensu
re access to affordable, reliable, s
ustainab
le and modern energy for all
•
SDG 8 - Promote inclu
sive and sus
tainable economic growth, employ
ment an
d decent wor
k for all
•
SDG 9 - Build resilient infras
tructure, p
romote sustain
able industrialization and
foster innovation
•
SDG 10 - Reduce inequ
ality within a
nd among cou
ntries
•
SDG 12 - Ensu
re sustainable cons
umption and prod
uction patterns
•
SDG 13 - Take urgent
action to combat climate ch
ange and
its impacts
•
SDG 17 - Revitalize th
e global partnership
for sustainab
le development
–
multi-sta
keholder partn
erships
3.4.1. Environmental Matters
We adopt a rigorous approach to managing our busin
ess operations in an environmentally responsible way.
Consistent
with
our
sus
tainability
approach,
we
have
established
proactive
env
ironmental
policies
with
respect
to
47
the
handling
of
chemicals,
emissions,
waste
disposals
and
o
ther
substances
of
con
cern
from
our
manufacturing
operations.
Our environmental
policy
Our
environmental
po
licy
(av
ailable
on
www.st.com)
an
d
procedures
describe
how
we
prevent
pollutio
n,
redu
ce
consumption
of
natural
resources,
reduce
waste,
and
minimize
the
impacts
o
f
ou
r
manufacturing
operations.
Our
environmental policy is
in line
with
international and
local regulations
and
is
s
upported by
ou
r sus
tainability charter.
Under
the
leadership
of
our
management,
the
corporate
environmental
team
is
respo
nsible
for
developing
environmental
programs
and
procedures.
These
are
then
implemented
and
executed
a
t
an
operational
level
by
dedicated environmental
teams at
each site.
M
anagement system
Our
environmental
manage
ment
is
aligned
with
intern
ational
s
tandards
.
We
are
certified
to
be
in
compliance
with
quality
stan
dard
ISO
9001
on
a
compan
y-wide
bas
is.
Almost
all
our
sites
ar
e
ISO 14001,
ISO 5000
1,
ISO
14064
c
ertified
and
EMAS
validated.
Our
performance
and
management
systems
are
evaluated
yearly
thro
ugh
third
-party
surveillance audits, and our ce
rtifications are renewed e
very three years. In 2021, we performed a number
of audits
and
all
our
sites
maintained
their
certifications.
Furth
ermore,
to
s
upport
our
cultu
re
of
continuous
improv
ement,
we also conduct
internal audits on a
three-year basis
.
Environment, h
ealth and safety
legal comp
liance
To assess the compliance status
of the
sites and to limit any risks related to our license to operate, we have a three
-
year
program
to
conduct
third
-party
environment,
h
ealth and
safety
(
“
EHS
”
)
legal compliance
audits
.
This p
rogram
covers 38
sites,
including
all our
manufacturi
ng
sites,
all our s
ites with
more than
150
employees
and
some smaller
sites
an
d
warehouses.
We
believe
that
in
2021
our
activities
complied
with
then
-applicable
environmental
regulations in all
material respects. We
hav
e e
ngaged outside consultants to audit all
of our
env
ironmental activities
and
have
created
environm
ental
managem
ent
teams,
info
rmation
systems
an
d
training
s.
We
have
also
instit
uted
environmental control procedures for processes used by us
as well as our suppliers. In
2021, there
were no mat
erial
environmental claims mad
e against u
s.
Monitoring performance
We
evaluate
our
overall
environmental
performance
by
monitoring
multiple
indicators,
such
as
resource
consumption, was
te, and air emissions
.
All
environmental data
within
ST is
regularly (monthly,
quarterly,
and yearly)
collected
in
our internal
central
environmental
datab
ase
and
reported
to
all
man
agement
levels
.
Tracking
the
progress
of
each
indicato
r
allows
us,
our various
sites and organizations
to consta
ntly adjust and impro
ve their performance.
Energy and Climate Chan
ge
At the
end o
f 2020,
we an
nounced
our
commitment
to b
ecoming carb
on neutra
l by
2027.
This
commitment
is p
art
of
our
response
to
the
global
climate
chall
enge
and
reflects
our
ambition
to
reduce
the
impact
of
ou
r
act
ivities
on
the environment. Our carb
on neutrality
targets include:
•
compliance
with
the
Paris
Agreement’s
1.5°C
scenario
by
2025,
implying
a
50%
reduction
in
direct
and
indirect GHG emissions
vs 2018
(GHG protocol scop
es 1 and 2)
•
sourcing 100% renewabl
e
ele
ctricity by 2027
48
In 2021, although
we recorded a significan
t increase of produ
ction, we managed to con
tinue our progres
s towards
carbon neutrality
. We decreased ou
r scopes 1 an
d 2 related GHG emissions b
y 34% vs 2018.
The table below sets
for our GHG em
issions o
ver the past 5 years:
Summary of net CO
2
emissions (KTons)
2021
2020
2019
2018
2017
Direct emissions Scope 1
481
486
557
644
605
Indirect emissions (purchased electricity) Scope 2
(1)
473
564
702
791
756
Other indirect emissions (transportation
(2)
) Scope 3
90
86
143
137
132
Total emissions
1,044
1,137
1,402
1,573
1,493
(1) Market
-based method ca
lculation accordi
ng to GHG Proto
col standa
rd.
(2) The tran
sportation emi
ssions value is an
estimate of emp
l
oyee commutin
g, business travels a
nd goods tran
sportation.
Covers our 11 mai
n manuf
acturing sites.
Our comprehensive program
(i)
Reducing our direct emiss
ions
The
use of perfluorinated
compoun
ds (
“
PFC
”
) in
the manufacture of
se
miconductors accounts
for
a s
ignificant share
of our
direct air
emissions
,
as defined by scope
1 of
the
GHG protocol. It
is therefore
a central part
of our
environmental strategy
to reduce
their use
an
d e
nsure they
are treated
ap
propriately before
being released
in
to
the
atmosphere.
In
2021,
we
ins
talled
n
ew
PFC
abatements
sys
tems
and
conducted
ass
essments
at
all
our
manufactu
ring
sites
to
explore the feasibility o
f introducing ad
ditional
ones.
2021
2020
2019
2018
2017
PFC emissions
Per unit of production - normalized values
56
74
80
90
94
Baselin
e 100 in 2016. Covers ou
r 11 main man
ufacturing sites.
(ii)
Saving energy
In
2021,
we
decreased
our
energy
cons
umption
b
y
18%
vs
2020
(per
unit
of
produ
ction),
although
we
slightly
increased
our
ab
solute
energy
consumptio
n
by
3%,
due
to
a
significant
increase
in
production.
This
demonstrates
that the actions
we have implemented hav
e improved our energy ef
ficiency.
2021
2020
2019
2018
2017
Consumption of energy
Per unit of production - normalized values
81
99
86
81
88
Baselin
e 100 in
2016.
Covers ou
r 11 main ma
nufacturing sites.
(iii)
Increasing our u
se of renewable
electricity
51
% of the total el
ectricity we p
urchased in 2021 ca
me from renewable sources,
compared to 4
3% in 2020.
Examples of
renewable
elect
ricity sourcing
in our
sites a
re
wind e
lectricity, photovoltaic
carport,
solar power
installations
.
The below table sh
ows our green electricity p
urchased ov
er the past 5 y
ears:
49
Covers our 11 main m
anufacturing sites.
(iv)
Indirect emissions from tra
nsportation
Reducing
CO
2
emissions
from
th
e
tra
nsportation
of
our
p
eople
an
d
p
roducts
has
been
part
of
our
sustainability
strategy for
25
years
.
We re
port
o
n
employee
commuting, business
tra
vel
and transportation
o
f
our goods (the
three
categories we can act o
n out of the categor
ies defined in s
cope 3 of the GHG proto
col
).
Indirect emissions from transportation
net CO
2
emissions (KTons)
2021
2020
2019
2018
2017
Indirect emissions (transportation
(1)
) Scope 3
90
86
143
137
132
(1) The tran
sportation emi
ssions value is an
estimate of employee co
mmuting, b
usiness travels a
n
d goods tra
nsportation.
Covers our 11 mai
n manuf
acturing sites.
Addressing climate-related r
isks
Since
2020,
when
we
declared
our
support
for
the
Taskforce
on
Climate-r
elated
Financial
Disclosure
(
“
TCFD
”
),
we
have been working towards
implementing TCFD r
ecommendat
ions.
We adopt a do
uble perspective when considering cli
mate
-related ris
ks:
•
impact of our activities o
n the environ
ment and people, an
d
•
impact of climate change on
our act
ivities.
In
2021,
o
ur
environ
mental
an
d
resilience
tea
ms
worked
closely
together
to
address
physical
risks
res
ulting
from
climate change that a
re either ch
ronic (induced by
longer
-term s
hifts in climate
patterns)
or acute (ev
ent-driven) in
a way that is
consistent with the TCFD a
nd the EU Green De
al classification,
as illustra
ted in the following chart
2021
2020
2019
2018
2017
Renewable electricity (%)
/ total electricity purchased
51%
43%
30%
23%
28%
50
ST
co
mmissioned
a
specific
s
cience
-based
study
from
an
expert
third
p
arty
to
assess
the
cu
rrent
climate
risks
and
associated
natural
hazards
on
the
140
most
-critical
locations
(including
all
the
main
ST
sites
&
thos
e
of
our
k
ey
manufacturing
an
d
logis
tics
partners
in
th
e
supply
ch
ain,
located
in
23
countries
in E
urope,
Asia,
th
e
Americas
an
d
Africa) as
well
as
their
potenti
al
future
evolution
.
The
an
alysis
was
b
ased
on
two
climate
chan
ge
scenarios
defined
by the United Nat
ions Intergovernmental Pan
el on Climate Cha
nge (
“
IPCC
”
):
- RCP4.5 (+2.4°C by 210
0 vs pre-indus
trial levels)
- RCP8.5 (+4.3°C by 210
0 vs pre-indu
strial levels)
For each scenario and for e
ach of the 140 locations, climate projections on 2030 and 2050 time
h
orizons show likely
evolutions acros
s a range of indicato
rs,
including:
•
cyclonic and n
on cyclonic
wind gusts
•
coastal and
riverine floods
•
number of very heavy
precipitation day
s
•
freezing conditions
such as cold wave d
uration, nu
mber of frost days, or p
ercentage of very cold days
•
Extreme heat conditions
, including
heatwave d
uration and
percentage of very warm days
•
Drought includin
g dry wave duration a
nd water stress
•
Landslides
, mud flows, rock falls
.
This
s
cience-based
study
has
enhanced
ou
r
understa
nding
of
the
most
relevant
in
herent
climate
-change
related
natural
hazards
for
each
s
ite
.
This
also
allows
the
computation
of
a
combined
climate
-related
‘
inh
erent
peril
score
’
for
each
location.
ST
further
commiss
ioned
a
second
external
study
from
a
specialist
firm,
specifically
focusing
on
the characteristics an
d impact of water scarcity
(referenced b
elow).
In
additio
n
to
these
global
analys
es,
site
-specific
studies
on
particular
n
atural
hazards
are
als
o
condu
cted
where
necessary due t
o local conditions.
Overall,
the
purpose
of
these
different
cli
mate-
related
analy
ses
is
to
feed
our
site-level
business
interruption
risk
assessments
and
bus
iness
impact
analyses,
as
we
ll
as
our
Site
Resilience
Index.
Ultimately
,
they
feed
regularly
updat
ed
improvement/adaptatio
n/mitigation plans
addressing both
environmental an
d resilience dimensions.
We
are
proactively
addressin
g
th
e
tra
nsition
to
a
lower
-ca
rbon
economy.
In
th
is
context,
we
are
in
th
e
p
rocess
of
further
identifying
and assessing
policy, legal,
technology,
and
market
transition
risks.
Simultaneously, w
e
are
actively
investing
in
researchin
g
new
prod
ucts
to
help
our
customers
develop
new
ene
rgy
saving
applications,
transforming risk in
to opportunity.
Water
Dealing
with
the
ch
allenges
o
f
wat
er
s
carcity
an
d
waste
water
treatment
has
been
p
art
of
our
s
trategy
s
ince
1993.
Water plays a
key role
in the
manufacturing of semiconductors. Our
proces
ses require
ultrapure water
and generate
wastewater that can b
e harmful for the environ
ment and local co
mmunities.
Assessing and mo
nitoring our impact
Water
is
a
limited
an
d
shared
resource
and
we
feel
respons
ible
for
all w
ater-r
elated
challen
ges
wherever
we operate.
The
reliability of
the w
ater
s
upply f
or
th
e
semiconducto
r
manu
facturing
process
is
essential.
All
ST sites
manage thei
r
water-related
risks
,
accord
ing
to
their
needs
and
water
availability
.
Each
site
monitors
the volu
me
of
water
it
uses
and complies
with local
permits. In
2021, 14%
of
the water
u
sed throughout our
operations came
from groundwater
and
86%
from
municipal
water
supplies.
It
is
f
undamental
to
ensure
the
continuity
of
water
supp
lies
in
the
areas
where
we op
erate. W
e
therefore
engage
in
regular
discus
sions
with
loca
l s
takeholders
and
implement s
olutions
to
reduce water extraction an
d consumptio
n.
51
Reducing o
ur water use
(i)
Water efficiency
We
aim
to
reduce
our
water
use
by
continuously
improving
water
efficiency
acro
ss
our
operations.
In
2021,
we
reduced our water consumptio
n by
16% per unit of production
compared to 2020
.
Although new advan
ced
technology
mix
requires
mor
e
water,
our
efforts
put
us
back
on
track
to
ach
ieve
our
2025
target
of
reducing
our
water consumption b
y 20% vs 2016
.
2021
2020
2019
2018
2017
Consumption of water
Per unit of production - normalized values
89
106
91
84
89
Baselin
e 100 in 2016. Covers ou
r 11 main man
ufacturing sites.
(ii)
Water recycling
In 2021, our water
recycling rate reached 40%, compared to 41%
in 2020. This is
mainly due
to our re
quirements for
ultrapure water, which significantly increased at our front
-end man
ufacturing sites due to higher production
volumes.
Water recycling rate
2021
2020
2019
2018
2017
Water reused, sent for recycling, or recovered
40%
41%
41%
41%
43%
One
of
our
main
appro
aches
to
ov
erall
water
conservation
is
to
reuse
and
recycle.
However,
as
we
us
e
ultrapure
water
in
our
processes,
it
is
not
always
possible
to
reuse
processed
water.
Although
water
can
be
treated
and
recycled into
ultrapure
water,
it is
more often
reused
to cov
er facility
needs,
such
as cooling
towers
and
s
crubbers.
Our two
s
ites located
in water scarcity regions initiate
variou
s actions to
reach at least
a water
r
ecycling rate
o
f 50%.
Assessing water-related
risks
In
2021,
we
conducted
a
wat
er
risk
assess
ment
at
corporate
level
for
all
our
manufacturin
g
sites.
The
aim
was
to
identify
our
overall
water
foo
tprint
and
ass
ess
operational
and
external
water
-related
risks
.
We
took
the
lifecycle
assessment appro
ach to evaluate our
indirect impacts linked to upstream and downstream
act
ivities, and our direct
impacts
linked
to
our
manufactu
ring
operations.
We
analy
zed
the
external
fa
ctors
for
e
ach
site,
depending
on
its
location,
applying
the
WWF
Water
Risk
Filter 5.
0 meth
odology.
As
a
result,
we identified
that
most
of our
manufacturing
s
ites
are
at
medium
risk
for
both
operatio
nal
an
d
external
ris
ks.
This
study
confirmed
th
at
wat
er
scarcity
and
water
quality
are
external
physical
ris
ks,
while
the
importance
o
f
water
in
our
o
peratio
ns
and
the
production o
f ultrapure water are drivers o
f our operational ris
ks.
Our
comprehensive
manage
ment
approach
includ
es
water
s
tress
assessment,
conservation
programs,
water
efficiency and wastewat
er treatment.
We are committed to reducin
g water u
sage and ad
dressing local scarcity ris
ks:
•
By assess
ing and evaluating the water stress level of a
ll our manu
facturing sites con
sidering local constra
ints.
•
By ensuring all u
sed water is appropriat
ely treated before disch
arging it back into
the natural
env
ironment.
•
By continuou
sly improving water efficiency a
cross ou
r operations.
52
Waste
Our
waste
management
strategy
is
bas
ed
on
the
proper
clas
sification,
separation
and
safe
disposal
of
waste.
It
is
driven by b
oth local regulations and Compan
y
policy, with our sites
being expected to respect th
e most stringent o
f
these
requirements.
Wherever
possible,
we
give
priority
to
reduction,
reuse,
recycling
and
recovery
over
incineration and la
ndfill. We strive for zero was
te and prom
ote a circular econo
my.
In
2021,
we
reused,
recove
red
o
r
sent
for
recycling
90%
of
th
e
waste
generated
by
o
ur
operation
s.
This
was
two
points
better
than
2020
but still
five
points
under
our
2025
goal
of
95%
reduction,
due
to
challenging
cond
itions
in
the COVID-19 pand
emic resultin
g in activity s
tops of some of our waste dis
posal supp
liers.
Waste recycling rate
2021
2020
2019
2018
2017
Waste reused, sent for recycling, or recovered
90%
88%
94%
93%
91%
Covers our 11 mai
n manuf
acturing sites.
3.4.2. Labor and Human rights
Human
rights
are
deeply
rooted
in
o
ur
history
and
cultu
re.
Ou
r
programs
are
established
to
ensure
that
all
of
our
employees are
treated
with respect
and dignity.
We follow
the
most advanced
standard
s
and apply
a
comprehe
nsive
due
diligence
process
covering
nine
core
principles:
freely-
chosen
employment,
prevention
o
f
underage
labor
and
protection
of
young
workers,
fair
organizatio
n
of
working
time,
fair
wages
and
b
enefits,
fair
treatment
an
d
anti
-
harassment,
non-discrimination
,
freedom
of
association
,
f
air
working
conditions
and
employee
well
-being,
and
privacy of person
al information.
The
main
managem
ent
s
ystems
and
p
rogram
we
us
e
to
monitor,
control
an
d
improve
lab
or
conditions
in
o
ur
operations are:
-
A
corporate
Labor
an
d
Hu
man
Rights policy
deployed throughout
our
operations
(available
on www.st.com)
aligned with the nine core pri
nciples describ
ed above
-
An internal aud
it program on
labor and human right
s, targeting our main manu
facturing sites
-
Responsible Bus
iness Alliance (
“
RBA
”
) human rights
self-asses
sments and t
hird-party
RBA audits
All
major
pro
duction
and
design
sites
are
required
to
an
swer
the
RBA
s
elf
-ass
essment
on
a
yearly
bas
is,
covering
90%
of
our
employees
.
In
2021,
t
he
sites
scored
from
90
to
95/100,
whi
ch
is
better
th
an
th
e
industry
average
of
89/100.
Our
main
manufactu
ring
sites
have
a
rolling
th
ird-party
RBA
audit
program
in
place,
covering
89%
of
our
employees.
This includ
es initial
audit,
corrective act
ion p
lan and
closure
audit on
a two
-year basis
. The s
ites h
ad an
average
R
BA
au
dit
score
ab
ove
the
industry
av
erage:
+
10
p
oints
in
initial
audits
and
+2
0 po
ints
in
closure
audits
(score
out
of
200).
In
addition,
our
main
manufacturing
sites
are
subject
to
internal
audits
allocating
p
riorities
with
timely and adequat
e corrective follow
-up actions
.
RBA VAP(1) audit score (score out of 200)
2021
2020
2019
2018
2017
Number of initial audits
6
5
3
6
2
ST average score (initial audit)
155
186
176
164
169
Comparison ST vs electronic industry average
+10
+45
+47
+35
+39
Number of closure audits
6
4
5
1
2
ST average score (closure audit)
198
198
183
200
194
Comparison ST vs electronic industry average
+20
+22
+13
+23
+24
Covers our 11 main manufacturing sites.
(1)
VAP: Validated Assessment Program.
53
In 2021, the main risks identified, and preventive and corrective actions implemented
in our operations
are
described in the tab
le below.
Description
Actions implemented
Control and mon
itoring
of
working hours (includ
ing
rest days)
•
Reinforced monitoring o
f working h
ours and rest
days.
•
Raised awareness on
anomalies prevention
and detection.
Prevention of forced labor an
d
bonded labor
•
Revision
of
corporate
guidelin
es
for
personal
an
d
educational
loans
to
be
deployed in 2022.
Supplier respons
ibility
•
Ensure
labor
agency
workers
are
p
aid
in
accord
ance
with
local
legal
requirements.
•
Inform suppliers o
f documents t
o be made availab
le for review during audits.
•
Training suppliers o
n the RBA code of cond
uct
Student protection
and
management
•
Validation
o
f
detailed
corp
orate
guidelines
for
stu
dent
employ
ment,
includin
g
allowances, to be deploy
ed in 2022.
To
improve
our
ov
erall
performance,
we
regularly
train
our
community
and
we
encourage
best
practice
shar
ing
between the sites.
We
aim
to
improve
workers’
awareness
of
their
labor
rights
and
to
amplify
workers’
voices
to
improve
working
conditions
and
miti
gate
issu
es
that
contribute
to
forced
labor. Ou
r
Code
of Condu
ct
and
related
‘
speak
up’
cu
lture
ensures employees are awar
e of how to r
aise grievances.
Since 2005,
we
are l
everaging
on
the RBA
code
of
conduct
to
develop
the
whole su
pply
chain on
Labo
r and
Human
rights e
ffective
r
isk management
.
We
identify our
risks
b
ased on
category of
supplier, business
volume
and in-region
risks and adapt our
level of
m
onitoring to those
ris
ks. These crite
ria determine the
level of
due diligence we
conduct
from
simple
evaluation
to
independent
third
-party
audits. We
require
our
su
ppliers
t
o
comm
it
to
RBA
code
of
conduct and
our sustainab
ility standar
ds.
3.4.3. Anti-bribery and corruption matters
We
conduct
our
bus
iness
with
the
highest
standards
of
integrity
and
believe
this
is
essential
for
our
long
-ter
m
success.
At
ST,
complianc
e
and
ethics
are
everyone’s
job
and
everyone’s
resp
onsibility.
We
have
a
zero
-tolerance
approach to
bribery and corruption, regard
less of the identity or position
of the originator or recipient of any
bribe.
It is also strictly forbidden for
any
body to use Com
pany funds or assets to m
ake a political contribution. Our Code of
Conduct
and
Anti
-Bribery
and
Corruption
policy,
which
are
available
in
the
corporate
governance
section
of
our
website
at
www.st.co
m/code
of
conduct
and
in
vestors.st.com/highlights
,
respectively,
provide
clear
definitions
regarding instances of
bribery and corruption,
an
d
include detaile
d descriptions of
the Company’s rules
for engaging
with
third-parties.
They
also
explain
how
to
report
actual
or
s
uspected
violations
and
ou
tline
the p
otential
disciplinary
actions
and
legal
con
sequences
of
non
-compliance.
Risks
of
non
-compliance
with
our
Code
of
Conduct
and
Anti-bribery
an
d
Corruption
policy
an
d
relevant
mitiga
tion
actions
are
further
d
escribed
ab
ove
in
paragraphs
3.3.1.2 and 3.3.1.3.
Any
actual,
potential
or
sus
pected
violations
of
our
Anti-Bribery
and
Corruption
p
olicy
and
all
requ
ests
for
bribes
must
be
reported
withou
t delay.
Such
reports
must
be made
in
accordance
with
our
misconduct
repo
rting
procedure
,
as
further
described
in
paragra
ph
3.3.1.4.
‘Ad
herence
t
o
our
Code
of
Condu
ct
and
comp
lying
with
applicable laws
and regulations’ above
.
Records of
all report
s that have
been made within ST
, shall
be kept by
either
54
the
Chief
Audit
an
d
Risk
Executive
or
the
Chief
Compliance
Officer.
If
an
y
situation
of
bribery
o
r
corruption
is
identified,
an
investigation
will
take
place
and
a
report
will
be
drawn
up
,
which
will
be
sh
ared
w
ith
our
Audit
Committee.
Any
violation of
our
Anti-Bribery
and
Corruption
policy w
ill
be
deemed
a
serious
violatio
n
of our
principles and will
lead to disciplin
ary actions in
cluding and up to termination
of the relationsh
ip with ST.
The below table sets
forth an overview of incid
ents reported thro
ugh o
u
r misconduct hotline in
2021
:
Misconduct r
eporting
2021
(1)
Number of incidents u
nder review as o
f January 1
st
7
Number of incidents reported
or identified d
uring the year
73
Asset misappropriat
ion
9
Bribery & corrup
tion (including conflict of interest)
12
Harassment & dis
crimination
42
Other
17
Incidents closed a
fter a preliminary a
ssessment or formal investigatio
n
73
Number of confirmed external mis
conduct cases
1
w
hich led to terminating o
r not renewing contrac
ts with bu
siness partners
0
Number of confirmed internal mis
conduct cases
23
w
hich led to employees b
eing dismissed or
disciplined
22
Incidents still o
pen at year end
7
Number of public legal cases
regarding corru
ption brou
ght against ST or its
employees
0
(1) In 2021, we incl
uded lo
cally reported cases, in
addition t
o cases reported at co
rporate level
.
3.4.4. Social and employee matters
Health and sa
fety
Protecting people from h
arm and s
afeguarding their health is
key for our s
uccess.
We are
committed to
pro
tecting the
health and safety
of employees and
subcontra
ctors by
pro
viding a
safe working
environment,
preventing wor
k in
juries an
d illness
es, and
pro
viding
access
to h
ealthcare. Since
the beg
inning o
f the
COVID-19 pan
demic, ST
has had
two prioriti
es: (i) th
e protection
and th
e safety o
f our employ
ees and ou
r
subcontracto
rs b
y
maximizing all
p
revention m
easures that
can
be
p
ut
in
place
an
d (ii
)
th
e cont
inuity of
our activities
to fulfil our commitments
.
We believe
in h
elping our
emp
loyees to
adopt
healthy
lifestyles
because
we know
good
health
is th
e foundat
ion of
a
fulfilling
and
produ
ctive
life.
Ou
r
health
plan
provides
our
employees
with
a
very
high
l
evel
of
medical
care,
including regular medical
check-up
s, vaccination
s and prevention s
creening.
Employee
well-being
is
a
key
focus
at
ST
and
promotin
g
high
-
quality working
conditions
is
even
more
important
in
since
the
beginning
o
f
the COVID-19
pan
demic.
At the
onset
of the
g
lobal
health
crisis, we
partnered
with an e
xternal
leading
partner to
p
rovide all
e
mployees and
their
families
arou
nd
the
world with
24/7
access to
a
dedicated support
platform
in
more
than
60
languages,
in
cluding
an
online
network
of
over
100
clinical
ps
ychologists,
to
provide
psychological s
upport and advice in coping with t
he pandemic.
In 2021, we recorded
more than
3,400 connections.
55
We constantly
s
trive
to
strengthen our
s
afety culture
by re-enforcing safe
b
ehaviors and
working cond
itions through
visits, training, au
dits, best practice sharing and
communication.
We
align
ou
r
safety
progra
ms
with
in
dustry
risks,
with
a
priority
on
preventing
employ
ees’
p
otential
exposu
re
to
hazards such a
s chemicals fire, radiation
and nanomaterial
s; an
d mechanical, han
dling and ergonomic risks.
In 2021, our recordab
le case rate for employ
ees (work
-related in
juries per 100 employees
per year) was 0.12
.
2021
2020
2019
2018
2017
Employee recordable cas
e rate - inju
ries
0.12
0.14
0.16
0.17
0.15
Per 100 emplo
yees per year as d
efined by OSHA-US regula
tion.
In
2021,
we
b
egan
reportin
g
on
our
total
re
cordable
cas
es
(injuries
an
d
illnesses)
for
both
e
mployees
and
contractors, a
nd we reached 0.1
47
,
in line with our 202
5 goal
of < 0.15.
We
con
tinue
to
align
our
safety
programs
with
indu
stry
risks,
with
a
priority
on
preventing
employees
’
potentia
l
exposure
to
hazards
such
as
chemicals fire,
radiation
and
nanomaterials;
and
mechanical,
handling
an
d
ergonomic
risks.
Attraction and e
ngagement
Recruiting
and re
taining
th
e
best
talent e
nables
us to
address
the
staffing
challenges
we
face, such
as
th
e
competitive
labor market, size of
the labor
pool, skill
shortages in some ke
y domains, and the
need to continually rejuvenate our
workforce
by
recruiting
young
talent.
In
2021, we
s
trengthened our
recruitment
communication strategy
to
enhance
our diff
erentiation and
increase
our visibility
as
an employer
of
choice.
We
also
continu
ed
to build
strategic
partnerships
with universities and engineering
s
chools throughout the world to ensure a r
egular flow of candidates,
while also establishin
g education
pathways
to respond to our specific competence n
eeds.
To
supp
ort
our
talent
p
ool,
we
r
eshaped
our
Ind
ividual
Performance
Manag
ement
p
rocess
to
b
etter
supp
ort
our
company’s
growth
and
transformation
o
ver
the
n
ext
few
years.
Our
new
app
roach
values
dial
ogue,
and
fosters
employee-manager re
lationships
built on open an
d continuous feedback and
employee development
Our
2021
employ
ee su
rvey
again
focused
on
individ
ual
engagement,
goal
align
ment
and
organizational
agility.
It
is
managed by an external partner and consisted of a
set of holistic questions asking employee
s to assess how well
we
are doing,
with
open qu
estions on
what is
working well an
d what needs
to be
improved.
Two categories ‘Employee
experience’
an
d
‘Innovation’,
were
added,
reflecting
the
imp
o
rtance
o
f
thes
e
topics
to
our
comp
any.
The
participation
rate
was
89%,
s
imilar
to
the
2020
survey.
The
overall
engagem
ent
index
was
83%
an
d
85%
of
employees
said they are willing to
go the extra mile to h
elp ST meet its
goals.
Employee survey
–
engagemen
t rate (
%)
2021
2020
2019
2018
Overall participation rat
e
89
89
90
87
Individual engagement ind
ex
83
82
79
77
Diversity, Equity
and Inclusion
We ar
e p
resent
in
more
than 35
countries
and
employ
115
different
nationalities.
We
believe
that
diversity,
equ
ity
and
inclusion
bring
value
to
our
b
usiness
th
rough
effective
innovat
ion,
attractivenes
s, engagem
ent
and
agility.
W
e
have a
zero-tolerance
for discrimination
of
any
kind and
are committed
to bu
ilding a d
iverse workforce
throughout
our organization, includin
g but not limited to,
nationality, age, gender, disab
ility, ethnic origin, and personal beliefs.
56
At
the
end
of
2021
34%
of
our
global
workforce
con
sisted
of wom
en.
Strengthenin
g
the
role
of
women
in
buildin
g
our
future
is
one
of
our
ongoing
objectiv
es.
Our
target
for
2025
is
to
increase
the
percentage
of
women
at
all
management levels to 20
%.
Women in man
agement
2021
2020
2019
2018
2017
Women in experienced
management (%)
20%
19%
18%
16%
16%
Women in senior manage
ment (%)
14%
13%
13%
12%
12%
Women in executive manage
ment (%)
10%
10%
9%
9%
9%
Total women in m
anagement position (%)
18%
17%
17%
17%
16%
Women in the Supervis
ory Board
44%
44%
44%
33%
33%
Diversity, equity and inclusion,
is an important message of our employer value proposition. It is prominent in all our
employer b
randing
campaign
s
and
is
a
tracked
indicato
r
in all
our
recruitm
ent
worldwide
.
To ad
dress
the
sh
ortage
of women in t
echnical
functions, we con
tinued in 2
021 to
promote diversity
in ST
EM (Science,
Technology,
Engineering and Math
ematics) function
s through lo
cal initiatives that encou
rage girls to choos
e technical studies a
t
an early stage in
their education.
Our
aim
is to
overcome stereo
types
by
continuously
rei
nforcing
an
in
clusive minds
et
that
recognizes
the
value
and
richness of
a
diverse
workforce.
To
h
elp
u
s
achieve
this, we
p
rovide
diversity and
inclusion training
for ST
e
mployees.
By the
end of
2021 over 7,500
employees had undergone our
e
-learning program on diversity and inclusion
awareness
since the
start
of the
program.
This
included
more than
5,000 man
agers and
human
resources
staff
.
We
also
deliver
workshops
for
our
employe
es
to
experience
ho
w
their
own
un
conscious
bias
and
micro-behav
iors
can
impact other people and
learn ho
w to be more attentive and
mindful when interacting
with others.
3.4.5. EU Taxonomy
3.4.5.1.
The EU Taxonomy Regulation
On
July
12,
2020,
Regulation
(EU)
2020/8
52
of
the
European
Parliament
and
of
the
Coun
cil
of
Ju
ne
18,
2020
(the
“
EU Taxon
omy Regulation
”
)
entered into
force.
The
EU Taxonomy
Regul
ation
provid
es th
e bas
is for
the EU
Taxonomy,
which
is
a
classification
s
ystem,
on
th
e
basis
of
which
a
list
of
environ
mentally
sustainable
economic
activities has b
een drawn up. As a res
ult of the EU Taxonomy Regulat
ion, we must dis
close information on ho
w and
to what extent our act
ivities are ass
ociated with economic a
ctivities that q
ualify as environmentally sus
tainable.
Environmental o
bjectives
The EU Taxonomy Regulation
defines ov
erarching conditions
that an econ
omic activity must
meet to be considered
environmentally
sus
tainable
an
d
focuses
on
six
environmental
objectives,
being
(i)
climate
change
mitigation,
(ii)
climate change adaptation, (iii)
the sustainable use a
nd protection of
water and marine resources, (iv) the tran
sition
to
a
circular
economy
,
(v)
pollution
prevention
and
con
trol
and
(v
i)
the
protection
and
restoratio
n
of
b
iodiversity
and
ecosy
stems.
For
each
environmental
objective,
a
dele
gated
act
will
be
issued
in
which
techn
ical
screening
criteria (EU Taxonomy criteria) will been laid down, which specify environm
ental performance requirements for the
economic activities to
be classified as environ
mentally sustainable (
“
EU Taxonomy Delega
ted Acts
”
).
On January 1, 2022,
the EU Taxonomy Delegat
ed Acts on climate chan
ge mitigation and
climate c
hange adap
tation,
entered into force.
No delegated acts have
currently entered into force
for the other
four
env
ironmental objectives.
57
Eligibility - alignmen
t
Disclosure
obligations
under
the
EU
Taxonomy
Regulation
will ent
er
into
force
in
multipl
e
phases.
For
th
e
financial
year
2021,
non
-financial
underta
kings
such
as
ST
will
on
ly
have
to
disclose
in
formation
on
th
e
Taxonomy
-eligibility
of th
eir
economic
activ
ities.
Fo
r
the
financial
year
2022,
no
n
-financial
underta
kings
such
as
ST
will
have
to
disclos
e
information on the Taxon
omy
-alignment of their econo
mic activities
as well.
An activity can be considered Taxonomy-eligible when the activity is described as such in the relevant EU T
axonomy
Delegated
Act.
To
assess
whether
the
activity
can
also
be
considered
Taxono
my
-aligned,
an
add
itional
evaluation
has to b
e made to identify if the EU Taxon
omy criteria are
met.
3.4.5.2.
Applicability EU Taxonomy
to
ST
As we are subject to
an obligation to p
ublish non
-financial information purs
uant to the
Directive 2013/34/EU of th
e
European
Parliament
an
d
of
the
Council
o
f
June
26,
2
013
(
th
e
“
NFRD
”
),
the
E
U
Taxono
my
Regulation
is
ap
plicable
to us, and subsequently, we must dis
close information on how and to what extent our activities are associated with
economic activities
that poten
tially qualify
as environmentally s
ustainable under th
e EU Taxonomy Regulation.
For
the current
financial
year 2021
,
the disclosure
for
non
-financial undertakings
such
as ST
is
limited to
the
disclosure
of
Taxono
my-eligi
ble
and
Taxon
omy
non
-eligi
ble
economic
a
ctivities
with
in
their
turnov
er,
capital
expenditure (CapEx) and operating
expe
nditu
re (OpEx) aiming
at substan
tially contributing to
climate change
mitigation and climate chan
ge adapta
tion and the qualit
ative information relevant for this d
isclosure.
For
the
f
inancial
year
2022,
we
will
perform
th
e
additional
evaluation
in
v
iew
of
T
axono
my-alignment
for
our
reporting in 2023.
The
follo
wing
disclosures
are
prepar
ed
based
on
our
current
interpretation
of
th
e
EU
Taxonomy,
while
acknowledging that the EU Taxonomy Regulation is still under
development and its interpretation and application is
evolving.
ST and EU Taxon
omy: Enabling
activities
Whereas
some
sectors
contribute
directly
to
climate
change
mitigation
and
adaptation,
we,
as
an
intermediate
product
manufacturer,
enable
the
manufacturing
of
low
-carb
on techn
ologies.
Our act
ivities
which s
ignificantly
aim
at
contribu
ting
to
climate chan
ge
mitigation
and
adap
tation,
as
p
er
the
d
efinition
of
th
e
EU
Taxonomy
Regulation,
are the
manufacturing of electronic components (NACE
code 26.1.1) that
enable other sustainable economic
activities and applications. We identified all our
p
roducts, technologies and detailed applications
that aim at
contributing
s
ubstantially
to
climate chang
e miti
gation.
This
encompasses
all
p
roducts
that
aim
at
s
ubstantial
GHG
emissions sav
ings across
their life cycle
in other sectors
of the economy (the “G
H
G Saving Pro
ducts”).
Our taxo
nomy-eligible
activities
are th
erefore con
sidered t
o b
e
mainly
based
on
the
rev
enue derived
from
the
sale
of
GHG
Savin
g
Pro
ducts
critical
to
enabling
the
activities
listed
in
th
e
E
U
Taxon
omy
as
3.
6
Manufacturing
of
other
low-carbon technologies
.
With
regard
to
climate
chan
ge
ad
aptation,
it
follows
from
our
assessment
th
at
our
activities
are
not
cov
ered
by
climate
chan
ge
adap
tation
as
per
the
EU
Taxonomy
definition.
Therefore,
the
proportion
of
turn
over,
CapE
x
an
d
OpEx that can be considered
as Taxonomy-eligible with respect to climate
change adaptation is 0%, and therefore is
not included in
our report on the eligibility ass
essment and
eligible activities
described be
low.
58
ST EU Taxonomy e
ligibility assessment
At ST, we believe that
the semiconductor
industry is
a strategic enabler of a low carb
on s
ociety as well as managin
g
the
trans
ition
toward
s
carbo
n
neutrality.
As
part
of
our
v
alue
prop
osition,
we aim
at
des
igning
and
manufacturin
g
products
th
at
have
the
greatest
pos
itive
impact
on
the
p
lanet
and
society.
We
therefore
develop
technologies
to
enable our custo
mers to create responsible ap
plications for safer, green
er, and smarter livin
g.
Our
advanced
technologies,
such
as
SiC,
GaN
or
FD-SOI,
enable
low
carbon
applications
and
bring
competitive
advantage in t
erms of GHG emission
s.
Low
carb
on
application
s
like
electric
mobility,
renewabl
e
energies,
smart
cities,
or
sma
rt
building
hav
e
b
een
and
remain strategic markets
for us
.
We are a
market leader
in the
design
and
manuf
acturin
g of
power solutio
ns o
r motor
control
enabling p
roducts,
in
which areas there are ampl
e opportu
nities for sh
ort term impact on GHG emissions
.
We also lead the s
emiconductor market in term
s of ultra
-low power ICs s
uch as sens
ors or microcontrollers.
Life-cycle assessment: a
key criterion for our EU Taxo
nomy repo
rting
For
more
than
10
years
we
hav
e
deployed
a
responsible
pro
duct
life
cycl
e
ass
essment,
which
details
the
G
HG
footprint and handprint,
our sustainable technology program.
We have set
a target for
2027 of allocating
33
% of
our
sales to environ
mental and social iss
ues, mainly for GHG re
duction.
As
a
semiconductor
manufacturer,
we
play
a
significant
role
in
d
eveloping
products
enab
ling
GHG
redu
ction,
so
contributing
to
climate
change
mitigation.
Ou
r
approach
and
methodology
ar
e b
ased on
climate ch
ange
mitigation
activities.
We
use
ou
r
advan
ced
produ
ct
lifecycle
assess
ment
experience
in
GH
G
emission
s
to
report
on
the
EU
Taxon
omy
requirements. Our ap
proach considers t
he full pro
duct lifecycle and it
s impact on th
e environment.
3.4.5.3.
EU Taxonomy reporting
–
Taxonom
y eligible activities
related to climate chan
ge mitigation
Taxonomy eligible Turno
ver
We h
ave
based
the
proportion
of
Taxono
my
eligible
turno
ver
metrics
on
revenues
from
GHG
Savin
g
Products
.
The
denominator
is
based
on
total
revenues
as
reported
on
the
consolidated
income
statement
for
the
year
ended
December 31, 2021.
All
product
families
have
been
reviewed
by
ST
divisions
,
and
their
p
otential
GHG
reduction
assessed.
We
have
selected
only
product
families
that
aim at
s
ubstantial G
HG
redu
ction
acros
s
pro
duct
life
cycle
,
from
material
s
ourcing
to
end
of
life.
We
have
exclu
ded
produ
cts
aiming
at
advanced
functionalities
v
s
power
management,
or
p
roducts
dedicated to comfort ap
plication
s even if they are competit
ive from a power man
agement p
erspective.
59
This
results
in
Taxonomy
eligib
le
turn
over
amou
nting
to
37%
of
total
revenu
es
r
eported
for
the
full
year,
whereby
the split by
activity in ou
r reportable segments is
as follows:
ADG
40%
AMS
43%
MDG
26%
Total
37%
Taxonomy eligible Cap
Ex
The
Taxono
my
eligible
CapEx
is
b
ased
on
capital
expenditures
related
to
our
ass
ets
or
processes
as
sociated
with
economic activities th
at are des
cribed
in
th
e relevant EU Ta
xonomy delegated acts.
The deno
minator
is
d
etermined
bas
ed
on
the
2021
ad
ditions
to
pro
perty,
plant
and
equ
ipment (includin
g ri
ghts
of
use
for
leas
ed
as
sets), intangible
assets (including
cap
italized
development costs),
as
reported in
notes
7.6.11, 7.6.12
and 7.6.13 of our con
solidated finan
cial statements for th
e year ended December 31,
2021.
Our
methodology
is
mainly based
on
existing
or
futu
re
technologies enab
ling
products
that
aim
at
substantia
l GHG
reduction across
their life cycle. It also
includes inv
estments supportin
g our carbon neutrality pro
gram.
This results in t
axonomy eligible activities a
mounting to
46
%
of the CapEx.
Taxonomy eligible OpE
x
The Taxonomy
eligible OpEx is
based on operational
expenditures related to
our assets or processes associated w
ith
economic activities th
at qualify as
env
ironmentally sustain
able under the relevant EU Tax
onomy delegated acts
.
The
denominato
r
is
d
etermined
based
on
Research
and
development
expens
es,
as
reported
in
th
e
cons
olidated
income statement
for the
y
ear ended
Decemb
er 31,
2
021, after
d
educting exp
enses, primarily overheads, which
are
not directly ass
ociated with the development
of new produc
ts or technologies.
Our
methodology
is
mainly
b
ased
on
systematic
review
of
new
prod
uct
develop
ment
a
iming
at
s
ubstan
tial
GHG
reduction across
lifecycle.
Sta
nd
ard
costs have
been reviewed
b
ased on
related technologies enabling
prod
ucts that
aim at subs
tantial GHG reduction a
cross their life cycle.
This results in t
axonomy eligible activities a
mounting to
36
%
of the OpEx.
In
su
mmary,
the
following
table
sets
for
th
the
proportio
n
of
ou
r
turnover,
Ca
pE
x
and
OpEx
which
is
Taxonomy
-
eligible and which is Taxono
my non
-eligible.
Turnover
CapEx
OpEx
Taxonomy-eligible
economic activities (in %)
37
%
46
%
36
%
Taxonomy non
-eligible
economic activities (in %)
63%
54
%
64
%
Total (in millions US Dolla
r)
12,761
2,726
1,157
60
3.4.5.4.
Future developm
ents
There is currently li
mited guid
ance publis
hed by Eu
ropean or Dutch ins
titutes availa
ble on the dis
cretionary leeway
to
ass
ess
whether
or
not
certain
economic
activities
ar
e
taxo
nomy
-eligible
o
r
taxono
my
n
on-eligible.
Despite
the
fact that
we hav
e car
efully ba
lanced o
ur as
sessment
and
disclosures on
the
EU Taxon
omy,
taking
into accou
nt th
at
this firs
t reporting
year
is con
sidered to
be a
trans
itionary
year, this
reporting
may d
iffer from f
uture
disclosures
as
more guidance becom
es available ov
er time. Furthermore:
•
Turnover is bas
ed on best
estimate to our knowledge and
availab
le data regarding o
u
r
eligible produ
cts;
•
OpEx
is
based
on
best
estimate
to
our
knowledge
and
possible
allocat
ion
of
new
eligible
pro
ducts
or
technologies’ developm
ent costs; an
d
•
CapEx
is
bas
ed
on
best
estimate
to
our
knowledge
and
possible
allocation
of
eligible
prod
ucts
or
technologies
used in capacity
increase or te
chnological Research and
Development.
In
the
coming
years,
we
will
continue
to
report
under
the
EU
Taxon
omy
with
regard
to
our
Taxonomy
-eligible
economic
activ
ities
as
well
as
our
Taxonomy
-aligned
economic
act
ivities
(as
of
financial
year
2022).
This
enta
i
ls
a
further
and
continuous
review
o
f
our
economic
activities.
Future
guidance
on
the
EU
Taxonomy
could
r
esult
in
updated
definitions
and
oth
er
d
ecision
-making
in
meeting
reporting
obligations
that
may
come
into
force.
We
exp
ect
that
ou
r
reporting
will
evolve
over
time
as
more
insight
s
will be
gained on
h
ow
best
to
comply
with
the
EU
Taxonomy.
4.
Report of the Su
pervisory Boa
rd
The supervision of the policies and actions of our
Managing Board is entrusted to our Sup
ervisory Board, which, in a
two-tier
corporate
stru
cture
under
Dutch
law,
is
a
separate
body
and
fully
independent
from o
ur
Managing
Board.
In
fulfilling
their
duties
und
er
Dutch
law,
our
Supervisory
Board
members
serve
th
e
best
interests
o
f
ST
and
its
business, takin
g into consideration t
he interests of all ST sh
areholders and o
ther stakeholders.
Our Supervisory
Board sup
ervises and advises ou
r Managing Board in perfo
rming its man
agement tas
ks and setting
the
direction
of
our
affairs
and
b
usiness.
Among
other
matters
ou
r
Supervisory
Board
supervis
es
the
structure
and
management
of
sy
stems
of
internal
bu
siness
contro
ls,
risk
management,
strategy
an
d
the
fin
ancial
report
ing
proces
s.
In
add
ition,
it
determines
the
remuneration
of
the
sole
member
of
the
Man
aging
Board
within
the
remuneration
policy adopted b
y the General Meeting of Shar
eholders.
The
members
of
our
Supervisory
Board
are
carefully
selected
based
on
their
comb
ined
experience,
expertise,
knowledge, as we
ll as the
bus
iness in
which we
op
erate. Our Supervisory Board
is
em
powered to recommend to
the
General
Meeting
of
Sharehol
ders
people
to
be
appoin
ted
as
members
of
our
Superviso
ry
Board
an
d
our
Managing
Board.
In
performing
its
duties,
our
Supervisory
Board
is
advised
and
assisted
by
the
following
committees:
the
Strategic
Committee,
th
e
Audit
Committee,
th
e
Compens
ation
Co
mmittee
and
th
e
Nominating
and
Corporate
Governance
Committee. In
the
first qu
arter o
f
2022
the
Sustainab
ility Committ
ee was
established
.
The committ
ees all
report to
our Supervisory
Board. Only members of th
e Supervisory Board
can be committee mem
bers.
Our
Supervisory
Board
has
determined,
bas
ed
on
the
evaluation
o
f
an
ad
-hoc
co
mmittee,
the
fol
lowing
independence
criteria
for
its
members:
Supervisory
Board
members
must
n
ot
have
an
y
material
relationship
with
STMicroelectronics
N.V.,
or
any
of
its
consolidated
subsidiaries,
or
its
management.
A
“material
relation
ship”
can
include
commercial,
indu
strial,
bankin
g,
consulting,
legal,
accounting,
charitable
and
familial
relationships,
among
others,
but
d
oes
not
include
a
relationship
with
direct
or
indirect
sh
areholders.
As
a
result,
we
hav
e d
eviated
from
the independ
ence criteria as
includ
ed in
best
practice
provision
2.1.8
of the
DCGC, specifically
item v
ii.
of such
best
practice provision, which
states that a
supervisory board
member
is
not
in
dependent if
he/she (or
his/her registered
partner
or
other
life
compani
on,
foster
child
or
relative
by
bloo
d
or
marriage
up
to
the
second
degree
as
defin
ed
under
Dutch
law)
is
a
member
of th
e
man
agement
bo
ard
—
or
is
a
representative
in
some
oth
er
way
—
of
a
legal
entity which holds
at least 10
% of our shares
, unless s
uch entit
y is a member of
our Grou
p. We do
how
ever comply
with corporate governan
ce listing s
tandards of the N
YSE.
61
Our Supervisory
Board also a
dopted specific bars
to indepen
dence. On that b
asis, ou
r Supervisory Bo
ard concluded
that all members qualify a
s independent b
ased on th
e criteria set forth
ab
ove.
The Supervisory Board
is pleased to r
eport on its Committees an
d its various a
ctivities in
2021
.
4.1. Composition of the Supervisory Board
Our
Supervisory
Board
adv
ises
our
Ma
naging
Board
and
is
responsible
for
supervising
the
policies
pursued
by
our
Managing
Board
,
the
manner
in
which
the
Managing
Board
implements
the
long
-term
v
alue
creation
strategy
an
d
the
general
cours
e
o
f
our
affairs
an
d
busin
ess.
Our
Supervisory
Board
cons
ists
of
s
uch
nu
mber
of
me
mbers
as
is
resolved
by
our
AGM
up
on
a
non-bind
ing
proposal
of
our
Sup
ervisory
Board,
with
a
minimum
o
f
six
members.
Decisions
by
our
AGM
concerning
the
number
and
the
identity
of
our
Superviso
ry
Board
members
are
taken
by
a
simple majority of the votes
cast at a
meeting, provided quorum con
ditions are met.
Our Supervisory
Board was composed of th
e following nine members a
s of December
3
1,
2021
:
Name
Position
Year First
Appointed
Term
Expires
Nationality
Gender
Age
Maurizio Tamagnini
Chairman
2014
2023
Italian
Male
56
Nicolas Dufourcq
Vice
Chairman
2015
2024
French
Male
58
Janet David
son
Member
2013
2022
American
Female
65
Ana de Pro Gonzalo
Member
2020
2023
Spanish
Female
54
Yann Delabri
è
re
Member
2020
2023
French
Male
71
Heleen Kersten
Member
2014
2023
Dutch
Female
56
Lucia Morselli
Member
2019
2022
Italian
Female
65
Alessandro Riv
era
Member
2011
2023
Italian
Male
51
Fr
é
d
é
ric Sanchez
Member
2017
2023
French
Male
61
Resolutions
of
our
Sup
ervisory
Board
require
the
ap
proval
of
at
least
three
-quarters
of
its
members
in
office
,
with
each
m
ember
being
entitled
to
one
vote
.
Our
Supervisory
Boa
rd
must
meet
up
on
request
by
two
or
more
o
f
its
members
or
by
our
Managing
Board.
Our
Su
pervisory
Board
meets
at
least
five
times
a
year,
including
once
per
quarter
to approv
e our
quarterly, s
emi-annual
and
annual
accounts
and their
re
lease. In
2021
,
the
average
attendance rate for th
e meetings of ou
r Supervisory
Board was
87
%. Our Supervis
ory Board
has adopted
a
Supervisory Board
Charter, which is a
vailable on ou
r website (www.st.com).
Our
Supervisory
Board
may
make
a
proposal
to
our
AGM
for
th
e
suspension
or
dism
issal
of
one
or
more
of
its
members.
Each
memb
er
of
our
Sup
ervisory
Board
must
res
ign
no
later
than
thre
e
years
after
appointment,
as
described
in
our
Articles
of
Association,
but
may
b
e
reappointed
following
the
expiration
of
his/her
term
of
office.
Pursuant
to
Dutch
law,
there
is
no
mandatory
retirement
age
for
members
of
our
Supervisory
Board.
Members
of
the Supervis
ory Boa
rd may b
e suspend
ed or
dismissed b
y our AGM.
Certain of
our Sup
ervisory
Board members are
proposed
by
a
nd may
retain
certain relation
ships
with
ou
r direct
or
indirect
shareholders
represented
through
ou
r
major shareholder.
Biographies
Maurizio Tamagnini
has
been a m
ember since June
2014 and has been
th
e Chairman
of
our Supervisory Board
sin
ce
June
2020.
He
was
the
Chairman
of
the
Supervisory
Board
from
June
2014
to
June
2
017
and
Vice
Chair
man
from
June
2017 to
June
2020. He
also
serves
on ou
r Sup
ervisory Board’s
Nominating
and
Corporate
Governance
Committee
an
d
chairs
its
Compensation
Committe
e
an
d
Strategic
Co
mmittee.
Mr.
Tamagnini
is
cu
rrently
Chief
Executive
Officer
of
FSI
SGR
S.p.A.,
an
as
set
management
company
participat
ed,
with
a
significant
stake
(39%),
among others, b
y
Cassa
Depositi e
Pres
titi S.p.A.
(CDP), which is
82.7%
controlled
by the
I
talian Government.
FSI SGR
S.p.A. manages “FSI I”, a private equity closed
-
end fun
d with approximately €1.4 billion
capital endowment,
specialized on
growth equity
investments in I
talian midmarket
compan
ies with
develop
ment potential. He
was,
until
April
2019,
no
n-executive
Cha
irman
of
FSI
Investimenti
S.
p.A.,
w
hich
is
controlled
77%
by
CDP.
Until
31st
March
62
2016,
Mr.
Tamagnini
was
Chief
Executive
Officer
and
Chairman
of
the
Investment
Committee
of
Fondo
Strategico
Italiano S.p.A.
(now
CDP
E
quity
S.p
.A.),
an investment
company controlled
b
y
CDP. Until
April
2016,
h
e
was Chairman
of
the
jo
int
venture
between
Fondo
Strategico
It
aliano
S.p.A.
an
d
Qatar
Holding
(IQ
Made
in
It
aly
Investment
Company S.p.A.) with ca
pital endowment of up to €2 billion in total for i
nvestments
in the food, brands, furniture &
design and
tourism sectors.
He
was
previously Southern
European
Manager
of
th
e Corporate
& Investments
Bankin
g
division
of
Bank
of
America
Merrill
Lynch
and
a
member
of
th
e
Executive
Committe
e
of
Bank
of
America
Merrill
Lynch for the EMEA region. Mr.
Tamagnini has gained over 25 years of
experience in the
financial sector specializing
in the areas
of Corporate Finance, Private E
quity, Debt and E
quity. Mr. Tamagnini is als
o a member of the
International Advisory
Board of
BIDMC
Harvard Medical
School.
He holds
a
degree
in International Monetary
Economics
from
Bocconi
University
in
Milan
and
has
also
studied
at
the
Rensselaer
Polytechnic
Institute
—
Troy
in
New York, USA.
Nicolas
Dufourcq
has
been
a
member
of
our
Superv
isory
Boa
rd
sin
ce
May
2015,
its
Ch
airman
from
June
20
17
to
June 2020
and
its
Vice
-Chairman
since J
une 2
020. H
e serv
es on
our
Supervisory
Board's
Nominatin
g and
Corporate
Governance
Committee,
Compensation
Committee
and
Strat
egic
Committe
e.
Mr.
Dufourcq
i
s
a
grad
uate
of
HE
C
(
Hautes
Etudes C
ommerciales
) and
ENA
(
Ecole
Nationale
d'Administration
).
He
began
his caree
r
at
the
French
Ministry of
Finance and
Economics before
join
ing the
Minis
try of
Health
and
Social affairs in
1992. In 1994,
he joined
France
T
elecom,
where
he
created
the
Multimedia
division
,
bef
ore
goin
g
on
to
chair
Wanadoo,
the
firm's
listed
Internet an
d Yellow Pages
subsidiary
. After
joining
the Cap Gemini
Group in
2003, h
e was made
responsib
le for th
e
Central and Sou
thern Europe region, su
ccess
fully leading their financial tu
rnaround. He was appointed Chief
Financial Officer of the
Group and member o
f the Executive Com
mittee in September 200
4. In 2005, he was n
amed
deputy Chief
Executive
Officer in
charge
of
finance, risk
managem
ent,
IT,
d
elivery
,
p
urchases
and LEAN
program
and,
in
2007,
also
in
charge
of
the
follow-up
of
th
e
grou
p's
m
ajo
r
con
tracts.
On
Febru
ary
7,
2013,
Mr.
Dufourcq
was
appointed Chief Executive Officer
o
f Bpifrance (
Banque Publique d'Investissement
), which is
one of
the shareholders
of ST Holding. Until J
anuary 2021, h
e was the perman
ent representativ
e of Bpif
ranc
e Participation
s as a
member of
the board
of directors
of Orange. Mr. Dufourcq
is also
a member
of the
strategic advisory board of
Euler Hermes (up
to June 2021), a member of the Supervis
ory Committee of Doctolib an
d of the Board of Directors of Stellantis (since
January 2021).
Janet Dav
idson
has
been
a
member of
our
Supervisory Board
since Ju
ne
2013.
She serves
on our
Supervis
ory
Board
’s
Audit
Committee
and
Strategic
Committee
and
chairs
our
new
ly
established
Supervisory
Board’s
Sustainability
Committee.
She
began
her
career
in
19
79
as
a
membe
r
of
the
Technical
Sta
ff
of
Bell
Labora
tories,
Lucent
Technologies (as of
2006 Alcatel Lucent), and
served from
1979 through 2011 in several
key positions, most rece
ntly
as
Chief
Strate
gy
Officer
(200
5
–
200
6),
Chief
Co
mpliance
Officer
(2006
–
2008)
and
EVP
Qualit
y
&
Cus
tomer
Car
e
(2008
–
2011). From 2005 thr
ough 2012, Ms.
Davidson was a member of the Lehigh University Board of Trus
tees. In
2007 she served on t
he Rivers
ide Symphonia
Board of Trus
tees and in 2005
and 2006,
Ms. David
son was a me
mber
of
th
e
Liberty
S
cience
Center
Board
of
Trustees.
Ms.
Davi
dson
was
a
member
of
the
b
oard
of
the
Alcat
el
Lucent
Foundation
from
2011
until
2
014
and
a
memb
er
of
th
e
bo
ard
of
directors
of
Milli
com
f
rom
April
2016
un
til
June
2020.
Ms.
Davidson
is
also
a
member
of
th
e
b
oard
of
the
AES
Corporation,
since
February
2019.
Ms
.
David
son
is
a
graduate of
th
e G
eorgia Institute
of Te
chnology (Georgia Tech), Atlanta, GA,
USA, and Lehigh
Univ
ersity, Bethlehem,
PA, USA and holds
a Master’s degree in Electrical E
ngineering
.
Ana
de
Pr
o
Gonzalo
has
been
a
member
of
our
Supervisory
Board
since
Ju
ne
2020.
S
he
chairs
our
Supervisory
Board’s
Audit
Committee.
Since
Ju
ne
2019,
Ms.
de
Pro
Gonzalo
is
an
ind
ependent
member
of
the
Glob
al
Steering
Group for Impact Assessment (
Consejo Asesor Nacio
nal Español
); since October 2019, she has been
an independent
non-executive
dir
ector
for
N
ational
Express
Group
PLC
and
a
member
of
its
safety
an
d
security
committee,
audit
committee
and remuneration comm
ittee;
and
since December
2020,
she has
also b
een
an independent
non
-
executive
director
for
Indra
Sistemas
S.A.
and
me
mber
of
its
sustainab
ility
an
d
audit
committees.
She
was
until
December
2020
chief finan
cial
officer of
Amad
eus
IT
Holding
(a
world
leading
technology
provider
and
trans
action
processor
for
the
glob
al
trave
l
an
d
tou
rism
indus
try),
with global
res
ponsibility f
or
financial
management
an
d
contro
l
for
the
Amadeus
group.
She
was
appoin
ted
in
this
role
in
February
2010
and
was
also
a
member
of
the
Amadeus
executive
management
tea
m.
From
2002
to
2010,
Ms.
d
e
Pro
Gonzalo
was
corporate
general
manager
at
Sacyr
Vallehermoso
and
was instrumental in
leading
the in
ternationa
l expan
sion of
one of
the major cons
truction
groups
in the world. From 1994
to 2002, Ms. de Pro
Gonzalo was deputy general manager and finance director at
63
Metrovacesa,
and
from
1990
to
1994
sh
e was
a senior
audi
tor
at
Arthur
Andersen.
Ms.
de
Pro
Gonzalo
ho
lds
a
BSc
in Business
Stu
dies, specializing
in Auditing, from
Universidad
Complutense
d
e Madrid,
and completed
IE
SE Business
School’s general manage
ment executive program
.
Yann
Delabrière
has
been
a
member
of our
Supervisory Board
s
ince
J
une
2020. He
serve
s on
our Supervisory
Board's
Audit
Committ
ee.
Mr.
Delabrière
began
his
career
with
the
French
Court
of
Auditors
b
efore
working
in
the
Fr
ench
Foreign
Trade
Ministry
from
1
981 to
1983.
He
served
as
chief finan
cial o
fficer
for
COF
ACE,
from
1983
to
1987,
an
d
for Printemps (a r
etail group,
now Kering) as
group C
FO fro
m 1987 to 1
990. In 199
0, be jo
ined PSA Peugeot
Citroën
as ch
ief finance
officer
and,
in 1998,
he join
ed
the ne
wly cr
eated executiv
e comm
ittee of
the
group
and,
in
parallel
of
his
position
as
CFO,
beca
me
chairman
an
d
chief
executiv
e
officer
o
f
PS
A's
consu
mer
finance
unit,
Ban
que
P
SA
Finance.
From
Febru
ary
2007
until
July
2016,
Mr.
Delabrière
was
the
chief
executive
office
r
of
Faurecia,
and
the
chairman of
its
board
of
directors
until
May 2017.
He
was
appoin
ted in
April 201
7 adv
isor to
the
board
and
then in
June 2017 chief execu
tive officer of Zodiac A
erospace and ov
ersaw the sale to Safran
group in
February 2018. Since
July 2020,
Mr. Delabrière has bee
n the
ch
airman of
th
e board
of Idemia,
a global lead
er
in augmented reality, w
here
he
previously
s
erved
as
president
and
CEO
(betw
een
October
2018
and
J
uly
2020).
He
h
as
been
appo
inted
as
non
-
executive
member
of
the
board
of
directors
of
Leddar
Tech
in
February
2021
and
has
been
the
lead
independent
director
of Alstom
since March
2017. Mr.
D
elabrière also
serv
ed
as
non-executive director
an
d
chairman of
the audit
committee
o
f
Capgemini
from
200
4
to
May
2018,
and
as
non
-executive d
irector
of
Soci
été
Générale
from
2012
to
2016.
Mr.
Delab
rière
holds
a
PhD
in
M
athematics
having
grad
uated
from
th
e
Ecole
Normale
Supérieure
an
d
the
Ecole Nationale d' Ad
ministration. He is a
lso a Chevalier de la Légion d'Ho
nneur (Knight of the Legion o
f Honor) and
Officier de l'Ordre Nation
al du Mérite (Officer of the N
ational
Order
of Merit).
Heleen
Ker
sten
has
been
a
member of
our
Supervisory Board
since
J
une
2014.
She serves
on our
Su
pervisory
Board’s
Audit
Committee
and
Compens
ation
Committee
and
ch
airs
its
Nominating
and
Corp
orate
Governan
ce
Committee.
Ms.
Kersten
is
a
partner
at
Stibbe
in
Amsterdam,
wher
e
she
h
eld
the
p
osition
of
managin
g
partner
from
2008
to
2013. Stib
be
is
a
Benelux
law
firm
with
offices
in
Amsterdam,
Brussels,
Luxembourg,
London,
New
York,
Dubai
and
Hong Kong.
She
b
egan her
career in
1989 with
Stibbe before
j
oinin
g
Dav
is
Polk
in
New Y
ork and
Lon
don (19
92-1993).
After her return to Stibbe Amsterdam, she rose through the ranks to become
a partner in 1997. As
a member of the
Bar of
Amsterd
am since
1
989, Ms. Ke
rsten specializes in
me
rgers and
acquisitions
, equity capital m
arkets, corporate
law and corporate governance. Ms. Ke
rsten was a supervisory board
member of
the Dutch listed Bank Van
Lanschot
N.V.
until
May
2015
and
the
chairman
of
the
sup
ervisory
b
oard
of
Egeria
Inves
tment
B.V.
until
April
2016.
She
is
currently
chairman
of
th
e
boa
rd
of
th
e
Dutch
Red
Cross (
Vereniging
Het
Nederland
se
Rode
Kruis
),
s
ince
Janu
ary
2020,
and
a
supervisory
board
memb
er
of
th
e
Rijks
museum
(
S
tichtin
g
Het
Rijksmuseum
),
since
2015.
Sh
e
is
also
a
b
oard
member of the
Foundation
Concertge
bou
workest s
ince 2010. Ms. K
ersten holds
master’s
degrees in Du
tch law and
tax law, both from Leiden Un
iversity in
the Netherlands
.
Lucia Morselli
has b
een a member of our Supervisory
Board since May 2019. She s
erves on our Superviso
ry Board's
Audit
Committee
and
Compe
nsation
Committee.
Ms.
Mors
elli
is
a
member
of
the
board
o
f d
irectors
and
President
of
th
e
Related Party
Committee and
member
o
f
the Audit
Committee
of
Teleco
m
It
alia.
She
is a
member
of the
board
of d
irectors
of
EssilorLuxottica
(Paris
),
of
Sis
al
S.p.A.,
and member
of
the
adv
isory
board
of
Veneranda
Fabbrica
del
Duomo di
Milan
o. She
is also in
charge of
th
e degre
e course
in Economics of
the Link
Campus University (Rome).
Ms.
Morselli
graduated
with
the
highest
grades
in
Mathem
atics
at
the
Univ
ersity
of
Pisa.
She
complet
ed
a
PhD
in
Mathematical
Physics at
the
University
of
Rome
and
she
holds
two
master
degrees, the
first
one
in
Business
Administration at
the University
of Turin and t
he second one in
European P
ublic Administ
ration at th
e Universi
ty of
Milan.
She
s
tarted
her
career
at
Olivetti
as
an
as
sistant
to
th
e
CFO;
fro
m
1985
to
199
0
sh
e
was
s
enior
manager
Strategic
an
d
Manufacturing
Service
with
Accenture;
from
1990
to
1995
she
was
CFO
of
the
Aircraft
Division
at
Finmeccanica
S.p
.A.
Subsequ
ently
she w
as
CEO of
Telepiù
Gro
up
(1995
-1998),
of
Ne
ws
Corpora
te
Europe and
Stream
(Sky) S.p.A. (1998-2003), of Tecnosistemi S.p.A. (2004), of Mikado S.p.A.
and Compagnia Finanziaria S.p.A. (2009), of
Bioera S.p.A.
(2010
-2011), of
Berco
Group (2
013
-2014), of
Acciai
Speciali
Terni (201
4-20
16) and
of Acciaitalia
S.p.A.
(2016).
She
als
o
served as
chairman
of
th
e
board and
CEO
of
Magis
te
Internation
al
SA
(20
06),
an
d
of
Scorpio
Shipp
ing
Group Ltd (2011-2013)
. She was a
member of the board of directors
of NDS (200
4-2005)
and IPI S.p
.A. (2007-2008).
In
2003
s
he
funded
the
consulting
firm
Franco
Tatò
&
Partn
er.
Since
2009
she
has
been
a
member
of
the
advisory
board
(restru
cturing
fun
d)
of DG
PA
& TATO'
Investment
Fu
nd. In
Octob
er
2019
Ms.
Mors
elli
was
app
ointed
chairm
an
of the board of directors
and CEO of ArcelorMittal
Italia
.
64
Alessandro Rivera
has
been a member of our Supervisory Board since May 2011. Mr. Rivera serves on our
Supervisory Board's
Strategic Committee
and Nominating
a
nd Corporate
Governanc
e
Co
mmittee.
H
e
was appointed
as
the
Director
General
o
f
th
e
Treasury
in
Augus
t
2018.
He
is
th
e
repres
entative
for
Finance
Deputies
meetings
of
the G7, G20,
and the IMF, and a me
mber of the
Economic and Financial Committee (as Vice-Pr
esident) and the Euro
Working G
roup of
the
European Union,
and
o
f
th
e
Board
of
Directors
of
th
e
E
uropean Stability
Mechanis
m.
He chairs
the
E
FC
Sub
-Committee
on
IMF
related
issues.
Prio
r
to
h
is
appointment
as
Director
Gen
eral
of
the
Treasu
ry,
Mr.
Rivera was
th
e
Head of
Direct
orate IV
"Financ
ial Sector
Poli
cy and Re
gulation Legal
Affairs" at
the Department
of the
Treasury, Ministry
of Economy
and Finan
ce from 2008 to 2
018. He s
erved as Head o
f Unit
in the Depart
ment of the
Treasury
from
2
000
to
2008
and
was
responsib
le
for
a
variety
of
policy
matters:
financial
services
an
d
markets,
banking
found
ations,
accoun
ting, finan
ce,
corporate
gov
ernance,
and
auditing.
Since
20
13,
he
has
been
a
member
of the Board of Directors of Cassa Depositi e Prestiti. He was the Chairman of the Board of Directors of
AMC
O S.p.A.
(formerly SGA
S.p.A.)
(2017
-2020). He
was
a
member of
the Boards
of
Directors an
d Compens
ation Committ
ees of:
Poste
Italiane
S.p.A.
(2011-2014);
It
alia
Lavoro
S.p.A.
(2005-
2008);
Mediocredit
o
d
el
Friuli-Venezia
Giulia
S.p.A
(2001
-2003).
Frédéric
Sanchez
has
been
a
member
of
ou
r
Supervisory
Board
since
June
2017.
He
serves
on
our
Supervisory
Board's
Compensation
Committee,
S
trategic
Com
mittee
and
Nominating
and
Corporate
Governance
Committee.
Mr.
Sanchez
is
the
chairman
of
the
execu
tive
board
o
f
Fiv
es,
an
industrial
engineering
group
with
heritage
of
over
20
0
years o
f engineering
excellence
and
expertise.
Fives
designs
and
supplies
machines,
process
equipment
and
production
lines
for
the
world's
largest
industria
l
groups
in
various
sectors
such
as
aluminum,
steel,
glass,
automotive,
logistics,
aerospace,
cement
and
energy,
in
bo
th
developing
and
developed
cou
ntries.
Mr.
Sanchez
started his career in 1985
with Renault in Mexico, then in
the USA. In 1987 he
b
ecame a mission manager at Ernst &
Young. In 199
0 he joined
Fives-Lille group, in
which he h
eld variou
s positions b
efore being appoin
ted chief financial
officer in
1994 and becoming chief
op
erating officer
in 1997. In
2002, the "Compagnie de
Fives-Lille" (renamed Fives
in
2007)
be
came
a
company with
a management
b
oard and
supervisory board
ch
aired
by
Mr. Sanchez.
In 2018,
Fives
became
a
French
simplified
joint
stock
company
(s
ociété
par
actions
simplifiée)
an
d
Mr.
Sanch
ez
its
chairman
and
CEO. Within MEDEF (French Business Confederation), Mr. San
chez is President of MEDEF International, President of
the
Council
of
Entrepreneurs
France-Jap
an,
France-United
Arab
Emirates
an
d
France-Barhain.
Mr.
Sanchez
is
an
administrator of
Primagaz,
Orange,
Thea
and Bure
au
V
eritas
an
d
he
is
hono
rary
co
-pres
ident
of
the
Alliance
In
dustrie
du Futur. Mr.
Sanchez graduated from H
EC Bus
iness School (1983
) and Sciences
-Po Paris (1985) a
nd he also h
olds a
Master Degree in Econ
omics from Université Paris
-Daup
hine (1984)
.
4.2. Meetings and activities of the Supervisory B
oar
d
Activities of the Supe
rvisory Board
Our Sup
ervisory
Board h
eld
eleven
meetings
in 2
021, of
whi
ch all
were h
eld in
the
presence
of th
e s
ole me
mber of
the Managin
g Board
and o
ther select members
of ou
r
Senior
Management,
with th
e exception
of th
e evaluation
of
the functioning of ou
r Managing Bo
ard, Superviso
ry Board, its Committees an
d its in
dividual members as
described
below.
The
ite
ms
d
iscussed in
those
me
etings
included re
curring subjects
su
ch
as
ou
r
annu
al
b
udget,
finan
cial
p
erformance,
Annual
Report on
Form 20
-F a
s
well as
its s
tatutory annu
al accounts,
objectives
and res
ults, strategy
and
long
term
value
creation,
operations
review, reports
o
f th
e v
arious
Committees
of
ou
r
Supervisory
Board,
the
conv
ocation
of
our
AGM,
the
risks
of
our
b
usiness
and
th
e ass
essment
by
our
Managing
Board
of th
e
structure
of
our
internal
risk
management
and
control
s
ystems,
as
well
as
any
significant
changes
thereto,
corporate
governan
ce
requirem
ents
and
d
evelopments
and
the
compensation
of
the
s
ole
member
of
our
Managing
Board.
Certain
Supervisory
Board
meetings also in
cluded presentation
s by senior executi
ve managem
ent.
Outside
the
Superviso
ry
Board
meetings,
the
Chairman
an
d
other
members
of
our
Sup
ervisory
Board
had
regular
contact with the s
ole member of the Managin
g Board, and
other members of our
Senior Management.
In
accordan
ce
with
the
best
practice
provisions
2.2.6
and
2.2.7
of
the
DCGC,
on
an
annual
b
asis
our
Supervis
ory
Board
un
dertakes
to
perform
an
evaluation
of
the
functioning
of
th
e
Managing
Board
an
d
the
Supervisory
Board
(which
als
o
includes a
n
evaluation
of
th
e
functio
ning
of the
Superviso
ry Board’s
committees and
its
members).
Once
every
three
years
,
this
evalu
ation
is
conducted
by
an
independent
external
expert,
whose
mission
is
to
assist
the
Supervisory
Board
in
th
is
evaluation
th
rough,
inter
alia
,
conducting
interviews
with
individual me
mbers
o
f
the
65
Supervisory Board
and Managing Board and
facilitating discussions with
in the Superviso
ry Board on the functioning
of
the
boar
d,
its
committees
an
d
its
mem
bers,
includ
ing
an
evaluation
of
the
involvement
o
f
each
member,
th
e
culture within the Su
pervisory Board and th
e relationship between the Supervisory
Board and the Managing Board
.
The
evaluat
ion f
or
th
e
y
ear
end
ed
December 31,
2021
, w
as completed
on
January 26,
2022,
an
d
concluded t
hat bo
th
the
Superviso
ry
Board
and
the
Managing
Board
of
t
he
Compan
y
are
fun
ctioning
well.
The
evalu
ation
als
o
noted
opportunities
for
further
improvements
including
but
not
limited
to
the
establishment
of
a
new
Sustainability
Committee, additional training sessions for
members of the
Superviso
ry Board, and
succe
ssion planning.
The
Sustainability
Committee was establish
ed in
the first quarter of 2022.
Membership and Atten
dance
As at
December 31,
2021, the
comp
osition of
the four
sta
nding comm
ittees of
o
ur Supervisory Board
was as follows:
(i)
Ms.
Ana
de
Pro
Gonzalo
is th
e
Chair
of
the
Audit
Committee,
and
Ms.
Janet
Dav
idson,
Mr.
Yann
Delabrière,
Ms.
Heleen
Kersten and Ms.
Lucia
Morselli are
members of
the Audit Committee;
(ii) Mr.
Ma
urizio Tamagnini is
the Chair
of
th
e
Compensat
ion Committee,
and Mr.
Nicolas Dufourcq,
Ms. Hele
en
Kersten,
Ms
.
Lucia
Morselli
an
d Mr.
Frédéric
Sanchez are
members
of the
Compensation
Com
mittee; (iii)
Ms.
Heleen Kersten
is
the Chair
of th
e Nominati
ng
an
d
Corporate
Governance Committee,
an
d
Messrs. Nicolas
Dufourcq
,
Alessandro Rivera, Frédéric
Sanchez and
Maurizio
Tamagnini are members of the
Nominati
ng
and Corporate Governance Committee; and (iv) Mr. Maurizio T
amagnini
is
the
Chair
of
the
Strategi
c
Committ
ee,
and
Ms.
Jan
et
Dav
idson,
and
Mess
rs.
Nicolas
Dufourcq,
Alessandro
Riv
era
and Frédéric Sanchez are
members of the Strategi
c Committee
.
Detailed
information
o
n
attendance
at
full
Supervisory
Boa
rd
and
Supervisory
Board
Committ
ee
meetings
d
uring
2021
is as follows:
Number of Me
e
tings
Attended in 2
021
Super
visory
Board
%
Attendance
Audit
Committee
%
Attendance
Compensati
on
Committee
%
Attendance
Strategic
Committee
%
Attendance
Nominating
&
Corporate
Governanc
e
Committee
%
Attendance
Maurizio Tama
gnini
11
100
__
__
4
100
2
100
1
100
Nicolas Dufour
cq
9
82
__
__
4
100
2
100
1
100
Janet Davidson
10
91
10
100
__
__
2
100
__
__
Heleen
Kersten
9
82
8
80
4
100
__
__
1
100
Yann Delabri
è
re
10
91
10
100
__
__
__
__
__
__
Lucia Morsell
i
9
82
9
90
4
100
__
__
__
__
Alessandro Ri
vera
7
64
__
__
__
__
2
100
1
100
Fr
é
d
é
ric San
c
hez
11
100
__
__
4
100
2
100
1
100
Ana de Pro Gon
zalo
10
91
10
100
__
__
__
__
__
__
4.3. Audit Committee
Our
Audit
Committee
as
sists
the
Supervisory
Board
in
fulfilling
its
oversight
responsibilities
relating
to
corporate
accounting,
reporting
practice
s,
an
d
the
quality
and
in
tegrity
of
our
financial
r
eports
as
well
as
our auditing
practices,
legal
and
regula
tory
related
risks
,
execution
of
o
ur
auditors’
recommendation
s
regarding
corporate
aud
iting
rules
and the independ
ence of our external audito
rs.
Our
Audit
Committee
met
ten
times
during
2021
.
At
many
of
th
e
Audit
Committee’s
meetings
,
the
comm
ittee
received presentations on current financial and accounting is
sues and had the opportunity to discuss with our
Chie
f
Executive
Officer,
Chief
Financial
Off
icer,
Chief
Accountan
t,
Chief
Audit
and
Risk
Executive,
Legal
Counsel,
Chief
Compliance
Officer
and
extern
al
au
ditors.
Our
Audit
Commit
tee
also
p
roceeded
with
its
annu
al
review
of
o
ur
internal
audit
function.
Our
Audit
Committee
reviewed
our
annual
Cons
olidate
d
Financial
Statements
in
U.S.
GAAP
for
the
year ended December
31, 2021, a
nd the results
press release was pub
lished on
Januar
y 27, 2022. Furthermore,
our
Audit Committee
also re
viewed our
annual Consolidated Financial
Statements
unde
r IFRS,
as
adopted by the
European Union
, for the year ended December
31,
2021
.
Our Audit
Committee approved
the compensation of
our external auditors f
or
2021
and discussed the
scope of
their
audit, aud
it related and non
-audit related services for
2021
.
66
Our Audit Committe
e
regularl
y reviewed manag
ement’s co
nclusions a
s to the effectivenes
s of internal con
trol over
financial reporting an
d sup
ervised the implementation of ou
r corporate ERM pro
cess.
As
part
of
each
o
f
its
quarterly
meetings,
our
Audit
Commi
ttee
also
reviewed
o
ur
financial
results
as
presented
by
Management- and whistleblowing re
ports, including independent investigative reports
provided
in relation thereto
.
4.4. Compensation Committee
Our
Compensation
Committee
ad
vises
our
Supervisory
Board
in
relation
to
the
compensation
o
f ou
r
President an
d
Chief
E
xecutive
Officer
and
sole
member
of
our
Managing
Board,
including
the
variable
portion
of
such
compensation
based
on
performance
criteria
recommended
by
our
Compensation
Committee.
Our
Compens
ation
Committee
also
reviews
the
stock
-based
compens
ation
plans
f
or
our
senior
managers
and
key
employees.
Our
Compensation Committe
e met
four times in
2021
.
Among
its
main
act
ivities, in
2021
our Compensation
Committ
ee:
(i)
reviewed and
amended the
remuneration policy
for
the
s
ole
member
of
th
e
Managing
Board,
President
and
CEO,
Mr.
Jean
-Marc
Chery
,
in
line
with
recent
changes
in
Dutch
corporate
la
w
and
the
EU
's
Shareholder
Rights
Directive
II
(SRDII);
(ii)
reviewed
the
obj
ectives
met
as
compared
to
the
performance
criteria
relatin
g
to
th
e
b
onus
of
our
President
and
CEO
for
the
fiscal
year
ended
on
December
31,
20
20;
(iii)
discussed
the
performance
targets
relatin
g
to
the
bonus
o
f
our
President
an
d
CEO
for
the
fiscal
year
ending
on
December
31,
2021
(which
s
hort
-term
targets
are
b
ased
on,
inter
alia
,
four
to
seven
performance
conditions
with
a
mix
o
f
finan
cial
criteria
for
approximately
70%
and
non
-finan
cial
criteria
(including
sustainability/corp
orate
social
respons
ibility
index
performan
ce) for
app
roximately
30%,
an
d
long
-term targ
ets
are
based
on,
inter
alia,
two
finan
cial
performance
condition
s
constituting
revenue
growt
h
versus
peer
group
an
d
average
of
operating
margin
ratio
before
restructuring,
and
one
non
-financial
performance
condition
cons
tituting
the composite corporate social respons
ibility index including health and safety, CO2 neutrality, diversity
& inclusion
and people engagement (as further detailed in
“
Managing Board remuneration in p
ar
agraph 4.8.3.
); and (iv)
established,
on
b
ehalf
an
d
with
the
approval
of
the
entire
Supervis
ory
Board,
the
applicable
p
erformance
criteria,
which must
b
e m
et by
senior
managers and
s
elected
key employees
particip
at
ing in
the e
mployee stock award
plans
to
benefit
fro
m
such
awards
(for
th
e
2021
unv
ested
stock
award
plan,
these
p
erformance
criteria
ar
e
further
described below in “
4.8.
3.
Managin
g Board Remuneration
–
Man
aging Board Remunerati
on Structure
”)
.
4.5. Strategic Committee
Our
Strategic
Committ
ee
advi
ses
the Supervisory
Board
on
and monitor
key
developments
within the
se
miconductor
industry
and
our
overall
strategy,
and
is,
in
particular,
involved
in
supervis
ing the
execution
of
corp
orate
strategies
and
in
reviewing
long-term
plan
ning
and
budgeting.
Our
Strategic
Committee
met
t
wo
times
in
2021
.
In
ad
dition,
there were s
trategic
discuss
ions,
many o
f which
occurred a
t extended
Supervis
ory Board
meetings an
d in
volved all
Supervisory Board
members.
4.6. Nominating and Corporate Governance Committee
Our Nominat
ing and
Corpora
te Governanc
e Co
mmittee adv
ises
the Su
pervisory
Board
on th
e selection
criteria
and
procedures relating to th
e appointment of members to o
ur Supervisory Board and Managing Board
, and the review
of
principles
relating
to
corporate
governan
ce.
Our
Nominating
and
Corporate
Governance
Comm
ittee
met
on
e
time
during
2021
to
discuss
succession
planning
for
our
Supervisory
Board
and
Managing
Board,
best
practices
regarding corporate governan
ce, and
the update o
f our
corporate governance do
cuments.
67
4.7. Secretariat and Controllers
Our Supervisory Board
appoints a Secre
tary and
Vice Secretary. Furthermore,
the Managing Board makes
an
Executive Secretary
available to
our Supervisory
Board,
who is
also appointed
by the
Superviso
ry
Board. The
Secretary,
Vice
Secretary
and
E
xecutive
Secretary
constit
ute
the
Secretariat
of
th
e
Sup
ervisory
Board.
The
mission
of the Secretariat is
primarily
to organize meetings, to
ensu
re the continu
ing education an
d trainin
g of our
Supervisory
Board
members
and
to
maintain
record
ke
eping.
Our
Chief
Com
pliance
Officer,
Philippe
De
reeper,
serves
as
Executiv
e
Secretary
f
or
our
Supervisory
Boa
rd,
an
d
for
each
of
the
four
stan
ding
committees
of
our
Supervisory
Board
.
Mr.
Gabriele
Pagnotta
s
erves
as
Secretary
an
d
Ms.
Charlotte
Fad
lallah
serves
as
Vice
Secretary
.
Mr. Pagnotta an
d Ms. Fadlallah s
erve as a Managin
g Director of ST Holding.
Our Supervisory Board also appoints two financial e
xperts (“Controllers”). The m
ission of the Controllers is prima
rily
to
ass
ist
our
Supervisory
Board
in
evaluating
our
o
perational
and
financial
perfor
mance,
b
usiness
plan,
strategic
initiatives
and
th
e
implementation
of
Supervisory
Board
decisions,
as
well
as
to
review
the
operational
reports
provided
under
th
e
respon
sibility
of
the
Managing
Board.
The
Controllers
g
enerally
meet
once
a
month
with
the
management o
f the
Company
and
report
to ou
r full
Supervisory Board
. The
current Contro
llers are
Messrs.
Samuel
Dalens
and
Marco
Zizzo
.
Mr.
Samuel
Dalens
serves
as
a
member
of
the
s
upervisory
bo
ard
of
ST
Holding
.
The
STH
Shareholders Agreement between our principa
l indirect shareholders contain
s provisions with respect to the
appointment of the Secr
etary, Vice Secretary and
Controllers.
4.8. Remuneration report
On
December
1,
2019,
a
Dutch
act
implementing
the
revised EU
Shareholders’
Rights
Directive
(2017/828/EU
(“SRDII”)
took
eff
ect
in
The
Netherland
s.
As
we
are
incorporated
under
t
he
laws
of
The
Netherlands
and
our
common shares are ad
mitted to trading on regulated mar
kets in the Eu
ropean Union, we are required, inter alia, to
have
a
remuneration
poli
cy
in
accord
ance
with
th
e
SRDII
requirem
ents
with
res
pect
to
the
compens
ation
of
the
Supervisory Board
members
and the
so
le
member
of our
Managin
g Board,
Pres
ident
and Chief Executive
Officer and
to comply
with the respective disclosure requirements introduced to
the Dutch Civil Code.
In
con
nection therewith,
we present in this section certain co
mparative information on ou
r performance relative to the compensat
ion of th
e
Supervisory Board members and the sole mem
ber of our Managing Board, President and Chief
Executive Officer.
In
addition, we
provide information
on the
ratio of
fixed
to variable
compensation of
the sole
member
of
ou
r
Ma
naging
Board, President an
d Chief Executiv
e Officer.
Following the
results
of
the 2
020 AGM,
where
our p
roposed
new re
muneration
policy fo
r ou
r Managin
g Board
and
remuneration
report
were
rejected
by
the
AGM
and
after
careful
review
of
comments
received
by
proxy
advis
ors
and
investors
following
our
2020
AGM,
we
conducted
a
th
orough
rev
iew
o
f
th
e
co
mpens
ation
structure,
with
th
e
involvement
of
members
of
the
Company
and
members
of
the
Supervis
ory
Board
(directly
and
through
an
ad
-hoc
committee and the Compensation Committee), each w
ith the supp
ort of
their own independent exte
rnal consulting
firm
and
a
comprehensive
qualitative
an
d
quantitative
b
enchmark
against
our
industry
peers
an
d
best
-
in
-c
lass
market
practices
.
Subsequ
ently,
we
pr
epared
a
revised
remuneration
policy
for
th
e
Managin
g
Boar
d,
which
was
submitted to th
e 2021 AGM, where it was a
pproved with a
substantial majority (95.86% i
n favor).
4.8.1. Supervisory boar
d remuneration
a)
Supervisory Board Remunerat
ion Policy
Our Articles
of Ass
ociation
provide that
the
compensation o
f our
Supervisory
Board
members is
determined by
our
General
Meeting
of
Shar
eholders.
Our
propos
al
for
ad
option
of
a
remuneration
p
olicy
for
th
e
Superv
isory
Board
members
to
ensure
complian
ce
with
the
new
requ
irements
under
the
Dutch
Civil Code
following
th
e
implementation
of SRDII, was app
roved by th
e AGM on June 17, 2020
,
with
a vo
te percentage in favor of the po
licy of 98.43%
.
68
b)
Comp
ensation paid
to current and former Supe
rvisory Board Memb
ers in F
Y 202
1
The
Supervisory
Board
Members
are
only
award
ed
a
fixed
remuneration
(including
an
att
endance
fe
e),
promoting
effective
an
d
independent
supervision
in
the
interest
of
the
Company
and
the
lon
g
-term
success
of
th
e
Compan
y.
The
aggre
gate
co
mpensation
fo
r
current
and
former
members
of
our
Su
pervisory
Board
with
respect
to
service
in
2021
was €
912,000 b
efore any
applicable withholdin
g taxes, as s
et forth in the following t
able
:
Supervisory Board
Members Fees
Annual Fees
Reimburseme
nt
Fees
Attendance
Fees
Total
Maurizio Tamagnini
€
140,500
—
19,500
160,000
Nicolas Dufourcq
(1)
€
—
—
—
Janet Davids
on
€
81,000
—
22,500
103,500
Ana de Pro Gonzalo
€
130,000
—
21,000
151,000
Yann Delabri
è
re
€
77,500
—
21,000
98,500
Heleen Kersten
€
84,500
—
23,000
107,500
Lucia Morselli
€
81,000
—
23,000
104,000
Alessandro Riv
era
€
77,000
—
10,500
87,500
Fr
é
d
é
ric Sanchez
€
80,500
—
19,500
100,000
Total
€
752,000
—
160,000
912,000
(1)
Mr.
Dufourcq
waived
his rights
to re
ceive
any compensat
ion f
rom
the
Company in
relation
to his
mandate
as
a m
em
ber
of the
Supervisory
Board.
c)
Supervisory Board Remunerat
ion Comparison
Set
forth
in
the
following
table
is
the
annual
change
over
the
las
t
five
years
of
(i)
the
average
remuneration
of
our
Supervisory Board Members, (ii)
the performance of
the Company and (iii)
the average
remuneration of our i
ndirect
employees
(i.e.,
all
indirect
employees
other
than
the
m
embers
o
f
our
S
enior
Man
agement,
includ
ing
the
sole
member of our Managing Boa
rd
, President an
d Chief Executive Officer)
:
In US dollars
2021
2020
2019
2018
2017
Supervisory Board
remuneration
Average remuneration of Sup
ervisory Bo
ard
Members
(1)
$
114,775
$
99,431
$
105,066
$
115,618
$
123,281
Company's perfor
mance
Net revenues (amounts
in millions)
$
12,761
$
10,219
$
9,556
$
9,664
$
8,347
Operating income
- US GAAP (amoun
ts in
millions)
$
2,419
$
1,323
$
1,203
$
1,400
$
1,005
Employee rem
uneration
Average remuneration
(2)
of all global
indirect
employees (FTE bas
is)
(3)
$
111,200
$
98,500
$
97,300
$
100,600
$
93,500
(1)
Usi
ng the Euro pe
r U.S. dollar e
xchange rate on
December 31, 2021 of
€1 = $1.13265.
(2)
R
emuneration
is def
ined
as
all
remunerati
on
paid
to employ
ees
including base
salary,
variable
compensation
in
b
oth
cash and
shares, soc
ial
premiums,
pension,
expense
allowances
and
benefits
in ki
nd.
The
average
is
calculated
by t
aking
the
sum
of
remuneration
costs
and
dividing
by the av
erage number o
f full-time equivale
nt indirect e
mployees over the per
iod.
(3)
Gl
obal indirect
employees
are
all
employees other
than
those
directly
manufacturing our
products,
excluding
Senior
Management
.
“F
TE”
refers to f
u
ll time equival
ent.
69
In
connection
with
the
above
tab
le
and
to
p
rovide
insight
in
the
correlation
between
the
re
muneration
of
each
Supervisory Board mem
ber and
the Company
performance as well
as the a
verage rem
uneration
of
all global
ind
irect
employees (FTE
basis
)
ov
er
th
e
pas
t
five
y
ears,
the table
below sets
for
th the
remuneration
(including
an attendance
fee) of each Supervisory
Board member
for the past five years
:
Supervisory Board
Members Fees
(1)
2021
2020
2019
2018
2017
Maurizio Tamagnini
$
181,224
192,002
203,657
203,044
215,312
Nicolas Dufourcq
$
0
(2)
0
(2)
0
(2)
0
(2)
0
(2)
Janet Davids
on
$
117,229
123,912
130,046
123,912
141,088
Ana de Pro Gonzalo
(4)
$
171,030
172,372
N/A
N/A
N/A
Yann Delabri
è
re
(3)
$
111,566
107,963
N/A
N/A
N/A
Heleen Kersten
$
121,760
128,819
143,541
135,567
144,768
Jean-Georges Malcor
(3)
$
N/A
8,588
122,072
120,845
120,845
Lucia Morselli
$
117,796
130,660
113,484
N/A
N/A
Alessandro Riv
era
$
99,107
103,055
112,870
126,979
130,660
Fr
é
d
é
ric Sanchez
$
113,265
118,391
132,500
129,433
118,391
Martine Verluyten
(4)
$
N/A
7,975
185,868
182,801
186,481
1.
These
amounts
are
in
US
dollars
using
the E
uro
per
US
dollar
exchange
rate
on
December
31,
2021
of
€1 =
$1.13265
and
include
a
fixed
annual compens
ation for t
he
members’ mandate
, together wi
th
attendance fees
from January 1 un
til December 31 of
the relevan
t year.
2.
Mr.
Dufourcq
would
have
be
en
entitled
to receive
remuneration in
the
relevant
years,
but
each
year
he
waived
his
rights to
receive any
compensati
on from the
Company in relati
on to his mandate a
s a member of t
he Supervisor
y Board.
3.
The term of M
r. Jean-Geor
ges Malcor ended on
June 17, 2020 and Mr
. Yann Delabri
ère was appoint
ed on June 17, 2020.
4.
The term of M
s. Martine
Verluyten ended on
June 17, 2020 and Ms. Ana d
e Pro Gonzalo was appo
inted on June 17, 2020.
We
d
o
not
hav
e
any
service
agreements
with
m
embers
of
ou
r
Su
pervisory
Board.
We
did
not
extend
an
y
loans
or
overdrafts to any
of our Supervisory
Board mem
bers. Furthermore, we
hav
e not
gu
aranteed any debts
or concluded
any
leases
with
any
o
f
our
Sup
ervisory
Board
members
or
th
eir
families.
No
s
hare
awards
or
s
tock
options
were
granted to Supervis
ory Board Members.
For
further
details
on
the
compensation
of
the
members
of
our
Supervisory
Board
we
refer
to
Note
7.6.34
to
our
consolidated finan
cial statements.
70
4.8.2. Senior Manageme
nt remuneration
a.
Remuneration structure for Se
nior Managemen
t
Our
Senior
Managem
ent,
in
cluding
the
so
le
member
of
our
Managing
Board
,
our
President
and
Chief
E
xecutive
Officer, received a comb
ination o
f fixed, short
-term and long-term comp
ensation
, based on performance
.
Specific
details
regarding
the
s
ole
member
of
our
Managing
Board,
o
ur
President
and
Chief
Executive
O
fficer
,
are
provided
in
the
below
paragra
ph
4.8.3.
“Man
aging
Board
Remuneration
”.
The
below
remuneration
stru
cture,
in
particular in regard
to the STI
and LTI, are no
t applicable to th
e sole member of ou
r Managing Board, P
resident and
Chief Executive Officer, u
nless sta
ted otherwise.
Base Salary
The
purpos
e
of
the
base
s
alary
is
to
provide
a
fixe
d
level
of
earnings
and
to
attra
ct
and
retain
ta
lent.
It
is
a
key
component of overall re
muneration, p
articularly as the STI is exp
ressed as a percentage o
f base sala
ry.
Short Term Incentive
s (STI)
The
STI,
which
we
call
Corpo
rate
Executive
Incentive
Pro
gram
(“EIP”),
entitles
s
elected
employees
including
the
members
of
S
enior
Man
agement
detail
ed
in
the
section
“Biograp
hies
of
our
Senior
M
anagement”
to
a
y
early
STI
based upon the
as
sessment of
the achievement of individual, organizational and
comp
any objectives that
ar
e set
on
an
annual basis
and focused,
int
er
alia
, on
return on
net ass
ets
,
cu
stomer
service,
p
rofit,
cash flow
and market
share.
The maxi
mum
amount
award
ed
under
the
STI
is
based
u
pon
a
percentage
of
the
executiv
e’s
salary
and
th
e ov
erall
achievement of the abo
ve objectives on a
n annual bas
is.
The 2021 STI includes a sustainability in
dex for Senior Management, as part of our effort to include corporate social
responsibility in
to the performance fra
mework of our Senio
r Management. For Execu
tive Committee membe
rs and
EVPs,
th
e
weight
for
th
e
sustainability
index
ran
ges
between
5%
an
d
10%.
The
sustainability
index
is
d
ivided
into
four criteria related to h
ealth and s
afety, environment, d
iversity
& inclusion, an
d people engagement.
For the 2021 STI, the Su
stainability I
ndex was comprised o
f the following KPIs:
•
Health & Safety: meas
ured against,
amongst others, the employee safety
performance
•
Environment/Climat
e: measured agains
t, amongst oth
ers
, direct emissions (kCO
2
equivalent)
•
Diversity & Inclus
ion: measured against,
amongst others, gender ratio
among managem
ent levels
•
People Management:
measured again
st, amongst
others, the employee survey (engage
ment index)
The w
eight
of
the
Susta
inability
Index
is
designed
to
remain
stable
ov
er
time, h
owever
the
individual
sub
-
components used to form the Sustainability Index may evolve
in the future to address
sustainability priorities facing
the Company and
the wider society.
Long Term Incen
tives (LTI)
Th
e
purpos
e
of
stock
awards
is
to
motivate
the
Senior
Ma
nagement
to
deliver
su
stainable
long
-term
shareholder
value through lo
ng-term profitab
ility and share price growt
h.
Stock
awards
vest
over
a
three year
horizon
from
th
e
date
of
the
grant,
with
32%
vesti
n
g
after
one
year,
a
further
32% after two years and the remaining
36% after three yea
rs, subject to performance criteria and provided that the
eligible employee is s
till an employee at such
time.
The
Supervis
ory
Board
determines
whether
the
performa
nce
criteria
will
be
met
an
d
concludes
whether
and
to
which extent all eligible
employees are entitled to a
ny stock awards
under the sto
ck award plan.
71
From 2021, a new
corporate social res
ponsibility co
ndition has been in
troduced among p
erformanc
e conditions for
the LTI, which includes
the below in
dex
.
For the 2021 grant, the Sustainability Index was comprised of the following KPIs which include two external criteria:
•
Environment/Climat
e: measured agains
t, amongst oth
ers, the direct emissions (kC
O
2
equivalent)
•
Diversity & Inclus
ion: measured against,
amongst others, gender ratio
among managem
ent levels
•
ESG Investor Ind
ex: measured again
st, amongst
others, the Dow Jones Susta
inability Indices
•
Carbon Rating Agency: m
easured agains
t, amongst oth
ers,
the CDP Carbon Rating
The
weight of
the Sustainability
Index is
des
igned
to
remain
stable
(33.33%)
for
future
gran
ts,
h
owever
the individual
sub-components
used
to
form
the
Sus
tainability
Index
may
evo
lve
in
the
future
to
address
s
ustainability
priorities
facing the Company
and the wider society.
Pension plan, life a
nd medical insurance
Our Supervisory Board has approved the establishment of a complementary pension plan for certain key executives
as
selected
by
th
e
sole
me
mber
of
our
Managing
Board,
President
and
Chief
Executive
Officer,
according
to
the
general
criteria
o
f
eligibility
an
d
s
ervice
set
up
by
the
Supervisory
Board
upon
th
e
proposal
of
its
Compensation
Committee. With respect to such p
lan, we have set up an independent foun
dation under Swiss law which manages
the plan
an
d to
which
we make con
tributions
.
Pursuant
to th
is pla
n, in 2021,
we made
a
contribution
of
approximately
$0.5
million
to
th
e
plan
of
the
sole
member
o
f
our
Managing
Board,
President
and
Chief
Executive
Officer,
and
of
$0.3
million
to
the
plan
for
all
benefici
aries
other
than
the
so
le
member
of
ou
r
Managing
B
oard,
President an
d Chief
Executive Officer.
The
amount
of pens
ion p
lan payments
made
for other
beneficiaries,
such
as
former employees retired in 2
021 and/or n
o longer salaried in 2021,
was $1.1 million.
The
members
of
our
Senior
Management,
including
the
sole
member
of
our
Managing
Board,
President
an
d
Chief
Executive
Officer,
were
covered
in
2021
under
certain
group
life
and
medical
insurance
programs
prov
ided
by
us.
The
aggregate
additional
amount
s
et
aside
by
us
in
2021
to
provide
pension,
retireme
n
t
or
similar
benefits
for
our
Senior Management, includ
ing th
e sole member of ou
r Managing Bo
ard, President an
d Chief Executive Off
icer, as a
group
is,
includ
ing
the amou
nts
allocated
to
th
e comp
lementary
pension
plan
d
escribed ab
ove
and
is
estimated
to
have
been
approximately
$6.4
million,
which
includ
es
statutory
employer
contrib
utions
for
state
run
retirement,
similar benefit programs a
nd other miscellaneous
allowances.
b.
Compensation p
aid to Senior Manageme
nt in 2021, 2020 and 2019
The
following
ta
ble
s
ets
forth
the
tota
l
cash
amount
paid
as
compensat
ion
in
202
1,
20
20
an
d
2019
to
our
Senior
Management
(including
the
s
ole
me
mber
o
f
our
Man
aging
Board,
our
Presid
ent
and
Chief
Executive
O
fficer)
as
of
December 31st of each y
ear, before applicable with
holdin
g taxes a
nd social con
tributions (amounts in million
s):
2021
(2)
2020
(3)
2019
(4)
Total cash amoun
t paid as compensation
(1)
$
26.2
$
21.4
$
21.3
(1)
Total cash am
ount paid
as
compensation comprises fixed sala
ry, annual
cash
short-term
incentive and
other
cash benefits.
In
addition,
non-cash
amounts pa
id as
compensation,
including vest
ed stock awar
ds and
other non-cash
benefit
s, as
well
as all
appli
cable
withholding
taxes, pension cont
ributions and social contr
ibutions, were approxi
mately $ 54.8 million in 2021, $36.9 million in 2020 and $22.3 million
in 2019.
(2)
Including amounts paid in 2021 to
our former President, Analog, MEMS
and Sensors G
roup, Benedetto Vigna and former Executive Vice
President
Europe and Fran
ce Public Affai
rs, Thierry Tingaud.
(3)
Takes
into
consideration
the
voluntary
decrease
in
base
salary
over
a
period
of
s
ix
months
ag
reed
b
y
the
Senior
Managemen
t
in
connection
with the COVID-19 pandemic. Despit
e this temporary decrease
of the base salary voluntary agreed by the Senior Management, the non-
cash amounts paid as compensatio
n were significantly increased in 2020, mainly due an increase in the long
-term compensation paid to
th
e
members
of
the
Senior
Management,
which
was
in
turn
a
result
of
an
increase
in
the
share
price
of
the
Unvested
Stock
Awards
(“USAs”).
72
(4)
Including
amounts
paid
in
2019 to
our for
mer
President,
Human
Resource
s
and
Corporate
Social
Responsibility,
Mr.
Philippe
Brun.
In 2019,
we
c
hanged
t
he
classifi
cation
of
pension
contr
ibutions
and
we
determined
that
pens
ion
contr
ibutions
ar
e
attributabl
e
to
non
-cash
amounts paid
as compensati
on. In addition, i
n 2019, we classifie
d housing and meal al
lowances (
as applicable) as othe
r cash benefits.
The
amounts
paid
in
2021
to
our
Senior
Management
(includ
ing
the
sole
member
of
our
Managing
Board,
ou
r
President
and
Chief
Executive
Officer)
p
ursuant
to
the
STI
represented
approxima
tely
47.43%
of
th
e
to
tal
compensation paid
to our Senior Management.
Bonus paid in 2021
(2020
performan
ce)
(1)
Bonus paid in 2020
(2019
performan
ce)
Bonus paid in 2019
(2018
performan
ce)
(2)
STI (cash) amount
$
11,476,929
$
8,708,142
$
8,239,417
Ratio STI / (base sala
ry + STI)
47.43
%
43.15%
41.12%
(1)
Inc
luding
amounts
paid
in
2021
to o
ur
former
President,
Analog,
MEMS
and
Sensors Group,
Benedetto
Vigna
and
former
Executive
Vice
President
Europe and Fran
ce Public Affair
s, Thierry Tingaud.
(2)
Inc
luding amounts pa
id in 2019 to
our former Pre
sident, Human Resour
ces and Corporat
e Social Resp
onsibility, Mr.
Philippe Brun.
We
did
n
ot
extend
an
y loa
ns o
r overdrafts
to
th
e
sole me
mber of
our
Managing Board, President
an
d
Chief
Executiv
e
Officer,
nor
to
any
oth
er me
mber o
f ou
r
Senior
Management.
Furthermore,
we
have
n
ot
guaranteed
an
y
debts
or
concluded any
leases with the so
le member of our Managing Board
, President and
Chief Executive Officer, n
or with
any other member of our S
enior Management or
their families
c.
Senior Managem
ent Pay Ratio
For the
year 2021,
the S
enior
Management
pay
ratio
was 31.6,
and
in
2020, the
pay
ratio was
27.5.
The increas
e of
the
2021
pay
ratio
compar
ed
to
th
e
20
20
pay
ratio
was
p
rimarily
du
e
to
an
increase
in
non-cas
h
amounts
paid
as
compensation, resu
lting from an in
crease in the sh
are price of the USAs. This ratio
is based o
n:
(i)
the average remuneration of our Senior Management (including the compensation of Mr. Benedetto Vigna and
Mr. Thierry Tingaud for
2021);
compared to
(ii)
the average
remuneration of our
global indirect employees
(i.e., all
employees other than those
directly
manufacturing
our pro
ducts), excluding
the
compensation
of
our Senior
Manage
ment and
th
e sole
member of
our Managing Board
, President and
Chief Executi
ve Officer.
For further
details
on
the compens
ation of
o
ur Senior
Man
agement we
als
o refer
to
Note
7.6.34
to
our consolidated
financial statements.
4.8.3. Managing Board r
emuneration
For details on th
e performance of ST in 2
021, w
e refer to the Bus
iness overv
iew in section 3.2.1.
a.
Guiding p
rinciples of Managing
Board Compensatio
n
The key
principles
that
are co
nsidered
to d
etermine the
remun
eration of
the s
ole m
ember of
our
Managing
Board,
President and Chief Executiv
e Officer as well as
the other members of S
enior Manage
ment are as follows:
•
Alignment
with
the
Compan
y’s
strategy:
t
he
compensation
package
should
be
strongly
linked
to
the
achievement of targets th
at are indicators
of the execution
of the Company’s b
usiness strategy.
•
Improving
th
e
performance
o
f
the
Compan
y:
most
of
the
compensation
(excluding
bas
e
salary
,
benefits,
an
d
pensions) is directly
link
ed to
the Company’s performance
th
rough variable pay ince
ntives. These
incentives are
73
based on
ambitious
p
erformance
conditions that
include
a
mix of
internal
and exte
rnal cri
teria as
well
as re
lative
performance condition
s agai
nst peers.
•
Enhancing
lon
g-term
value
creation:
to
s
trengthen
the
alignment
to
the
interests
of
the
shareholders
,
and
to
enhance the long-term value creation of the Company, the compensation structure includes long
-term variable
remuneration in the form o
f sh
ares and short
-term variable remuneration
.
•
Promoting
Sustainab
le corp
orate
developm
ent:
to
ensure
t
hat
STMicroelectron
ics
is
managed
in
a
s
ustainable
and
responsible
manner
for
the
common
good,
the
remuneration
includes
non
-financial
performance
conditions
related
to
corpo
rate
social
respo
nsibility
and
environmental,
s
ocial,
and
governan
ce
factors
.
Bot
h
short- and
long-
term incentive in
cludes performanc
e conditions
promoting ST’s s
ustainable growth.
•
Retaining
and
motivating
key
em
ployees:
the
co
mpensation
package
sh
ould
be
highly
comp
etitive,
ensuring
remuneration
levels
ar
e
determined
by
reference
internally
against
the
Company’
s
Senior
Management
and
externally against comp
anies of comparable s
ize, complexity
and global scop
e.
To determ
ine the re
munerati
on structure, the
Supervisory Board con
siders, among o
thers, the key
principles
outlined abov
e.
In accord
ance with
the k
ey p
rinciples of
the Co
mpany’s
remuneration
structu
re, the
total remuneration
of
the
sole
member o
f ou
r
Managing
Boar
d,
President
and
Chief
Executiv
e Officer
takes
into
consideration
factors
s
uch
as
th
e
size
an
d
complexity
of
our
Company,
our
global
presence
and
that
of
o
ur
custo
mers,
the
pace
of
change
in
our
industry,
the
Company’
s
value
proposition,
strategy
and
goal
of
long-term
value
creation,
and
the
need
to
recruit
and retain key p
ersonnel.
b.
Manag
ing Board Remune
ration Policy
The remuneration of the s
ole member of our Man
aging Board
, President and
Chief Executive Officer, is determin
ed
by our Sup
ervisory Board on the
advice of the Comp
ensation Co
mmittee
Based on
the SRDII, as
we are
incorporated under
the laws
of The
Netherland
s and
our
common shares
are admitted
to
tradin
g
on
regulated
marke
ts
in
the
E
uropean
Union,
we
a
re
required to
hav
e
a
remuneration
policy
in
accordance
with
th
e
SR
DII
requirements
with
respect
to
the
comp
ensation
of
the
Superv
isory
Board
m
embers
and
the
sole
member of our Managing Board, President and Chief Executive Officer and to comply with the
respective disclosure
requirements
introdu
ced
to
the
Dutch
Civil
Code.
In
connection
therewith,
we
present
in t
h
is
section
certain
comparative information
on
our
performance r
elative to
the comp
ensation
of the
Supervisory
Board
members and
the sole member of our Man
aging Board, President
and Chief
Executiv
e Officer.
After careful
review of com
ments
received by
proxy
advisors an
d investors
following our 2020
AGM, we con
ducted
a thorough review of the compensation structu
re, with the involvement of
members of the Company and members
of the Superviso
ry Board (dire
ctly and th
rough an ad
-ho
c committee and the
Compensati
on Committee), each
with
the
s
upport
of
their
own
independent
external
consu
lting
firm
and
a
comprehensive
qualitative
and
quantitativ
e
benchmark
agains
t
our
industry
peers
an
d
best
-
in
-
cl
ass
market
p
ractices.
Subs
equently,
we
p
repared
a
revised
remuneration policy for the Managing Board, which was submitted to the 2021 AGM, where it was approved with a
substantial majority
(95.86% in favor).
Set
forth
in
th
e
tab
le
below
is
the
lis
t
of
com
p
anies
used
for
the
peer
group
compensat
ion
analys
is
us
ed
for
the
remuneration policy for th
e Managing Board
voted at th
e 2021 AGM:
ADI (+ Maxim Integrat
ed)
On Semiconducto
r
Infineon
Texas Instruments
Monolithic Power Syste
ms
Vishay
Microchip
Rohm
NXP
Renesas (+ Dialog)
74
Should
one
of
the
companies
in the
ab
ove
table
n
ot
publish
financial
results
for
any
reason,
the compan
ies
Diodes
and/or Melexis would replac
e the miss
ing company.
The
remuneration
of
the
sole
member
of
our
Man
aging
Board,
President
and
Chief
Executive
Officer,
is
bound
by
the
remuneration
policy
as
ad
opted
by
ou
r
2021 AGM
for
a
duration
of
a
maximum
of
4
y
ears.
Under
the
terms
of
the
Dutch
Civil
Code,
th
e
remunerati
on
policy
for
th
e
Managing
Boa
rd
is
put
to
a
binding
vote
at
the
AGM
at
least
every four years, s
ubject to a qualified majority o
f 75%.
The
revised remuneration
policy f
or
the
Ma
naging
Board, approved
at
the
2021 AGM,
contain
s ce
rtain new
features
,
including:
•
the reinforcement of th
e link between Managing Bo
ard remuneration a
nd long
-term company stra
tegy;
•
the simplification
of
the s
hort
-term
incentive s
tructure
(fully
paid
in
cash,
as comp
ared to
a
hybrid
cash
-equity
pay-out
previously)
featuring
enhanced disclosure
of
criteria and
threshold,
targets,
an
d
maximum
p
erformance
levels;
•
the
inclusion
of
Sustainability
ind
ex
amon
g
performance
c
onditions
for
both
the
short
-
term
(“
STI
”)
and
long
-
term incentive (“
LTI
”) in
line with ou
r objectives of promotin
g susta
in
able corporate development;
•
enhanced
disclosu
re
of
long
-term
incentiv
e
(sh
are-settled)
performanc
e
con
ditions
and
threshold
an
d
target
performance levels;
•
a
three-year
performance
period
for
long
te
rm
incentives
(as
compared
to
one
y
ear
previous
ly),
with
vesting
based on
performance
meas
ured
over
the
3-year perform
ance period,
to improve
alignment of
Managing Board
remuneration with our ob
jective of enhancing
long
-term value;
•
enhanced disclos
ure regarding early vestin
g provisions for
the Unvested Stock Aw
ards
;
•
the implementation of s
hare ownership guid
elines for the Man
aging Board; and
•
the
introduction
of
claw-back
provision
s
in
order
to
reclaim
payments
after
they
have
been
award
ed
or
to
withhold remuneration un
der specific conditions
.
The
2020
remuneration
r
eport,
which
was
based
on
our
p
rior
remuneration
policy,
was
submitted
to
an
ad
visory
vote
at
the
2021
A
GM,
which
resulted
in
a
majority
shareholder
vote
in
favor
of
the
2020
re
muneration
report
(53.79%).
Sinc
e
then
our
remuneration
p
olicy
has
been
replaced an
d
we
continue
to
increase in
our
remuneration
report the level of
disclosure and transparency in relation to the
remuneration of the sole
member of our Managing
Board,
President
and
Chief
Executive
Officer
herein
to
address
the
2020
an
d
2021
AGM
results
and
provide
our
stakeholders with a
n increased level of ins
ight in our remuneration
practices.
Managing Boa
rd Remuneration Structure
The
remuneration structure
is
reflective
of the
l
evel
of
respon
sibility
of
the
Co
mpany’s
sole
member
of
th
e
Managing
Board,
President
and
Chief
Executive
Off
icer.
The
remuneration
s
tructure
is
furth
er
adapted
to
the
Company’s
context
while
remaining
competitiv
e
an
d
providing
an
incentive
to
promote
th
e
Compan
y’s
performance
over
the
medium to long-term, in co
mpl
iance with the corpo
rate interest an
d the interests
of all the stakeho
lders.
The
Compensat
ion
Committee
ad
vises
the
Su
pervisory
Board
in
reviewing
th
e
remuneration
package
of
the
sole
member of our Managing Board, President and Chief Executive Officer both
in the context of
the Company
performance
and
agains
t
a
range
of
semiconductor
peer
companies
and
relevant
market
index.
Before
setting
targets
for
the
sole
member
of
our
Managing
Board,
President
and
Chief
Executive
Officer,
the
Compensation
Committee carries ou
t scenario analy
ses of the poss
ible financial outcomes of m
eeting target levels.
The
Supervisory
Board, on
advice
from Compensation
Committee
determines the
rem
uneration
stru
cture
and
remuneration amounts for our sole
member of
the Managing Board,
President and Chief Executive Off
icer based on
75
the analysis of the theoretical maximum total direct remuneratio
n (i.e., sum of base salary, maximum annual bonus
opportunity
, and maximum long
-term incentives).
The
remuneration
package
of
the
sole
member
of
our
Managin
g
Board,
President
and
Chief
Executive
Officer’s
comprised of the follo
wing:
•
A
base salary
that a
mounted
to 800,000 EUR paid in
2021;
•
A sho
rt-term
ince
ntive
of
up
to 210%
o
f
base
salary
which
is
fully
paid
in
cas
h.
Prior
to
the
implem
entation
o
f
the new remuneration p
olicy following the 2021 A
GM, the STI was p
artly paid in
shares, partly in cas
h;
•
A l
ong-term incentive
through
th
e grant
of
sto
ck
awards
, up
to a
maximum
of 100,000
shares. The term
s of
th
is
LTI are
included in t
he long-term
incenti
v
es plan
(“
LTIP
”) approved
at
the 2021
AGM allowing
for grants in
2021,
2022
and
2023.
The
vesting
of
Unvested
Stock
Awards
(“US
As”)
is
subject
to
the
ach
ievement of
performance
conditions and
calculated over a three-year p
erformance period. Grants
made in
2021, 2022 and 2023 will fully
vest, subject to p
erformance condition
s, in 2024, 2025 and
2026 respectively.
The
su
m
of
these
three
elem
ents
represents
the
maximum
total
direct
remuner
ation
for
the
sole
member
of
our
Managing Board, Pres
ident and C
hief Executive O
fficer.
(i)
Breakdown
of
the
maximum
to
tal
direct
remuneration
structure
of
the
sole
m
ember
of
our
Ma
naging
Board,
President and Chief E
xecutive Officer
The following
provides a breakdown of
the
maximum
tota
l direct remuneration structure of
th
e sole m
ember of
our
Managing Board, Pres
ident and Chief Executiv
e Officer.
Given that the maximum LTI grant
to which the sole member of our Man
aging Board, President and Chief Executiv
e
Officer
is
eligible
is
express
ed
as
a
quantity
of
shares,
up
to
a
ma
ximum
of
100,000,
t
he
below
chart
describing
maximum total direct remuneration structure uses the share value at
grant date of $ 39.33
(grant date as of July 28,
2021).
Using
the
above
hypothesis
,
the
proportion
of
maxim
um
total
direct
compensat
ion
for
t
he
s
ole
member
of
our
Managing
Board,
Presid
ent
and
Chief
Executive
Officer
compris
ed
of
share
-settled
lon
g-term
incentiv
es
has
increased as a res
ult of the evolution
of the Company s
hare price over the cours
e of FY 2021.
The three comp
onents of the
total maximum rem
uneration are described a
s follows:
Base salary
The
purpos
e
of
th
e
base
salary
is
to
p
rovide
a
fixed
level
o
f
earnings
and
to
attract
and
retain
the
sole
member
of
our Man
aging Boa
rd, Pres
ident an
d
Chief Execu
tive Of
ficer. It
is
a
key co
mp
o
nent
of ov
erall remun
eration,
particularly as the annual bonus is expressed as a percentage of base salary. The Com
pan
y seeks to determine a f
air
and
competitive
fixed
s
alary
as
compared
to
ind
ustry
and
index
peers.
The
determinat
ion
of
salary
is
b
ased
on
several
factors
including,
but
not
limited
to,
market
pay
levels
among
international
industry
peers
of
compar
able
size.
76
Short-Term Incentive (S
TI)
The
purpose of the
STI is to
m
otivate the
s
ole member
of our Managing Board,
Presid
ent and
Chief Executiv
e
Officer
to
achieve
finan
cial
and
commercial
objectives
consistent
with
an
d
supportive
of
the
Company’s
s
trategy
and
to
create a tangible link betw
een annu
al performance and individual
pay opportun
ity.
In accord
ance with
the Man
aging Board
remunerat
ion po
licy as
approved
at our
2021 AGM,
and
effective from th
e
year 2021,
the STI of
the sole member
of our Managing Board
and President and
Chief Executive Officer
is
to
be fully
paid
in
cash
up
to
a
maximum
of
210%
of
the
base
sala
ry
for
the
relevant
y
ear,
all
subject
to
the
assessment
and
achievement of
a number of
perfor
mance conditions which
are set annually by
the Compensation Committee
o
f our
Supervisory Board
.
The S
TI
is
subject
to
annual
performance
measurement
o
f
a
un
ique
set
of
4
to
7
pr
edefin
ed
criteria
(both
financial
and
non-financial)
an
d
a
performance
matrix
both
for
financial
and
n
on
-financial
criteria
th
at
explicitly
outline
threshold an
d target outcomes (as well as
overperformance con
ditions for finan
cial criteria).
Performance
meas
ures
and
weightings
are
reviewed
annually
by
the
Compensation
Committee.
The
calculation
of
the
target
STI
op
portunity
is
b
ased
on
the
sum
of
the
target
weight
of
each
performance
crit
erion.
The
recommendations mad
e by the Compensation Committ
ee regarding scor
ecard targets and weightings are designed
to support the
delivery of the
strategy. The Supervisory Board, upon recommendation by the
Compensation
Committee,
retain
s
the
ability
to adjust
performance
m
easure
targets and
weightings
y
ear
-
by
-year
within the
overall
target and maximum pay
outs app
roved in the remuneration
policy.
The
Sup
ervisory
Board,
upon
the
recommendation
o
f
its
Compensation
Committee
,
set
the
cond
itions
and
performance criteria th
at must be met by
Mr. Chery for the
attribution o
f his 2021 bo
nus (to be paid in 2022).
These performance con
ditions
will enable to con
duct a ho
listic and comprehens
ive assessment o
f the sole m
ember
of
ou
r
Managing
Board,
President
and
Chief
E
xecutive
Officer's
annual
performance.
The
combination
of
finan
cial
and
non-financial
criteria
is
well
b
alanced
in
terms
of
external
and
internal
criteria
a
nd
refle
ct
the
challenging
objectives set by
the Compensation Co
mmittee in line with the Company
's ambitious long
-term vision and bus
iness
strategy.
The
external
criterion
is
the market
share
evolution.
Ma
rket
s
hare
evolution
is
measured
by assessing
the
Company’s
relative p
ositioning
an
d
competitiveness
in
relation
to
its
market
and
its
industry
peers
and
how
fast
th
e
Company
grows its revenues compared
to its competitors. Market share is assessed
on the basis
of industry data
published by
WSTS (“World Semicon
ductor Trade Statistics
”).
The
three
internal
criteria
include
total
company
revenue,
op
erating
income
an
d
net
operating
cash
flow.
Total
company revenue
represents
the t
otal
amount of
income
generated
by the
Company’s
operations. Operating
income
is
an
important
yardstick
of
profit
measu
rement
a
nd
reflects
th
e
operating
performance
o
f
the
business
which
does
n
ot
take
into
consideration
non
-operating
gains
or
losses
s
uffered
by
business,
the
impact
of
financial
leverage
and
ta
x
factors.
Net
operatin
g
cash
flow
is
a
liquidity
me
tric
that
evaluates
whether
the
Company
has
enough
liqu
idity
to
meet
its
d
ebt
obligation
s.
This
metric
helps
assess
the
finan
cial
soun
dness
of
the
co
mpany
in
terms of liquidity ris
k, financial risk,
credit risk and
business risk.
The
Sup
ervisory
Board
considers
the
three
abov
e
criteria
to
be
crucial
in
determining
th
e
finan
cial
strength
of
the
company.
The
2021
STI
includes
a
sus
tainability
index
fo
r
the
sole
member
of
our
Managing
Boar
d,
our
President
an
d
Chief
Executive Officer, as
part of o
ur effort to in
clude corporate
so
cial responsibility
into the perfor
mance framework o
f
our Senior
Management,
including
the
Managing Boa
rd. The su
stainability
i
ndex
is divided
into fou
r criteria
related
to health and
safety, environment, diversity &
inclusion, and peop
le engagement.
77
For the 2021 STI, the Su
stainability I
ndex was comprised o
f the following KPIs:
•
Health & Safety: meas
ured against,
amongst others,
the employee s
afety performance
•
Environment/Climat
e: measured agains
t, amongst oth
ers, direct emissions (kCO
2
equivalent)
•
Diversity & Inclus
ion: measured against,
amongst others, gender ratio
among managem
ent levels
•
People Management:
measured again
st, amo
ngst oth
ers, the employee survey (engagement in
dex)
The w
eight
of
the
Susta
inability
Ind
ex
is
designed
to
remain
stab
le
over
time,
however
the
individu
al
sub
-
components used to form the Sustainability Index may evolve
in the future to address
sustainabili
ty
priorities facing
the Company and
the wider society.
Set forth in the following table are the performance criteria and weight set for 2021 that
have been assess
ed by the
Supervisory Board
in March 2022 for the attributio
n of the 2021 STI (to b
e paid in 2022):
Table A1: Performance cr
iteria with target weight
s and p
ay-out
and achievement rate
Annual STI Performanc
e criteria FY 2021 (to b
e
paid in
2022)
Target Weighting
(as a % of total
weighting for
performan
ce
criteria)
Target
pay-
out
(as a % of
base salary)
Achievement rate
(as a % of base
salary)
Financial performanc
e conditions
o
Market share evolutio
n
14%
30%
0% (below)
o
Revenue growth
19%
40%
60% (stretch)
o
Operating income
19%
40%
60% (stretch)
o
Net operating cash
flow
19%
40%
60% (stretch)
Sub-total for financial per
formance c
onditions
71%
150%
Capped at 150%
Non
-financial performance
conditions
o
Execute special manu
facturing programs
14%
30%
30% (target)
o
Execute strategy
implementation
5%
10%
5% (met)
o
Sustainab
ility/CSR Index
10%
20%
20% (target)
Sub-total for no
n-financial perfor
mance conditions
29%
60%
55%
Total
100%
210%
205%
78
Table A2: Pay-out acco
rding to performanc
e for each perfo
rmance criterion
Pay-out as a percen
tage of base salary
Annual STI Performanc
e criteria FY 2021
(to be paid in 2022)
Performanc
e
below
threshold
Performanc
e
above or
equal to
threshold
and below
target
Performanc
e
above or
equal to
target and
below
stretch
Performanc
e
above
stretch
Financial performanc
e conditions
o
Market share ev
olution
0%
15%
30%
45%
o
Revenue growth
0%
20%
40%
60%
o
Operating income
0%
20%
40%
60%
o
Net operating cash
flow
0%
20%
40%
60%
Sub-total for financial per
formance c
onditions
0%
75%
150%
Capped at
150%
(1)
Non
-financial performance
conditions
o
Execute special manu
facturing programs
0%
15%
30%
30%
o
Execute strategy
implementation
0%
5%
10%
10%
o
Sustainab
ility/CSR Index
0%
10%
20%
20%
Sub-total for no
n-financial perfor
mance conditions
0%
3
0%
60%
60%
(2)
Total
0%
105%
210%
STI pay-out
capped at
210%
(1)
Over
-performance
f
or
financial c
onditions
can
balance
the potent
ial
under-
perfor
mance
of othe
r
financial
condition
if pe
rformance
exceeds
stretc
h
targets,
without
exceeding
a
maximum
pay-out
of
150%
of
base
salary
regarding
the
portion
of
the
STI
dependent
on
financial
performanc
e criteria.
(2)
No stre
tch targets are define
d for non-financial p
erformance cr
iteria
.
As
described in
Table
A2,
the
final
p
ay-out i
s
calculated
by
measuring
the
performance
of
each
condition,
then adding
the
sums
of
the
corresponding
pay
-out
from
the
abo
ve
table,
taking
into
account
any
applicable
caps.
The
su
m
is
then multiplied by t
he bas
e salary to determine the final S
TI pay
-out.
The
evaluation
and
assess
ment
of
the
f
ulfillment
o
f
condition
s
and
performance
criteri
a
were
completed
by
the
Compensation Committee of ou
r Supervisory Board on March 23, 2022, in order to determine the actual
a
mount of
the 2021 STI.
The
Comp
ensation Committee
of
our
Supervisory Board
determined
that based
on the
2021
performanc
e
of the
sole
member o
f ou
r
Managing
Board,
our
President
and
Chief
Executive
Officer,
Mr.
Jean
-Marc Chery,
the
performance
criteria
have
been
ass
essed
as
follows:
market
s
hare
evolution
(
below
thres
hold),
revenu
e
growth
(overachievement)
operating
income
(overachi
evement
),
net
operating
cash
flow (
overachievement
),
execute
special
manufacturing
programs
(target
),
execute
strategy
implementation
(thresho
ld
),
sustainability
/CSR
index
(target). Therefore, the 20
21 STI (to be paid
in 2022)
of the
sole member of our Man
aging Board
, our President and
Chief
Executiv
e
Of
ficer,
Mr.
Jean
-Marc
Chery
,
amounts
to
EUR
1,640,000
(gross),
which
is
205
%
of
his
base
salary,
representing a global ach
ievement rate of
205% (out
of the maximum o
f 210%).
79
Long-Term Incentive
(LTI)
The
purpose of the
L
TI
is to motivate the
sole member of
ou
r Managing Board,
Presid
ent and Chief
Execu
tive Officer
to deliver susta
inable long
-term shareholder value thro
ugh long
-term profitability
and sh
are price growth.
Award
levels
are
determined
annually
by
the
Compens
ation
Committee
within
the
maximum
amounts
set
by
the
Supervisory Boa
rd. In accor
dance with
the resolutio
n ad
opted by
our General Me
eting of Sh
areholders,
the
maximum
ann
ual
grant allowed
in
relation
to
the
sole
member
of our
Man
aging
Board,
Presid
ent
and Chief
Executive
Officer’s stock award for 2019,
2020 and 2021 w
as 100,000 unvested stock awards (“USAs”) subject to
performance
criteria.
The
Supervisory
Board,
up
on
recommendation
o
f
the
Compensation
Co
mmittee,
determin
es
whether
the
performance
criteria
ar
e m
et
and
conclud
es
whether
and
to
which
extent
all
eli
gible e
mployees,
includ
ing
the
sole
member o
f
our
Managin
g
Board
,
President
and
Chief
Executive
Officer,
ar
e
entitled
to
a
ny
sto
ck
awards
und
er th
e
stock
award
plan.
Scorecard
targets
are
not
disclosed
prosp
ectively
as
it
would
require
the
d
isclosure
o
f
commercially sensitive in
formation
. Scorecard targets
will be disclos
ed only when they a
re no lon
ger deemed to b
e
commercially sensitive.
Grant in 2021
In
accordance
with
the
long-
term
incentives
plan
(“L
TIP”)
ap
proved
at
the
2021
AGM,
allowing
for
grants
in
2021,
2022
an
d
2023,
the
s
tock
awards
vest
at
the
end
of
a
thr
ee
-year
perfor
mance
period,
from
th
e
d
ate
of
th
e
grant,
provided
that the
eligible employee is
still
an
employee at s
uch time
(subject
to the
termination provis
ions listed
in
section e. Evo
lution of paid r
emuneration to the Managing Board in
2021, 2020 and 2019
).
As compared to the p
rior LTI plan, a n
ew Sus
tainability index conditio
n has b
een introduced.
For the
2021 grant, the
Sustainab
ility Index
was
comprised
of the following
KPIs
, which
in
clude two
external criteria:
•
Environment/Climat
e: measured agains
t, amongst oth
ers, the direct emissions (kCO
2
equivalent)
•
Diversity & In
clusion: measured against,
amongst others
, gender ratio among managem
ent levels
•
ESG Investor Ind
ex: measured again
st, amongst o
thers, the Dow Jones Sustain
ability Indices
•
Carbon Rating Agency: m
easured agains
t, amongst oth
ers, the CDP Carbon Rating
The
weight
of
the
Sus
tainability
Index
is
designed
to
remain
s
table
for
future
grants
,
however
the
individ
ual
su
b
-
components used to form the Sustainability Index may evolve
in the future to address
sustainability priorities facing
the Company and
the wider so
ciety.
Table B1: Performance
criteria and t
arget weights
LTIP
Perfor
mance
Criteria
for
to
be
assessed
o
ver
a
3
-year
period
Target Weighting
(as % of maximum
achievement scor
e)
Revenue
gr
owth
(FY
2023
vs
FY
2020
in
co
mparison
to
peer
group)
33.33%
Operating margin ratio before restructuring (average for the
2021
–
2023 period
)
33.33%
Sustainability/CSR index
33.33%
Maximum achieveme
nt score
100%
which corr
espond to a
maximum of 100,000 US
As
80
Table
B2:
Shares
to
vest
at
the
end
of
th
e
3
-year
vesting
p
eriod
acco
rding
to
performa
nce
for
each
performance
criterion
Shares to vest as a p
ercentage of maximum aw
ard
LTIP Performance C
riteria to
be assessed over a
3-year period
Performanc
e
below
threshold
Performanc
e
equal to
threshold
Performanc
e
above thresho
ld
and below tar
get
Performanc
e
above or at
target
Revenue
growth (FY
2023 vs
FY
2020
in
comparison t
o peer group)
0%
16.67%
25%
33,33%
Operating margin ratio
before
restructuring (average for
the 2021
–
2023 period)
0%
16.67%
16.67%
33,33%
Sustainability/CSR index
0%
16.67%
16.67%
33,33%
Total
0%
50%
58.34%
100%
LTI grants in 2019
and
2020
Set forth in the
following table are
the performance criteria, weight, and achievement rate for the
p
eriods indicated
below set for the LTI gran
ts in 2019
and
2020.
Under
the
terms
of
th
e
below
mentioned
201
9
and
2020
LTI
grants
under
th
e
previou
s
LTI
plan,
perfor
mance
was
measured
over
th
e
course
of
th
e
y
ear
follo
win
g
the
grant,
s
ubject
to
th
ree
per
formance
condition
s.
Based
on
the
achievement
of
LTI
performance
conditions
,
the
total
number
of
shares
to
be
vested
was
determined,
up
to
a
maximum
of
100,000
s
hares.
Performance
con
ditions
were
assess
ed
o
nce,
one
year
fol
l
owing
the
grant
date.
Th
e
USAs then vested following th
e timeframe:
•
One year post
-grant: 32% of USAs ves
t (a maximum of 32,
000 shares if all targets
were met)
•
2 years post
-grant: 32% of USAs v
est (a maximum of 32,000
shares if all targets
were met))
•
3 years pos
t-grant: 36% of USAs v
est (a maximum of 36,000
shares if all targets
were met)
Assessment of performance
criteria for 2019
and
2020
LTI g
rants
LTIP Performance C
riteria
Target Weighting
(as % of maximum
achievement scor
e)
2020
2019
Evolution of Sales
33.33%
Criteria met
Criteria met
Evolution of Oper
ating Income
33.33%
Criteria met
Criteria met
Return On
Net Assets (RONA)
33.33%
Criteria met
Criteria not met
Maximum achieveme
nt score
100%
which corr
espond to a
maximum of 100,0
00 USAs
100%
Performanc
e
Achieved
67%
Performanc
e
Achieved
81
Vesting schedule
for outstanding shares
Set
forth
in
th
e
following
table
is
an
overview
of
the
outstan
ding
awards
under
grants
prior
to
implementation
of
the
new
LTI
plan
in
2021
that
hav
e
been
granted
to
our
sole
member
of
our
Managing
Boar
d,
President
and
Chie
f
Executive Officer, including t
he 2018 grant
for which the fin
al vesting d
ate took place in 2021
:
Plan
Grant date
Final
vesting
date
Max.
number
of shares
that
can be
granted
Number of
shares
awarded
based on
performance
conditions
achievement
Share
price at
grant
(in $)
2019
vesting
2020
vesting
2021
vesting
2022
vesting
2023
vesting
Unvested
shares as
of
end of
2021
2020 USAs
Grant
July 23,
2020
June 17,
2023
100,000
100,000
$29.97
32,000
32,000
36,000
68,000
2019 USAs
Grant
July 24,
2019
May 23,
2022
100,000
66,672
$19.45
21,335
21,335
24,002
24,002
2018 USAs
Grant
July 24,
2018
31
-May-
21
100,000
100,000
$23.64
32,000
32,000
36,000
_
Total vesting
32,000
53,335
89,335
56,002
36,000
92,002
Share ownership guide
lines
The
sole
member
o
f
our
Managing
Bo
ard,
President
and
Chief
E
xecutive
Of
ficer
is
expected
to
build
up
a
shareholding in the Compan
y equal to 1.5 times bas
e salary (within 3 to 5 years based on LTI plan v
ested shares net
of tax).
Claw-back provisions
All
p
erformance-related
rem
uneration
awarded
to
the
sole
member
of
our
Managing
Board,
Presid
ent
and
Chief
Executive Officer are subject to the following claw-back pro
visions,
in accordance with Dutch law.
If
the Supervisory
Board considers that there is a significant downward restatement of the Company's finan
cial results, breach of duty
from
the
sole
member
of
our
Managing
Board,
President
and
Chief
Executive
Officer,
or
where
remuneration
has
been
paid
based
up
on
incorrect
information
ab
out
the
achievement
o
f
the
goals
on
wh
ich
the
remuneration
was
based
o
r
the
circums
tances
on
which
th
e
bonus
was
dependent,
it
may,
in
its
discretion,
within
two
years
o
f
the
performance-related
remuneratio
n
of
the
sole
member
o
f
our
Ma
naging
Board,
Presi
d
ent
and
Chief
Executi
ve
Officer vesting or being p
aid:
•
Require
the
s
ole
member
of
o
ur
Managing Board,
President
and
Chief
Executiv
e
Officer
to
repay
to the
Company
an
amount
equal
to
th
e
after
-tax
value
of
some
o
r
all
of
any
cas
h
b
onus
or
the
Company's
shares
that
were
granted; and/or
•
Require the Company to withhold from, or
offset against, any other remuneration to
which the sole mem
ber of
our
Managing
Board,
Presid
ent
and
Chief
Executiv
e
Officer
may
be
or
beco
me
entitled
in
conn
ection
with
its
employment such
an amount as t
he Su
pervisory Board
considers appropriate.
When
reaching
its
decision
,
the Superv
isory
Board
will
take
into
account
th
e s
ignificance
of
the
breach
of
duty
an
d
in
addition,
the
Supervisory
Board
may
ta
ke
other
actions
in
relation
to
th
e
statutory
provision e.g.
claim
for
damages.
During 2021, no claw
-backs hav
e occurred.
The
Managin
g
Board
als
o
may
receive
other
types
of
rem
uneration
included
as
p
art
of
the
remuneration
policy
approved at
the 2021
AGM,
su
ch
as social
premiums, benef
its in
kind (including
com
p
any c
ar), pension contributions
and miscellaneous a
llowances.
82
d.
Compen
sation paid to
the sole me
mber of the Mana
ging Bo
ard, our President
and Chief
Executive Officer
in FY 2021
The sole member of our Managing Board, President and Chief Executive
Officer, received compensation
in the form
of
a
Bas
e
Salary,
Short
-term
Incentive
STI
(paid
fully
paid
in
cas
h
from
2021
onward
s),
Long
-Term
Incentive
grant
(Unvested
Stock
Awards),
social
p
remiums,
benefits
in
kin
d
(including
company
car),
p
ension
contrib
ution
s
and
miscellaneous allowanc
es.
Set forth in the following table is the tota
l compensation of the sole member of our Managing Board, Pres
ident and
Chief Executive Officer, Mr. J
ean
-Marc Chery, in 2021:
Base Salary
$
936,357
STI
(1)
$
1,907,307
LTI
(2)
$
3,245,640
Other
(3)
$
1,470,226
Total
$
7,559,530
(1)
Bonus includes both the
amount paid
in
cash and
the amount
paid in
shares in 2021
(based on
2020 performance). The achievement
rate
based on 2020 pe
rformance, was
183% (135% in c
ash and 48% in sh
ares), and pai
d in the cour
se of the year 2021.
(2)
Our sole member
of our
Managing Board, President and
Chief Executive Officer was
granted,
in accordance with the compensation
policy
adopted by
our General
Meeting of Shar
eholders
and subsequent s
hareholder autho
rizations, up to
100,000 USAs, subje
ct to p
erformance
criteria.
The
vesting
of
such
stock
awards
is
conditional
upon
the
s
ole
member
of
our
Managing
Board,
President
and
Chief
E
xe
cutive
Officer’s, contin
ued service with us. T
he LTI value
is a financial value
which is
calculated as follows: number of
shares vested X s
hare price
based on mark
et value the
day of vesting.
(3)
Including soc
ial premiums, benef
its in kind
(including company
car), pension cont
ributions and miscellaneo
us allowances.
During
2021,
o
ur
sole
member
o
f
our
Man
aging
Board,
President
and
Chief
Executive
Officer,
Mr.
Chery,
did
not
have
any
stock
options,
and
d
id
not
purchas
e
an
y
shares
in
the
Co
mpany.
Durin
g
20
21,
our
sole
memb
er
o
f
our
Managing Board, Pres
ident and Chief Executiv
e Officer, Mr.
Chery, sold 62,542 s
hares.
e.
E
volution of pa
id remuneration to the
Managing Board in
2021,
2020
and
2019
Set forth in the following table is the tota
l compensation of the sole member of our Managing Board, Pres
ident and
Chief
Executiv
e
Officer, in
2021,
2020
and 2019
.
The
to
tal
compensation
of
th
e
sol
e
member
of
ou
r
Managing Board,
President
an
d
Chief
Executive
Officer,
comprises
(i)
with
relation
to
2021,
of
the
total
compensation
of
Mr.
Jean
-
Marc
Che
ry (ii
) w
ith relation
t
o
2020,
o
f
the total
compens
ation of
Mr. Jean-Marc
Chery and takes
into consideration
the voluntary decrease
of
the
base salary for the
period
of
s
ix months as
a result
of the COVID
-19 pandemic, and (ii
i)
with
relation
to
2019
(y)
the
tota
l
compensation
of
Mr.
Jean
-Marc
Chery
and
(z)
contractu
ally
obligated
deferred
compensation relating to
Mr. Carlo Bozotti’s
retirement in 2018
:
2021
2020
2019
Salary
$
936,357
$
856,837
$
896,297
STI
(1)
$
1,907,307
$
1,285,378
$
1,280,173
LTI
(2)
$
3,245,640
$
2,224,984
$
1,130,443
Other
(3)
$
1,470,226
$
1,372,048
$
4,487,939
Total
(2)
$
7,559,530
$
5,739,247
$
7,794,852
(1)
T
he
bonus paid
in
2021,
2020
and
2019 was
approved by
the Compensation Committee and
Supervi
sory Board
with
respect to
the
20
20,
2019 and 2018 financ
ial year, respectiv
ely, based on the evalua
tion and assessment of the act
ual achievement of a numbe
r of p
re
-defined
objectiv
es for such year
.
83
(2)
Including
stock
awards
of
100,000
USAs
in
2021,
2020
and
2019,
during
which
years
our
sole
member
of
our
Managing
Board,
Pres
ident
and
C
hief
Executive
Officer,
Mr.
Chery,
was
g
ranted,
in
accordance
with
t
he
compensat
ion
policy
adopted
b
y
our
General
Meeting
of
Shareholde
rs and
subsequent shareholder authorizations, up
to 100,000
USAs,
subject to
performance
cr
iteria.
The
vesting of
such stock
awards i
s cond
itional
upon
the sole membe
r of
our Managing
Board,
President
and
C
hief
Executive
Office
r’s, continu
ed ser
vice wit
h us.
The
LTI value
is
a financial value
which is calculat
ed as f
ollows: number
of sh
ares vest
ed X sh
are price ba
sed on
market
value the
day of
ves
ting.
(3)
Including so
cial
premiums,
benefits i
n ki
nd (incl
uding co
mpany
car
a
llowance),
pension co
ntributions
and miscell
aneous
allowances,
as well
as one-off c
ontractually o
bligated deferre
d compensation pa
id to Mr. Bo
zotti in 2019.
f.
Overview
of
the
total
co
mpensation
p
aid
or
owed
to the
sole m
ember
of
our
Managing
Board, Presiden
t
and Chief Exec
utive Officer in 2021, 20
20
, 2019
Set forth in the following table is the tota
l compensation of the sole member of our Managing Board, Pres
ident and
Chief Executive Officer in
office durin
g the years
202
1
,
2020
an
d
2019:
Year
Base
Salary
Bonus
(1)
Benefits
Social
security
contributions
(2)
Pensions
Unvested
stock
awards
(4)
Total
Proportion
of fixed
and variable
remuneration
2021
$
936,357
$
1,919,531
$
101,866
$
904,742
463,617
$
3,245,640
$
7,571,753
32% fixed
68% variable
2020
$
856,837
$
1,737,988
$
103,599
$
797,306
471,143
$
2,224,984
$
6,191,857
36% fixed
64% variable
2019
$
896,297
$
1,285,378
$
94,889
$
584,915
476,216
$
1,130,443
(3
)
$
4,468,138
46% fixed
54% variable
(1)
The b
onus includes bot
h the amount paid in cash and the amount paid in shares, as applic
able. As of 2021 with the implementation
of the
new remunerat
ion policy fo
r our Managing Board, the
bonus is paid
fully in cash. The bonus related to
202
1
,
20
20
and
201
9 was approved
by the Compen
sation Com
mittee and Sup
ervisor
y Board wi
th respect t
o the
202
1,
20
20
and
2019 fina
ncial ye
ar, resp
ectively, bas
ed on the
evaluati
on
and
assessment
of
the
actual
fulfillment
of
a
number
of
pre-defined
objectives
for
such
year.
The
bonus
related
to
a
relevant
year is pa
id in the
subsequent ye
ar, i.e. the bonus
related
to the 2021, 20
20
and 2019 fina
ncial year
,
respective
ly, is paid in 2022,
2021
and
2020
respectively.
The
achievement
rate
for
the
2021
bonus
(to
be
paid
in
2022)
,
based
on
20
21
perfor
mance,
was
205%
in
cash
out
of
maximum of
2
10%. The
achievement
rate for
the 2020 bonus
(paid in
2021)
, based
on 20
20
performance,
was 183%
(
135
% i
n cash
and
48
%
in
shares) out
of maximum
of
210%
.
T
he
achievement rat
e
f
or the
2019 bonus
(paid in
202
0), based
on 2019
performance,
was 170%
(110%
in cash and
60% in shares)
out of maximum of 210%.
(2)
The s
ocial se
curity contributions
relate to the
fixed and variable
remuneration, incl
uding the unvest
ed stock awards.
(3)
Inc
luding
vesting
of
unvested
stock
a
wards
granted
before
the
appointment
of
Mr.
Jean-Marc
Chery
as
sole
m
ember
of
our
Managing
Board,
President
and Chief Exec
utive Officer (amounting in
total to $645,334).
(4)
The
Unvested
Stock
A
wards
value is
a f
inancial
v
alue whi
ch
is calc
ulated
as
follows:
number of
shares
granted X
share
price base
d
on
market
value the
day of grant.
g.
Manag
ing Board Remune
ration Comparison
Set
forth
in
th
e
following
tab
le
is
th
e
an
nual
change
over
the
las
t
five
y
ears
of
(i)
the
remuneration
of
th
e
so
le
member of
our Managing Board, President and Chief
Executive
Officer, (ii) the
perfor
mance of
th
e Company and
(iii)
the
average
remuneration
of
our
global
indirect
employees
(i.e.,
all
employees
other
th
an
those
directly
manufacturing our products, excludin
g the compensation
of our Se
nior Management
, includ
ing the sole member of
our Managing Boar
d, our
President and Chief Executive Of
ficer):
Year
2021
2020
2019
2018
2017
Managing Board r
emuneration
Total remuneration of th
e sole member
of our Managing Board
, President and
Chief Executive Officer
$
7,559,530
$
5,739,247
$
7,794,852
(1)
$
11,114,344
(2)
$
3,776,514
Company's perfor
mance
Net revenues (amounts
in millions)
$
12,761
$
10,219
$
9,556
$
9,664
$
8,347
Operating income US G
AAP (amounts
in
millions)
$
2,419
$
1,323
$
1,203
$
1,400
$
1,005
Employee rem
uneration
Average remuneration
(3)
of all global
indirect employees (F
TE-basis)
(4)
$
111,200
$
98,500
$
97,300
$
100,600
$
93,500
84
(1)
Tot
al Managing Boar
d remunerat
ion for 2019 includ
es one-off contrac
tually obligated
deferred compensat
ion paid to Mr. Bozotti.
(2)
Tot
al Managing Boar
d remunerat
ion for 2018 inc
ludes the acc
elerated remunerati
on to Mr
. Bozotti.
(3)
R
emuneration
is def
ined
as
all
remunerati
on
paid
to empl
oyees
including base
salary, v
ariable
compensation
in
both
cash
and shares,
social
premiums,
pension,
expense
allowances
and
benefits
in ki
nd.
The
average
is
calculated
by t
aking
the
sum
of
remuneration
costs
and
dividing
by the av
erage number o
f full-time equivale
nt indirect emplo
yees over the peri
od.
(4)
Gl
obal indirect
employees
are
all
employees
other
than
those
directly m
anufactur
ing
our
products,
excludi
ng
the
members
of
the
Senior
Management. “FTE” re
fers to
full time equival
ent
.
h.
Termination
provisions
for
th
e
sole
member
o
f
the
Managing
Board,
o
ur
President
and
Chief
E
xecutive
Officer
The sole member
of our Managing
Board, President and Chief
E
xecutive Officer, was appointed on May
31, 2018 for
a
three-year
term
expiring
at
the
2021
AGM.
At
the
2021
AGM,
he
was
reappointed
for
anoth
er
three-year
term,
expiring at the 2024
AGM. He has
employment agreements with
us, the first with
our Dutch parent company, which
relates to his activities as s
ole member of our Managing Board an
d representative of the Dutch legal ent
ity, and the
second with
one
of
ou
r
entit
ies in
Switzerland, which
relates
to
his activities
as President
and
Chief Executive
Officer,
the
EIP,
Pension
and
oth
er items
cover
ed
by
th
e comp
ensation
policy
adop
ted
by
our
General
Meeting
o
f
Shareholders.
Wh
ile
the
rela
tionship
between
a
member
of
the
Ma
naging
Board
and
a
listed
Dutch
comp
any
will
be
treated
as
a
mandate
agreement,
not
an
employment
agreement,
existing
employmen
t
agreements,
includin
g
the employment agreement b
etween us
and our sole member of t
he Managing Board, w
ill remain in effect.
The
agr
eement
can
be
t
erminated
with
a
n
otice
period
of
3
month
s
if
terminat
ed
by
the
Co
mpany
or
6
month
s
if
terminated by the Man
aging Board member.
Vesting of stock a
wards in the event
of termination not in
conn
ection with a
change-
in
-c
ontrol
If th
e s
ole
member of
our
Ma
naging
Board,
President
and Chief
Executiv
e O
fficer
is
not
employed
by
the
Company
at
the
time
of
v
esting,
s
tock
awards
will
laps
e,
except
in
c
ertain
circumstan
ces
as
determined
by
th
e
Supervisory
Board includ
ing s
ickness,
death, retirement
and
in th
e event
of the
sole me
mber of o
ur
Managing
Board,
President
and Chief
Executive
Officer not
being re
-appoin
ted or
any other circu
mstance as
decided b
y the
Supervisory
Board.
Good
and bad
leaver conditions w
ill
be included
in the
app
endix of
the
con
tract of
the sole
member of
our Managing
Board, President an
d Chief Executive Officer.
In the
cas
e
th
at
employment is
terminated by the
Company without cause
or termination
bu
t for
a pre-defined good
reason
as
d
etailed
ab
ove,
then
the
portion
of
any
award
which
vests
will
be
determined
solely
b
y
the
Supervisory
Board based o
n several factors includ
ing performance agains
t targets.
In cas
es of
resignation
or dis
missal
for cause,
variable
remun
eration elements
(inc
luding
annual
bonu
s and
LTI) will
generally
lapse
and
th
e
sole
member
of
our Managing
Board,
President and
Chief
E
xecutive
Officer
will
not
be
eligible
for compensation for los
s of office.
Vesting of stock a
wards in the event
of termination in con
nection
with a
change-
in
-co
ntrol
In
the
event of
a
change
in
control
of
the
Company,
any
award
will
b
e
rolled
ov
er
into
an
award
in
the
new entit
y,
subject to p
erformance, with the bala
nce rolled over.
In
the
case
that
employment
is
terminated
by
the
Company
with
out
cause,
or
termination
b
y
the
sole
member
of
our Managing
Board, President and Chief Executive Officer for
a pre
-defined good
reason detailed ab
ove in
connection with a ch
ange in control,
then outstandin
g awards will vest immediately with
out time proration
.
4.8.4. Share owne
rship
None of the members of ou
r Supervis
ory Board, Man
aging Board or
Senior Management
holds s
hares or options
to
acquire shares repres
enting more than 1% of ou
r issued share cap
ital.
85
4.8.5. Stock award
s and options
Our
stock-bas
ed
compensation
plans
are
designed
to
incentivize,
attra
ct
and
retain
our
executives
and
key
employees b
y aligning
compensation
with our performance
and
the evolu
tion of o
ur share price.
We hav
e adopted
stock
based
compensat
ion
p
lans
comprising
either
stock
options
or
unvested
stoc
k
award
s
for
our
Senior
Management
as
well
as
key
employees.
Further
more,
until
2012,
the
Comp
ensation
Committ
ee
(on
behalf
of
the
Supervisory Board an
d with its approval) granted stock
-based awards (t
he options to acquire common shares in the
share capital o
f the Company) to th
e members and profession
als of the Supervis
ory Board.
Pursuant to the shareholders’ resolutions adop
ted by our general meetings of shareholders, our Supervisory Board,
upon
the
p
roposal
of
the
Managing
Board
and
th
e
recomm
endation
o
f
the
Compensation
Committee,
took
the
following actions:
•
appro
ved con
ditions relating
to
our 20
21
unvested
stock award
allocation
under th
e 20
21
Unvested
Stock
Award Plan, includin
g restriction criteria linked to
our performance (for s
elected employees
);
•
approved
conditions
relating to
our
20
20
unv
ested s
tock award allocation
und
er the
2017 Unvested
Stock
Award Plan, includin
g restriction criteria
linked to ou
r performance (for selected employ
ees)
; and
•
approved
conditions
relating to
our
201
9 unv
ested s
tock award allocation
und
er the
2017 Unvested
Stock
Award Plan, includin
g restriction criteria linked to
our perfor
mance (for s
elected employees).
The exercise
o
f stock options
and the
sale or purchase
of shares
of our
sto
ck by the
m
embers or professionals of
our
Supervisory
Board,
the
sole
me
mber
of
our
Managing
Board
,
President
and
Chief
Executive
Officer,
and
all
our
employees are sub
ject to an in
ternal policy which in
volves, inter alia, certain b
lackout periods
.
5.
Corporate Governance
5.1. Commitment to the principles of good corporate gove
rnance
Our consisten
t commitment to good co
rporate governan
ce principles is evidenced b
y:
•
Our
corporate
o
rganization
under
Dutch
law
that
entrusts
our
management
to
a
Managin
g
Board
acting
under
the
supervision
and
control
of
a
Supervisory
Board
totally
in
depe
ndent
from
the
Managing
Board.
Members of
our
Managing
Board and
of
our
Supervisory Board
are
appointed
and
dismiss
ed
by our
shareholders;
•
Our early
adoptio
n
of
po
licies on
importan
t
is
sues such
as
bus
iness e
thics and
conflicts of
interest and
s
trict
po
licies
to
co
mply
with
applicab
le
regulatory
requirements
concerning
financial
reporting
,
ins
ider
trading
and pub
lic disclosures;
•
Our compliance with Dutch securities
laws, because we are a
company incorporated under the laws of The
Netherlands, and, as applicable, our compliance with
American, French and Italian securities
laws, because
our
sh
ares
are
listed
in
th
ese
jurisdiction
s,
in
addition
to
o
ur
compliance
w
ith
the
corporate,
social
an
d
financial laws applicab
le to our sub
sidiaries in the countries
in
which we do bus
iness;
•
Our
broad-based
activities
in
the
field
of
corporate
social
responsibility,
encompassing
environ
mental,
social,
h
ealth,
safety,
educational
and
other
related
issues
including
our
corporate
governance
statement
which
evidenc
es
ou
r
policy
objectives
with
respect
to
dive
rsity
as
well
as
the
results
of
implementing
o
ur
diversity policy for
the year ended December
31, 20
21
;
•
Our implementation of
a non
-compliance reporting channel (managed
by an
independent third party).
We
encourage
everyone,
including
external
b
usiness
partners,
to
express,
in
goo
d
faith,
any
concerns
they
might
have
regarding
poss
ible
violations
of
our
Cod
e
of
Conduct, the
Company’s
policies,
or
the
law
(including,
without
limitations,
any
concerns
regarding
accoun
ting,
internal
controls
or
auditing
matters
).
Our
misconduct
reporting
process
is
communicated
to
all
e
mployees
and
includes,
in
addition
to
int
ernal
local and corpo
rate reporting chann
els, an independ
ent multilingual misconduct reportin
g hotline;
•
Our Corporate Ethics Com
mittee and
Local Ethics Com
mittees, whose m
andate is
to
provide support
to our
management
in
its
ef
forts
to
foster
a
bus
iness
ethics
culture
consistent
across
regions,
function
s
and
organizations;
86
•
Our
Chief Complian
ce
Officer,
who
reports
to
ou
r
Chief E
xecutive
Officer,
also
acts
as
Executive
Secretary
to our Supervis
ory Board; and
•
Our
Chief
Audit
and
Risk
Executiv
e,
who
reports
directly
to
our
Audit
Committee
for
Internal
Audit
and
directly
to
the
Chief
Executive
Officer
for
Enterpris
e Ris
k
Management
and
Resilience
(bus
iness
continuity
and crisis man
agement) is also respo
nsible for our whis
tle-blowing h
otline and related in
vestigations.
As a Dutch compan
y, we are subject to th
e DCGC, which
is publicly availab
le at www.mccg.nl
. We are committed to
informing
ou
r
s
hareholders
of
any
s
ignificant
changes
in
our
corp
orate
gov
ernance
policies
an
d
p
ractices
at
our
AGM. Along
with our Supervisory
Board
Charter
(which we
last updated in October
2019 and
which al
so includes
th
e
charters
of
our
Sup
ervisory
Board
Committees)
an
d
our
Code
of
Conduct,
the
curren
t
version
of
o
ur
Corporate
Governance
Charter
is
po
sted
on
our
website
(www.st.com),
and
these
d
ocuments
are
av
ailable
in
p
rint
to
any
shareholder who may requ
est them.
As required
by
article
2:391(4) and
(5) jo
. article
3
of the
Decree on
the
content o
f the
management repo
rt and
the
DCGC,
our
Corp
orate
Governance
Charter
includes
information
on
the
broad
outline
of
our
corporate
governance
structure and
our compliance with th
e DCGC.
Our
Supervis
ory
Board
is
carefully
selected
based
upon
the
combined
experience
an
d
ex
pertise
of
its
members.
In
fulfilling th
eir du
ties
under
Dutch
law,
Supervis
ory Board
members
serve
the
best
in
terests o
f the
Company
and
its
business,
taking
into
consideration
the
interests
of
all
ou
r
shareho
ld
ers
and
other
stakeholders,
and
must
act
independently
in
their
supervision
of
ou
r
management.
Our
Sup
ervisory
Boa
rd
has
adopted
criteria
to
ass
ess
th
e
independence of its m
embers in accord
ance with corporate
governance listing s
tandards of the NYSE.
Ou
r
Supervisory Board
has
on
various
occasions discussed
Dutch corporate
governan
ce
s
tandards,
the
implementing
rules
and
corporate
governance
stand
ards
o
f
the
SEC
and
of
the
NYSE,
as
well
as
other
corporate
governance
standards. The Sup
ervisory Board h
as de
termined, bas
ed on the evaluat
ions by
an ad hoc committee, th
e following
independence
criteria
for
its
members:
Supervisory
Board
members
must
n
ot
have
an
y
material
relationship
with
STMicroelectronics
N.V.,
or any
of our
consolidated sub
sidiaries, or
our
management. A “material
relationship”
can
include
commercial,
industria
l,
banking,
consultin
g,
legal,
accounting,
charitable
and
familial
relationsh
ips,
among
others, but
does not include a relationsh
ip with direct or indirect s
hareholders.
We believe
we are fully compliant with
all material NYSE cor
p
orate governance standards, to the
extent possible for
a Dutch company
listed on Euronext Paris,
Borsa Italiana,
as well as the NYSE.
Because
we
are
a
Dutch
company,
the
Aud
it
Committee
is
an
advisory
committ
ee
to
the
Su
pervisory
Board
,
which
reports
to
the
Supervisory
Board,
and
our
General
Meetin
g
o
f
Shareho
lders
appoints
our
statutory
auditors.
Ou
r
Audit
Committee
has
establis
hed
a
charter
outlining
its
d
uties
and
responsibilities
with
respect
to,
among
oth
ers,
the monitoring of our acco
unting, aud
iting, financial reporting and
the appointment, retention a
nd oversight of our
external
auditors. In
additio
n,
our
Audit
Committee
has
establis
hed
procedures
for
the
receipt,
retention
and
treatment
o
f
co
mplaints regarding
accoun
ting, internal
accounting controls
or
auditing ma
tt
ers,
and t
he
con
fidential
anonymous sub
mission by our employees re
garding question
able accounting o
r auditing matters.
Pursuant
to
our
Sup
ervisory
Boa
rd
Charter,
the
Su
pervisory
Board
i
s
re
sponsible
for
handling
an
d
deciding
on
potential
reported
conflicts
of
interests
b
etween
the
Company
and
members
of
the
Supervisory
Board,
as
well
as
the Managing Board.
The
so
le
member of
our Managing
Board may
not serve
on
the
board of
a p
ublic company w
ithout the
prior approval
of our Supervisory Board.
Pursuant to the
Su
pervisory Board Charter, the
sole member of our Managing
Board must
inform our Supervisory Board of any (potential) conflict of in
terest and pursuant to such charter and Dutch law, any
Managing Board re
solution regarding a
transaction
in
relation to which
th
e sole
member of our
Man
aging Board
has
a conflict of interest must
be approved a
nd adopted by our Supervis
ory Board. Should our entire Sup
ervisory Board
also have a
conflict of
in
ter
est, the
resolution must be
adopted by
our shareholders’ m
eeting pursuant to
Dutch
law.
We
are
not
a
ware
of
any
potentia
l
con
flicts
o
f
interests
between
the
privat
e
int
erest
or
oth
er
du
ties
of
ou
r
s
ole
Managing Board member an
d our senior
managers and t
heir du
ties to us.
87
5.2. General Meeting of Shareholders
Our ord
inary General
Meetings
of Sharehold
ers are
held at
least an
nually, within s
ix
months after
the clos
e of each
financial year, in
Amsterdam,
Haarlemmermeer (Schiphol
Airport), Rotterdam
or
The Hague,
The
Netherlands.
Extraordinary
General
Meetings
of
Shareholders
may
be
held
as
often
as
our
Supervis
ory
Boa
rd
deems
necessary
,
and
must
be
held
u
pon
the
written
requ
est
of
registered
s
hareholders
or
other
pers
ons
entitled
to
attend
General
Meetings of Shareholders of at least 10% of the total issued share cap
ital to our Managing Board or our Supervisory
Board s
pecifying in
detail th
e business
to b
e dealt
with. Such written
requests
may
not be su
bmitted electronically
.
In th
e event
that th
e Managing
Board
or
the Sup
ervisory Board
does not
convene
the General
Meeting
of
Shareholders within
six weeks of
su
ch a
requ
est, the
a
foremention
ed shareholders or
indiv
iduals may be
authorized
by a competent jud
icial authority.
Notice of
General Meetings
of Shareholders shall
be given
by our
Managing Board or
by our Supe
rv
isory Board or
by
those who
according
to
the la
w or
our
Articles
of As
sociation
are entitled
th
ereto. The
no
tice shall
be giv
en
in su
ch
manner
as
shall
be
auth
orized
or
required
by
law
(including
but
not
limited
to
a
wr
itten
notice,
a
legible
and
reproducible message sent by electronic means and an announcement published by elect
ronic means), as well as in
accordance with
th
e re
gulations of a
stock exchange
where
our shares
ar
e of
ficially listed
at our request.
In addition,
shareholders
and
other
persons
entitled
to at
tend ou
r General
Meetings
of
Shareholders
th
at are
registered
in
our
share
register
s
hall
be
notified
by
letter
that
th
e
mee
ting
is
being
convened.
The
notice
convening
our
General
Meeting
of
Shareholders
shall
be
given
with
due
observance
of
th
e
statu
tory
notice
period,
which
is
currently 42 days
prior to the meeting.
The notice of
o
ur General Me
eting of Shareholders states t
he business to be
trans
acted as
well as
other information
prescribed
by
law
and
our
Articles
of
Association
.
The
agend
a
is
fixed
by
the
autho
r
o
f
th
e
notice
of
the
meeting;
however,
one
or
more
shar
eholders
or
oth
er
persons
entitled
to
attend
General
Meetings
o
f
Shareholde
rs
representing
at
least
on
e-tenth
of
our
issued
sh
are
capital
may, pro
vided
that
the
request w
as
mad
e
at
least
five d
ays
prior to
th
e date
of convocation
of
the meeting, request that
pro
posals be included
on
the
agenda.
N
otwithstand
ing
the
previous
sentence,
pro
posals
of
persons
who
are
entitled
to
attend
General
Meetin
gs
of
Shareholders
will
be
included
on
the
agend
a,
if
such
proposals
are
made
in
writing
to
our
Man
aging
Board
within
a
period
of
sixty
days
before
that
me
eting
b
y
persons
who
are
entit
led
to
at
tend
our
General
Meetings
of
Shareholders
who
,
s
olely
or
jointly,
represent
at
least
1%
of
ou
r
is
sued
share
capital
or
a
market
v
alue
of
at
least
€50
million.
The
requests
referred to
in th
e p
revious
two
sentences
may
not b
e subm
itted electro
nically.
The afor
ementioned
requests
must
comply with
conditions
stip
ulated by
our
Managing
Board, sub
ject to
t
h
e appro
val of
our Supervis
ory Board
, which
shall be posted on ou
r website. Pursuant to Dutch la
w, a shareholder requesting discussion of an
agenda item must
disclose to us
its entire benefi
cial interest (
long and s
hort positio
n). We are required t
o dis
clo
s
e this interest on
our
website.
Dutch
law
prescribes
a
fix
ed
registration
date
of
28
days
prior
to
the
date
of
the
Gen
eral
Meeting
of
Sharehold
ers,
which
means
that
s
hareholders
an
d
other
p
ersons
entitled
to
attend
o
ur
General
Meetings
of
Shareholders ar
e
those
persons
who
hav
e
such
rights
at
such
date
and
,
as
su
ch,
are
registered
in
a
re
gister
des
ignated
by
our
Managing
Board, regardless of who is a shareholder or otherwise a person entitled to
attend our General Meeting of
Shareholders at th
e time of th
e meeting if a registratio
n date would not b
e applicable.
Unless
otherwise
required
by
our
Articles
of
Association
or
Dutch
law,
resolutions
of
our
Ge
neral
Me
etings
of
Shareholders
require
th
e
ap
proval
of
a
majority
of
the
votes
cast
at
a
meeting
at
which
at
least
fifteen
percent
of
the issued and
ou
tstanding share
capital
is
present
o
r represented. If
a quorum is
not present, a f
urther meeting
can
be convened which shall be entitled, irrespective of the share capital represented, to pass a resolution. We
may not
vote our sh
ares held in treasury. Blank an
d invalid votes
shall not be counted.
88
In general, the most importa
nt items of our Genera
l Meetings of Shar
eholders are:
•
the ado
ption of our annu
al accounts;
•
the ado
ption of a div
idend;
•
the dis
charge of the members
of our Managin
g Board and Supervis
ory Board;
•
the ado
ption of the compens
ation policy o
f our Managing Board;
•
the determination
of the com
pensation o
f the members of our Sup
ervisory Board;
•
the app
ointment, suspens
ion and dismiss
al
of the sole member of our Managing Bo
ard;
•
the app
ointment, suspens
ion and dismiss
al of the members of our Sup
ervisory Board;
•
the app
ointment of our au
ditors;
•
the auth
orization to our Ma
naging Board to repurchas
e shares;
•
the
issuance
of
shares
a
nd
the
grantin
g
of
rights
to
subscribe
for
s
hares
(op
tion
rights)
as
well
as
the
delegation of these auth
orities to o
ur Supervisory Board;
•
appro
ving resolutions o
f our Managing Board as
referred to below under “
Managing Board”; an
d
•
resolution
s regarding the amendment of our Articles of Association, our liquidation, legal merger and legal
demerger.
Under Dutch law, our General
Meeting of Sh
areholders has
the authority to adopt our statutory
annual accounts as
prepared by
our
Managing
Board
. Our
General
Meeting o
f S
hareholders
does
not h
ave the
authority
to
amend
our
statutory ann
ual accounts as prepared by o
ur Managing Board
. Our General Me
eting of Shareholders can
:
i.
either adopt our s
tatutory annual accou
nts in the form as prepared b
y our Managin
g Board; or
ii.
instruct our Managing Board
to amend our
statutory
annual
accounts
before
adopting these annual
accounts; or
iii.
not adopt th
e statutory annual accou
nts.
If our
General Meeting
of
Shareholders
instructs
our
Managing Board
to
amend our
statutory
annual
accounts,
our
Managing Boa
rd is
required
to make
the n
ecessary amend
ments, un
less th
e instruction co
ntravenes
the p
rovisions
of
reasonab
leness
an
d
fairnes
s
(
redelijkheid
en
billijkheid
).
Furthermore,
th
e
instru
ction
must
not
contravene
with
the
ap
plicable
presentation
rules
for
the
statu
tory
annu
al
accounts
,
includ
ing
requirements
of
cons
istency
an
d
balance
continuity
.
If there
are
multiple
options,
our
General
Meeting
of
Shareholders
is
authorized
to decide
with
due observan
ce of said limits.
If
there
are
do
ubts
re
garding
the
correctnes
s
of
ou
r
statutory
annual
accounts,
the
annual
report
an
d
the
other
information,
a
petition
for
revision
o
f
our
s
tatutory
annual
accounts
can
be
filed
wit
h
the
Enterprise
Chamber
(
Ondernemingskamer
) o
f the
Amsterdam
Court
of
Appeal
in
The Neth
erlands
by
each interested
party
on
the bas
is
of
non
-compliance
with
the
applicable
presentation
requirements
for
the
statutory
a
nnual
accounts,
the
annual
report
and/or
the
other
in
formation
prescribed
by
the
E
U
IFRS
regime,
Title
9
of
Book
2
of
the
Dutch
Civil
Code
and/or the
Dutch Financial
Markets Supervision
Act
(
Wet op
het f
inancieel toezicht
). T
he
petition
mus
t
s
tate
in
which
respect the documents require revision. The petition can also be file
d by the Advocate General (
advoca
at-generaal
)
of
the
Amsterdam
Court
of
Appeal
o
n
the
bas
is
of
public
interest
as
well
as
the
Dutch
Au
thority
for
the
Fina
ncial
Markets
(
Auto
riteit
Financiële
Markten
)
with
due
obs
ervance
of
Section
4
of
the
Dutch
Fin
ancial
Ma
rkets
Supervis
ion
Act.
89
5.3. Supervisory Board
Our
Supervisory
Board
adv
ises
our
Ma
naging
Board
and
is
responsible
for
supervising
the
policies
pursued
by
our
Managing
Board
,
the
manner
in
which
the
Managing
Board
implements
the
long
-term
v
alue
creation
strategy
an
d
the
general
cours
e
o
f
our
affairs
and
b
usiness.
Our
Supervisory
Board
con
sists
of
such
n
umber
of
m
embers
as
is
resolved
by
our
General
Meeti
ng
of
Shar
eholders
upo
n
a
non
-bind
ing
propo
sal
of
our
Supervis
ory
Board
,
with
a
minimum of
six
members. Decisions by
our shareholders conce
rning the
n
umber and the identity
of our Supervisory
Board members are taken by a simple m
ajority of the votes cast a
t a meeting, provided quorum conditions are met.
Under
Dutch
law,
certain
statuto
ry
provisions
limit
the
number
of
supervis
ory
positions
that
members
of
our
Supervisory
Board
may ho
ld. A
member o
f our
Supervisory
Board
can
only
be app
ointed as
s
uch if
he/
she
does n
ot
hold
more
than
four
supervisory
po
sitions
at
other so
-called
“large”
Dutch
entit
ies.
In th
is con
nection,
the p
osition
of chairman equ
als two positio
ns. The term su
pervisory p
osition means the pos
ition of sup
ervisory director or n
on
-
executive
dir
ector.
Su
pervisory
positions
at
s
everal
entities
belonging
to
the
s
ame
grou
p
con
stitute
one
positio
n,
and
s
upervisory
po
sitions
at
non
-Dutch
entities
are
not
ta
ken
in
to
accoun
t.
Furthermor
e,
an
appointment
by
th
e
Enterprise
Chamber
(
Ondern
emingskame
r
)
of
the
Amste
rdam
Court
of
Ap
peal
as
part
of
corporate
inq
uiry
proceedings is
not
ta
ken
in
to
account. For
purposes of
th
e
foregoing, ”large”
Dutch
entit
ies
ar
e
Dutch
limited liability
companies,
private compan
ies
with limited
liability
and
foundation
s which
m
eet
at leas
t
two of
the
following
three
criteria
(“‘La
rge
Dutch
Entitie
s”):
(i)
th
e
valu
e
of
the
assets
accord
ing
to
the
consolidated
s
tatement
of
financial
position with exp
lanatory notes exceeds
€20
million; (ii) th
e net turn
over for the financial
year e
xceeds €40
m
illion;
or (iii) there are, on a
verage, 250 or more employe
es during the finan
cial year.
In
the
Netherlands,
companies
such
as
ours
are
exp
ected
to
pursue
a
policy
of
hav
ing
a
balan
ced
participation
by
men
and
women
in
supervisory
boards
.
Where
seats
on
a
su
pervisory
board
are
to
be
divided
among
individuals,
balanced p
articipation
is deemed to
exist
if at
least 30%
of
the seats
are
taken by
men and
at
least 30%
by women.
We have balanced participation by men and women on our Supervisory Board
an
d currently, our Supervisory Board
comprises nine members o
f which 4 are female an
d 5 are male.
In
accordance
with
th
e
criteri
a
as
refle
cted
in
our
Superviso
ry
Board
Cha
rter
an
d
diversity
p
olicy,
members
of
our
Supervisory
Board
are
selected on
th
e
basis
of
their
s
pecific
business
,
financial, technical
an
d/or
legal expertise,
p
rior
professional
experi
ence, s
oundness
of
judgment,
ability
to
make an
alytical
enq
uiries
and
willingn
ess
to
devote
the
time
required
to
adequ
ately
perform
th
eir
activities
as
Super
vis
ory
Board me
mbers.
The
o
bject
of
our
div
ersity
policy
is
to
have
a
diverse
compos
ition
of
our
Supervisory
Board
in
the
areas
th
at
are
relevant
to
u
s,
s
uch
as
nationality,
experience, backgrou
nd,
gender and
age.
Our Sup
ervisory
Board endorses
the
princip
le
of a
diversified
Supervisory
Board, in
cluding th
e aforeme
ntioned
statutory
gender balan
ce rules,
within th
e scope
of
the criteria
as
reflected
in
our
Sup
ervisory
Board
Charter
and
diversity
policy.
We
will
contin
ue
to
en
sure
an
appropriate
bala
nce
as
re
commended
by
the
aforemention
ed
statutory
gender
bala
nce
rules.
The
Superviso
ry
Board
mee
ts
the
other
criteria as set forth in
their Charter as well, resu
lting in a divers
ified composition o
f the Supervisory
Board.
The responsibilities of ou
r Supervisory
Board
include (but
are not limited to):
•
sup
ervising,
monitoring,
and
advising
our
Managing
Board
on:
(i)
our
performance,
(ii) ou
r
s
trategy
and
risks
in
herent
to
our
business
activities,
(iii)
the
structure
an
d
managem
ent
of
th
e
internal risk
management
and control s
ystems, and (iv)
compliance with legislat
ion and regulation
s;
•
disclos
ing, complying with a
nd enforcing our corp
orate governance stru
cture;
•
selecting and
recommending th
e appointment of th
e member(s) of the Man
aging Board;
•
propo
sing
th
e
compensation
policy
for
the
m
ember(s)
of
our
Managing
Board
(such
po
licy
to
be
adopted
by our General Meeting o
f Shareholders),
fixing the compen
sation an
nually and the contractu
al terms and
conditions
of
employment
of
th
e
me
mber(s)
of
our
Managin
g
Board
(in
accordan
ce
with
the
said
compensation
policy);
•
electing
and
reco
mmending
the
ap
pointment
o
f
th
e
members of
our Supervisory
Board
a
nd proposing
their
remuneration;
90
•
evaluatin
g
and
as
sessing
th
e
functioning
of
o
ur
Managing
Boa
rd,
our
Su
pervisory
Board, a
nd
their
individual
members (includ
i
ng th
e
evaluation
of our
Superviso
ry Board
’s p
rofile and
the in
troduction,
education
and
training program);
•
hand
ling, and
deciding on, p
o
tential reported
conflicts of interest
between us
on the
one hand
and
members
of
our
Superv
isory
Board,
our
Ma
naging
Bo
ard,
our
external
aud
itor
and
our
(major)
shareholder(s) on t
he other hand;
•
selecting
and
recommending
the
appointment
of
ou
r
external
aud
itor
up
on
p
roposal
by
our
Audit
Committee;
•
reviewing and a
pproving ou
r whistle-blower procedu
res up
on approv
al by t
he Audit Committee;
•
hand
ling,
and
deciding
on,
re
ported
alleg
ed
irregularities
th
at
relate
to
the
functioning
of
o
ur
Managin
g
Board;
•
appro
ving decisions
by our Managing Board as
referred above under “Man
aging Board”;
•
sup
ervising
the
adoption
and
implementation
b
y
our
Managing
Board
on
a
consolidated b
asis
of
stra
tegic
pluri-annual p
lans and annual bud
gets in line with the decision
s of our Sup
ervisory Board;
•
on an
annual
basis, the
renewal
of
the authorization
by
our Managing
Board
to i
ssue
guaran
tees
to
companies whose accou
nts are consolidated by us, as well as guarantees granted t
o third parties including
nonconsolida
ted subsidiaries of us
; and
•
declaring
independently
as
well
as
proposing
to
our
General
Meeting
of
Sharehold
ers
to
decla
re,
distribution
s
out
of
our
share
premium r
eserve
and
other
reserves
available
for
shareholder
distributions
under Dutch law.
Our
Supervisory Board
Charter, as
p
osted
on
o
ur
website,
contains
detailed
p
rovisions on
the
reporting and
han
dling
of (potential) conflicts of inter
est.
For information on the identity of our Supervisory Board mem
bers, includin
g its comm
ittees, as well a
s the
compensation
of
the
members
of
our
Supervis
ory
Board,
see
the
report
o
f
our
Superviso
ry
Board.
We
b
elieve
that
at least one member of ou
r Supervisory Boar
d can be regarded as
a financial expert.
For information
on the role
and identity of
the committees of
our Supervisory Board, see
the report
of our
Supervisory Board
.
5.4. Managing Board
In
accordance
with
Dutch
law,
our
managem
ent
is
entru
sted
to
the
Man
aging
Board
u
nder
the
s
upervision
of
our
Supervisory
Board.
Mr.
Jean-Marc
Chery
is
currently
the
s
ole
member
o
f
our
Managing
Board
with
the
function
of
President and Chie
f Executive Offi
cer.
Under our
Articles of
Association, t
he sole member o
f our Managing
Board is
appointed
for
a
three-year
term,
upon
a
non
-binding
proposal
by
our
Supervisory
Board,
at
our
AGM
(by
a
simple
majority of the votes
cast, provided q
uorum condition
s are met), which
term
may be renew
ed one or more times.
In
the
Netherlands,
companies
such
as
ours
are
exp
ected
to
pursue
a
policy
of
hav
ing
a
balan
ced
participation
by
men
and
wom
en
in
man
aging
board
s.
Wh
ere
seats
on
a
managing
board
are
to
be
divided
among
ind
ividuals,
balanced p
articipation
is deemed to
exist
if at
least 30%
of
the seats
are
taken by
men and
at
least 30%
by women.
Since its creation in 1987
, our Managing Board has
always bee
n comprised of a sole
member
and therefore we
have
not put in place a d
iversity
policy for our Managing Board
.
Our
sh
areholders
may
suspend
or
dis
miss
one
or
more
members
of
our
Managing
Boa
rd,
in
accordan
ce
with
th
e
procedures
laid
down
in
our
Articles
of
Associatio
n.
Under
Dutch
law,
our
Managing
Board
is
entrusted
with
our
general man
agement an
d th
e representa
tion o
f ou
r Co
mpany.
Our Managin
g Board
mus
t s
eek prior
approval
from
our
shareholders
for
d
ecisions
regarding
a
significant
change
in
the
identity
or
natu
re
o
f
the
Co
mpany.
Under
our
Articles
of As
sociation
an
d
our Supervis
or
y
Board
Charter,
our
Managing
Board
must
also s
eek p
rior
approval
from
our Supervisory Board
for certain
other decisions w
ith regar
d to
th
e Com
pany and o
u
r dir
ect or indirect
su
bsidiaries.
91
The
so
le
member of
our Managing
Board may
not serve
on
the
board of a
public company
without the
prior
approval
of our
Superv
isory Board. Pursuant to
our Supervisory Board Charter,
the sole member of
o
ur Managing
Board must
inform our Supervisory Board of any (potential) conflict of in
terest and pursuant to such charter
and Dutch law, any
Managing Board re
solution regarding a
transaction
in
relation to which
th
e sole
member of our
Man
aging Board
has
a conflict of interest must
be approved a
nd adopted by our Supervis
ory Board. Should our entire Sup
ervisory Board
also h
ave a
conflict
of interest,
the
resolution
must
be adopted b
y our
shareholders
pursuant
to
Dutch
law. We
are
not
aware
of
any
potentia
l
conflicts
of
interests
between
th
e
private
interest
or
other
duties
of
our
sole
Managing
Board member and o
ur senior manager
s an
d their duties t
o us.
Pursuant
to our
Articles of
Association
and the
Supervisory Board Cha
rter, the
following decision
s b
y our Managin
g
Board
with
regard
to
the
Company
and
an
y
of
our
direct
or
ind
irect
subs
idiaries
(an
“ST
Group
Company”)
require
pr
ior
approval
from
ou
r
Supervisory
Board:
(i)
any
modification
of
our
or
an
y
ST
Group
Company’s
Articles
of
Association
or
oth
er
cons
titutional
documents,
oth
er
th
an
tho
se
o
f
wholly
owned
s
ubsidiaries;
(ii)
other
than
for
wholly
owned
s
ubsidiaries,
any
chan
ge
in
our
or
any
ST
Grou
p
Company
’s
auth
orized
share
cap
ital
or
an
y
iss
ue,
acquisition
or d
isposal b
y us
—
with the
exception
of s
hares in
our
share
capital
acquired in
order
to tra
nsfer th
ese
shares
under employee s
tock option
or stock
purchase plans
—
or
any ST Group
Company
of
own shares
or change
in share rights and any issue of
ins
truments resulting in a share in the capital of
an
y ST Group Company
or its profits
(iii)
the
liquidation
or
dissolution
of
the
Company
or
an
y
ST
Group
Company
or
the
dispo
sa
l
of
all
or
a
substantial
and
material
part
of
our
bus
iness
or
assets,
or
those
of
any
ST
Group
Company,
or
of
a
ny
shares
in
an
y
ST
Group
Company;
(iv) any
merger,
ac
quisition
or
join
t
venture
agreement
(an
d,
if
substa
ntial
and
material,
any
agreement
relating
to
IP)
to
which
we
or
any
ST
Group
Company
is,
or
is
p
roposed
to
be,
a
party,
as
well
as
the
formation
of
new
companies
by
us
or
any
ST
Group
Company
(with
the
u
nderstanding
that
only
acquisitions
above
$25
million
per
trans
action
are
subject
to
p
rior
Supervisory
Board
approval);
(v)
our
d
raft
Consolida
ted
Statem
ent
of
Fina
ncial
Position
and
Con
solidated
Financial
Statements,
as
well
as
our
and
any
ST
Group
Compan
y’s
profit
distrib
ution
policies;
(vi)
entering
into
any
agree
ment
th
at
may
qualify
as
a
related
party
tran
saction,
including
any
agreement
between us or an
y ST Group
Company
and any
of our major s
hareholders; (vii)
the appointment
of members o
f the
Executive
Committee;
(viii)
the
key
parameters
of
our
p
luri
-annual
plan
s
and
our
conso
lidated
an
nual
bu
dgets,
as
well as
any significant
modification
s to
said plans a
nd bud
gets, or any o
ne of
the matters s
et forth in
our Articles
of
Association
an
d
not
included
in
the
approved
plans
or
budgets;
(ix)
operation
s
which
have
to
be
sub
mitted
for
Supervisory
Board
prior
approval
even
if
their
financing
w
as
already
pro
vided
for
in
the
approved
an
nual
budget;
(x) our
quarterly, semi-annual
and annual
Cons
olidated
Fina
ncial
Sta
tements
prepared
in
accordance w
ith
U.S.
G
AAP
and, as required, according to IFRS;
(xi) th
e exercise of any shareholder right in a ST
joint v
enture company, which is
a company (a)
with respect to which we hold d
irectly or indirectly either a mino
rity equity po
sition in excess of 25%
or
a
majority
position
without
the
voting
power
to
adopt
extraordinary
resolutions,
or
(b
) in
which
we
directly
or
indirectly
participat
e
and
s
uch
par
ticipation
has
a
value
of
at
leas
t
one
-third
of
our
total
as
sets
according
to
th
e
Consolidated
Statement
of
Financial
Pos
ition
and
notes
thereto
in
our
most
recen
tly
ad
opted
(statutory)
annual
accounts,
with
th
e u
nderstandin
g,
for
the
avoidance
o
f
doub
t,
that
decisions
of
the
Managin
g
Board
regarding
th
e
general
management
and/or
operations
o
f
su
ch
ST
jo
int
venture
company
are
not
subject
to
Superviso
ry
Boa
rd
approval
and
that
the
Managing
Board
reports
to
the
Superviso
ry
Board
on
the
operations
of
the
ST
joint
v
enture
companies as
part of
its re
gular
reporting to
the
Supervisory Board
and in
principle at
least
every six
month
s;
(xii)
the
strategy
of our
company;
(x
iii)
th
e annu
al internal
audit plan
and the
appointment,
replacement, reas
signment an
d
dismissal
of
our
Chief
Audit
a
nd
Risk
E
xecutive;
(xiv)
all
propo
sals
to
be
s
ubmitted
to
a
vote
at
the
AGM;
(xv)
the
formation
of
all
compan
ies,
acq
uisition
or
sale
of
an
y
p
articipation
and
conclus
ion
of
any
cooperation
an
d
participation
agreement;
(xvi)
all
our
pluri
-annual
plan
s
and
the
budget
for
the
coming
year
(covering
investm
ent
policy,
policy
regarding
resea
rch
and
development,
and
commercial
policy
and
objectiv
es,
general
financial
policy
and policy
regarding personnel);
and
(xv
ii) all
acts, decisions
or operations
covered
b
y
the foregoing
and
con
stituting
a significan
t chan
ge with res
pect to d
ecisions alread
y approved
by
the Supervisory
Board or
not p
rovided for
i
n the
above list an
d as specifically laid do
wn by a Sup
ervisory Board resolution to th
at effect.
92
Senior Managemen
t
On January 11,
2021, we announced the
appointment of Rajita D’Souza
as President, Human Resources and
Corporate Social Res
ponsibility (CHRO
) and me
mber of the Executiv
e Committee.
On November 18, 2021,
we announ
ced the following changes, effective a
s of Janu
ary 1, 2022:
i.
Marco Cassis was
appointed President, An
alog, MEMS an
d Sensors Grou
p. In addition to
his
Product Group ro
le, Cassis
retains a number of corp
orate responsib
ilities, namely Strategy
Development, System Resear
ch and Ap
plications and t
he Innovation Office.
ii.
Remi El-Ouazzane was
appointed Pres
ident, Microcontrolle
r and Digital ICs Grou
p, following
Claude Dardanne’s
decision t
o retire at
the end of the year
from this po
sition.
iii.
Lorenzo Grandi was co
nfirmed in
his Chief Financial Officer
role and was a
ppointed President,
Finance, Purchasin
g, ERM and Resilience.
iv.
Jerome Roux was appointed P
resident, Sales & Mar
keting and member of
the Executive
Committee. The new Sales &
Marketing p
arameter will incl
ude the Regions, t
he Global Key
Account and t
he Demand Planning Orga
nizations.
General manageme
nt of our business
The
so
le
member
of
our
Man
aging
Board,
our
President
and
Chief
Executive
Officer,
is
entru
sted
with
our
general
management and is supported in
his tasks
by
our
E
xecutive Committee and Executive Vice
Presidents, who together
constitute ou
r Senior Management
.
As a
compan
y committed
to good governance, we
hold
corp
orate meetings
on a
regular basis. Such
meetings, which
involve the particip
ation of several members of our
Senior Managem
ent include:
Executive Co
mmittee
, which
meets
once every
month
and
oversees
the general
strategy
and
is
responsible for
the
risk management of the
Company.
Corporate
Op
erations
Review
,
which
meets twic
e p
er q
uarter
to
review
monthly
results,
sh
ort
-term
forecasts
and
monthly bus
iness results.
Corporate
Staff
Meeting
,
which
meets
onc
e
per
quarter
to
re
view
the
business
in
its
entirety
and
to
plan
and
forecast
for the next quarter an
d beyond.
Executive Com
mittee
The
Executive
Committee
wa
s
established
on
Ma
y 31,
2018 to
improve
the
corp
orate
govern
ance
of
th
e
Company
consistent with evolving Dutch practice. The Executive Committee acts under the authority and responsibility of the
Managing Board and in this re
spect manages the Company. The Managing Board remains legally responsible for the
management
of
the
Compan
y.
The
resp
onsibilities
of
the
Executive
Committee
include
overseeing
th
e
general
strategy
as
well
as
the
risk
management
in
connect
ion
with
th
e
Company’s
act
ivities,
operational
an
d
finan
cial
objectives and financial repo
rting processes.
The Executive Committee adopts resolu
tions based on consensus, or if
no con
sensus can
be
reached, b
y a
majority
of the
votes
cast by
the
members of
the Man
aging
Board includ
ing th
e
vote of the chairman
of the Executive Com
mittee.
The
chairman
of
the
Executiv
e
Committee
is
the
President
and
Chief
E
xecutive
Officer
of
the
Compan
y
and
th
us
serves
as
the
primary
interface
between
the
Executive
Co
mmittee
and
the
Supervisory
Board.
Members
of
the
Executive
Committee
are
appointed
by
the
Managing
Board
subject
to
the
approval
of
the
Supervisory
Board.
Members
of
the
Executiv
e
Committee
can
b
e
suspended
and
dismissed
by
the
Managing
Board
without
prior
approval b
y the Supervisory Board.
93
The
Executive
Committee
was
composed
of
the
following
eight
members
as
of
December
31,
2021
as
set
forth
in
the table below.
Name
(1)
Position
Years with
Company
Years in
Semi-
Conductor
Industry
Age
Jean-Marc
Chery
President and Chief Executiv
e Officer
37
37
61
Orio Bellezza
President, Technology, Man
ufacturing a
nd Quality
38
38
62
Marco Cassis
President,
Sales,
Marketing,
C
ommunications &
Strategy Development
34
34
58
Claude Dardanne
President, Microcontrollers a
nd Digita
l ICs
Group
39
42
69
Lorenzo Grandi
President, Finance, In
frastructure and Serv
ices, and
Chief Financial Officer
34
34
60
Marco Monti
President, Automotive &
Discrete Group
35
35
60
Steven Rose
President, Legal Couns
el
30
30
59
Rajita D'Souza
President, Human Res
ources, Corporate Social
Responsibility
1
1
49
(1)
Remi El-Ouaz
z
ane and
Jerome Roux
j
oined
the Execut
ive Committee
as
President,
Microcontroller
s &
Digital ICs
Group and
President, Sales
& Marketi
ng respective
ly on January 1, 2022. Bene
detto Vi
gna left the Company and
the Executi
ve Committee in 2021.
Detailed biographies of ou
r Executive Committee Me
mbers are av
ailable on our website ww
w.st.com.
94
Executive Vic
e Presidents
The group of Executive Vic
e Presid
ents consis
ted of the followin
g people as of Dec
ember
31,
2021
:
Name
(1)
Position
Years with
Company
Years in
Semi-
Conductor
Industry
Age
Michael Anfang
Executive Vice President
Sales &
Marketing, Europe, Mid
dle East an
d Africa
Region
23
31
53
Eric Aussedat
Executive Vice President
Imaging Sub
-Group General
Manager Analog, MEMS a
nd Sensors
Group
41
41
67
Stefano Cant
ù
Executive Vice President
Automotive Discrete Group
Smart Power Solutions
Macro-Divis
ion General
Manager
Automotive Business
Deputy
27
27
53
Alberto Della Chiesa
Executive Vice President,
Supply Chain
33
33
57
Paul Cihak
Executive Vice President,
General Manager, Sales &
Marketing, Americas Region
23
28
50
Fabio Gualandris
Executive Vice President,
Head of Back
-
End
Manufacturing & Technology
33
37
62
Jo
ë
l Hartmann
Executive Vice President,
Digital &
Smart Power Technology a
nd Digital Front
-
End
Manufacturing
21
43
66
Michael Hummel
Executive Vice President,
Front-En
d Manufacturin
g,
Analog and Power
3
31
62
Fr
é
d
é
rique Le Gr
è
ves
Executive Vice President,
France Public Affairs,
President, STMicroelectro
nics France
1
1
54
Claudia Levo
Executive Vice President,
Integrated Marketing & Co
mmunication
s
10
12
56
Matteo Lo-Presti
Executive Vice President,
Analog,
Sub-Group General Man
ager, Analog
MEMS and Senso
rs Group
28
31
57
Giuseppe
Notarn
icola
Executive Vice President,
Corporate
Treasury,
Insurance, M&A,
IP BU, Real Estate, an
d Italy
Public Affairs
16
16
60
Jerome Roux
Executive Vice President,
Sales & Mar
keting, Asia
Pacific Region
30
34
56
Thierry Tingaud
Executive Vice President
Europe Public Affairs a
nd
Special Projects
37
37
62
Nicolas Yackowlew
Executive Vice President
Product Quality
& Reliability
26
27
52
(1)
Joël
Hartmann
and
Thierry
Tingaud
re
tired
from
their
positi
ons
at
the
end
of
2021.
Jerome
Roux
was
promot
ed
from Execut
ive
Vice
President
, Sales & Marke
ting to President, Sale
s & Market
ing from January 1, 2022.
(2)
As of Januar
y 1, 2022, the fol
lowing Execut
ive Vice Presi
dents were appointed:
a.
Henry Cao, Execut
ive Vice Pr
esident, Sales & M
arketing, China
Region
b.
Alessan
dro Cremonesi
, Executive Vi
ce President, Chi
ef Innovation
Officer, General Man
ager, System Rese
arch and Applic
ations
c.
R
icardo De
-
Sa
-Earp, Executive Vi
ce Preside
nt, General-Purpose M
icrocontroll
er Sub-Group, Mic
rocontrollers and Digit
al ICs Group
d.
Franck Fr
eymond, Executi
ve Vice Pre
sident, Chief Audi
t & Risk Executi
ve
e.
Laurent Malier, Execut
ive Vice Presi
dent, Digital Fr
ont-End Manufacturing & Tec
hnology
f.
Edoardo Merl
i, Executive Vice
President, Power Transi
stor Sub-Group, Auto
motive and D
iscrete Group
g.
Hi
roshi Noguchi
, Executive Vice Pr
esident, Asia Paci
fic Region
Excluding China (APeC)
h.
Andrea O
netti, Exec
utive Vice Pre
sident, MEMS Sensors Sub-Group, Anal
og, MEMS and Senso
rs Group
i.
Rino Peruzzi, Executive Vic
e President, Sale
s & Market
ing, Global Key
Account Organization
j.
Chouaib-Mohamed Rok
bi, Executiv
e Vice President
,
Digital Transfo
rmation and Infor
mation Technology
95
Detailed biographies of ou
r Executive Vice Presidents
are available on
our website www.s
t.com.
5.5. Indemnification of mem
bers of our Managi
ng Board and Supervisory Board
To
th
e
extent permitted
by Dutch
law, me
mbers
of
ou
r
Man
aging
Board and
Supervisory
Board as
well
as our
officers
or agents shall be indemnified by
us against expenses, such as the
reasonable costs of defending claims, as st
ated in
our
Articles
of
Associatio
n.
Under
certain
circumstances,
there
will
be
no
entitle
ment
to
th
is
reimbursement.
We
hold
a
Director &
Offi
cer liab
ility
insu
rance
for
the
members
of
our
Man
aging
Board
and
Su
pervisory
Board
as
well
as our officers.
5.6. Risk Management and Control System
s
For our statement on
the main features
of our risk manage
ment and con
trol systems a
nd of the group of which
the
financial data
are included
in our
an
nual accounts,
please refer
to the section
Ris
k Management
an
d I
n
ternal Control
in the Report of the Man
aging Board.
5.7. Required information Article 10 Takeover Di
rective
The
EU
Tak
eover
Directive
requires
that
listed
comp
anies
publish
additional
information
providing
insight
into
defensive
structures
and
mechanisms
which
they
ap
ply.
The
relevant
provision
has
been
implemented
into
Dutch
law
by
means
of
a
decree
o
f
April
5,
2006.
Purs
uant
to
this
d
ecree,
Dutch
companies
whose
securities
h
ave
been
admitted
to
trading
on
a
regulated
market
h
ave
to
include
information
i
n
their
ann
ual
report
which
could
be
of
importance for persons
who are considering t
aking an interest
in the company.
This information comprises
amongst
other things:
•
the capita
l structure of the compan
y;
•
restrictions
on the tran
sfer of securities a
nd on
voting rights;
•
special p
owers conferred upon
the holders o
f certain shares;
•
the
rules
gov
erning
the
appointment
an
d
dismiss
al
of
board
members
and
the
amendment
of
the
articl
es
of association;
•
the rules o
n the issu
ing and the repurchasing of
s
hares by t
he company;
•
significant
agreements to which th
e company is a party and which conta
in change of control rights
(except
where their nature is s
uch that their dis
closure would be s
eriously prejud
icial to the company
); and
•
agreements
between
the
Company
and
its
board
members
or
employees
providing
for
a
“golden
parachute”.
Capital structur
e.
The
authorized share
cap
ital
of
STMicroelectronics
N.V.
is €1,810
million
con
sisting
of
1,200,000,000
common
s
hares
and
540,000,000
pref
erence
shares,
each
with
a
nominal
value
of
€1.04.
As
at
December
31,
2021
,
the
number
of
common shares iss
ued was
911,276,920 sh
ares (December 31, 20
20
:
911,239,4
20 shares).
As of Decem
ber 31,
2021
, the number of common shares outstanding was 906,518,057 shares (December 31, 20
20
:
905,415,002
sh
ares).
There
we
re
no
preference
sh
ares
iss
ued
as
of
December
3
1,
2021
and
December 31,
20
20
,
respectively.
Restrictions on t
he transfer of shares.
We do not
have restrictions on
the transfer of our
common and p
reference shares
, provided that
Stichting
Continuïteit ST,
if it
holds p
reference shares,
requires ou
r consent
to sell
or otherwise dispos
e of p
reference shares
or voting rights
attached thereto
.
96
Holdings in us that ar
e subject to a disclosur
e obligation.
For
information
on
holdings
in
us
th
at
are
subject
to
a
disclosure
obligation
pursuant
to
Chapter
5.3
of
the
Dutch
Financial
Markets
Supervis
ion
Act
(“
We
t
op
het
financiee
l
toezicht
”)
(the
“FMSA”),
please
refer
to
chapter
“Majo
r
Shareholders” further on
.
Special controlling rights.
We do not hav
e special controlling rights a
ttached to ou
r common or preference shares.
Control of em
ployees share/option sch
emes.
We d
o
not
have
an
y
scheme
gran
ting
rights
to
employees
to
s
ubscribe
for
or
acquire
sh
ares
in
our
sh
are cap
ital
or
the
share
cap
ital
of
a
subsidiary
of
us
where
th
e
control
is
n
ot
directly
exercised
by
the
employees.
However,
key
employees
as
d
etermined
b
y
our
Unv
ested
Share
Award
Plan
s
are
gran
ted
share
awards
(as
part
of
their
compensation)
with
a
staggered
vested
s
chedule
pursuant
to
our
d
etermined
criteria.
For
more
information
on
employees shar
e/option schemes, see the Remuneration
Report.
Restrictions on vo
ting rights.
We d
o
not
have
any
restrictions
on
votin
g rights
nor
have
we coop
erated
in
the
issuan
ce of
deposita
ry
receipts
for
shares.
Agreements with shar
eholders that may give rise to
restrictions on
the transfer of sh
ares or restriction
s of voting
rights.
We
do
n
ot
hav
e
any
agreements
with
s
hareholders
that
may
give
rise
to
restrictions
on
th
e
transfer
of
shares
or
restrictions
of
votin
g righ
ts. However,
please
see
belo
w u
nder
“Shareholders’
Agreemen
ts”
for
certain
information
on sharehold
ers’ agreements regarding us t
o whic
h we are not
a party.
Provisions on
appointm
ent and
dismissal o
f mem
bers
of our
M
anaging Board
and Sup
ervisory Bo
ard and
amendmen
t of our Articles of Association.
Please
see
the
information
included
above
und
er
“Managing
Board”
and
“Supervisory
Board
”
with
respect
to
the
appointment an
d dismissal of the members
of our Managing Boar
d and Sup
ervisory Board.
Our
Articles
of
Association
can
be
amended
by
our
General
Me
eting
of
Shareholders,
upon
the
proposal
of
our
Supervisory
Board,
by
a
simple
majority
of
the
votes
cast
at
a
meeting
where
at
least
15%
of
the
issued
and
outstand
ing share
capital is
present o
r represented.
If
a qu
orum is
not
present,
a furth
er meeting
c
an
be convened
which
shall,
irrespective
of
th
e
share
capital
represented,
to
pass
a
resolu
tion.
If
the
relevant
amendment
affects
the
rights
of
holders
of
common
sh
ares
or
hold
ers
of
preference
shar
es,
the
approval
of
the
meeting
of
holders
o
f
common shares a
nd the meeting of h
olders of preference s
hares, respectively, is
required.
Authority of the M
anaging Board and
Supervisory Board regarding the issuance
and repurc
hase of shares.
Pursuant
to
our
Articles
of
Associatio
n,
our
Man
aging
Board
does
not
hav
e
the
authority
to
issue
shares
or
grant
rights
to
subs
cribe
for
shares.
Our
Supervisory
Board
h
as
this
auth
ority.
Our
20
21
AGM,
held
on
May
27,
2021
,
authorized
our
Superv
isory
Board
,
until the
con
clusion
of
th
e
2022
AGM,
to resolve
u
pon:
(i)
the
issu
ance
of
common
shares or the granting of right
s to subscribe for comm
on shares in our share capital, up
to a maximum
of 10% of our
issued
common
share
capita
l
as
per
December
31,
20
20
,
but
n
ot
exceeding
the
limits
of
authorized
shar
e
capital,
(ii)
the terms
and conditions
of
an issuance
of
common and pref
erence
shar
es;
and (ii
i)
the limitation
and/or
exclusion
of
pre-emptive
rights
of
existing
shareho
lders
upon is
suance
of
common
shares
or
rights
to s
ubscribe
for
it.
97
Pursuant to
a
s
hareholders’
resolution
adop
ted
at
our 2021
AGM
held on
May
27,
2021,
o
ur
Managing Board,
subject
to the
ap
proval of
our Supervisory
Board, was
au
thorized, u
ntil the
con
clusion of
the 20
22 AG
M, to
acq
uire comm
on
shares and/or pref
erence shares subject
to the
limits of our
Articles of
Associatio
n
and the acquisition
price
conditions
set
forth in
such shareholders’
resolution.
Furthermore, our
Articles of
Association
prov
ide that
we shall
be able to acquire s
hares in our
own share capital in
order to tran
sfer these shares u
nder employee sto
ck option or
stock purchas
e plans, without an a
uthorization of our Gene
ral Meeting of Sharehold
ers.
Significant agreemen
ts to which we are
a party and whic
h
contain change of co
ntrol rights
On June 22, 2017, we announced the issuance of senior unsecured bonds, in two tranches
, one of $750
million with
a
maturity
of
5
years
and
one
of
$750
million
with
a
maturi
ty
of 7
years,
conv
ertible
into
new
or
exis
ting
com
mon
shares in
o
ur
shar
e
capita
l.
On
July 28,
2020,
we
announced the
issuance
of
s
enior
unsecured
bonds, in
two
tranch
es,
one
of
$750 million
with
a
matu
rity
of
5
years
and
one
of
$750
million
with
a
maturity
of
7
y
ears,
convertible
into
new or
existing
co
mmon shar
es
in our
share
capital.
Pursuant
to
the ter
ms an
d con
ditions
of the
senior
bonds
(the
“Conditions”
),
bondholders
hav
e
certain
conv
ersion
rights
an
d
redemption
rights
upon
a
change
of
control,
all
as
provided in th
e Conditions.
Agreements with the sole member of our Managing Board and other employees regarding distributions upon the
termination of th
eir employment co
ntract in connection with a p
ublic offer on u
s.
The
contract
of
our
President
and
Chief
Executive
Officer,
Mr.
Jean-Marc
Chery,
provides
that
upon
a
ch
ange
of
control
following
a
takeover
bid
(i) all
u
nvested
sto
ck
awards
gran
ted
to
Mr.
Chery
will
fully
ves
t
and
(ii) th
e
bonus
payable
u
nder
our
Executive
Incentive
Plan
will
be
d
ue
for
the
full
amount,
which
is
150%
of
the
executive
g
ross
annual base sala
ry. Such benefits are not link
ed to termination of th
e employment agreement.
Stichting Continuïteit ST
—
our p
reference shares
We have
an
o
p
tion agreeme
nt with an
independent foundation, Stichting Continuïteit
ST (the
“Stichtin
g”), re
gard
ing
our
preference
s
hares.
This
is
a
common
practice
used
by
a
majority
of
publicly
trad
ed
Dutch
companies.
Our
Managing Board
and our
Supervisory Board,
along
with
th
e
board of
the Stichting,
have
declared
that
th
ey
ar
e
join
tly
of
the
opinion
that
the
Stichting
is
independ
ent
of
us.
The
option
agreement
provides
for
the
issu
ance
of
up
to
a
maximum 540,000,0
00 preference
shares.
Any such
shares would
be issued
to the
Stichting upo
n its request
and in
its sole discretion
and upon payment of at
least 25%
of the p
ar value of the preference s
hares to be is
sued.
The Sti
chting
would
hav
e
the
option
,
which
it
shall
exercis
e
in
its
so
le dis
cretion,
to
take
up th
e
preference s
hares.
The shares would be issuable in the event of
act
ions which th
e board of the
Stic
htin
g determines would be contrary
to
our
interests,
ou
r
shareholders
and
our
oth
er
stakeholders
and
which
in
the
event
of
a
creeping
acquisition
or
offer
for
our
common
shares
are
not
supported
by
our
Managing
Board
an
d
Supervis
ory
Board
.
The
preference
shares may remain o
utstanding for no lo
nger than two years
.
No
preference
shares
have
been
issued
to
date.
The
effect
of
the
prefere
nce
shares
may
be
to
deter
potential
acquirers from e
ffecting an
u
nso
licited acquisition re
sulting in a
change of
control as
well
a
s to
create a
level
-playing
field in
th
e ev
ent
actions
whic
h
are
considered
to
be
hos
tile b
y
our
Managing
Boa
rd
and our
Su
pervisory
Board
,
as
described
abo
ve,
occur
and
which
th
e
board
of
th
e
Stichting
determines
to
be
contra
ry
to
our
interests
and
our
shareholders an
d other stakeholders.
The board of the Stichting is
currently compris
ed of the following three
members:
•
Professor
S.C.J.J.
Kortmann,
a
well-known
professor
at
law
at
th
e
Radb
oud
University
in
Nijmegen,
The
Netherlands, as
Chairman of the Board;
•
Mr.
F. Ago, a
well-known and
experienced attorn
ey at law in Italy; an
d
•
Mr.
E.
Alphandery, a p
rofessor of econ
omics and former Fr
ench Minister of E
conomy.
All members of the board o
f the Stichting are independ
ent from the Co
mpany.
98
5.8.
Sha
res without vot
ing rights a
nd s
hares whi
ch do
not give
any or onl
y a limited
right to
share in the profits or reserves
We d
o
not
hav
e any
shares
with
out
voting
rights
or
shares
which
do
not
give any
or
only
a
limited
right
to
s
hare
in
the profits or reserves
of the Company.
5.9
.
Code of Conduct
Our
Code
o
f
Conduct
is
des
igned
to
promote
h
onest
and
ethical
bu
siness
conduct,
to
d
eter
wrongdoing
an
d
to
provide principles t
o which our employees are expected to adhere and a
dvocate. Our Code of Conduct is app
licable
to
all
of
our
employees
and
senior
man
agers.
We
have
adapted
and
will
amend
our
Code
of
Conduct
and
related
policies, as appropriate, to raise awareness, ensure effectiveness and compliance, and to reflect regulatory or other
changes.
Our
Code
o
f
Conduct
als
o
encourage
our
employ
ees
(or
any
interest
third
party
)
to
speak
up
and
express
any
concern
they
may
have
i
n
good
faith,
without
fear
of
retaliation.
Our
Code
of
Conduct
provides
that
if
any
employee or senior manager acts in contraventio
n of the principles set forth therein, we will take ap
propriate steps
in terms
of the
pro
cedures in
p
lace for
fair d
isciplinary
action.
This action
may,
in
cases o
f s
evere breach
es, includ
e
dismissal.
Our
Code
of
Conduct
is
available
on
our
website
in
the
Corporate
Governance
section,
at
http://investors
.st.com.
5.10
. Deviations from the
Dutch Corpor
ate Governance Code
According
to
th
e
DCGC,
we
are
requ
ired
to
p
ublish
a
list
of
current
d
eviations
from
th
e
DCGC,
and
an
explanation
why
we
do
not
comply
(“Comply
o
r
Explain”).
Because
we
are
listed
on
the
NYSE
,
we
are
required
to
comply
with
the U.S. Sarban
es-Oxley Act o
f 2002, as
well as N
YSE listing
rules, and
the rules and
regulations
promulgated by t
he
U.S. Securities
and
Exchange Commis
sion
(“SEC”).
For th
e full text
of (i) th
e U.S. Sarb
anes-Oxley
Act of
2002, p
lease
see
htt
ps://www.govinfo.gov/
content/pkg/COMP
S-1
883/pdf/COM
PS-1883.pdf, (ii)
the
NYSE listing
rules,
please
see
https://nys
eguide.srorules.com/listed
-compan
y-manual and
(iii) the rules and regulations p
romulgated by the SEC,
please https
://www.s
ec
.gov.
We comp
ly
with
s
uch
principles
an
d
best
practice
prov
isions
or
by
explainin
g
why
it
deviates
from s
uch
provis
ions.
We comply
su
ch principles
and best
pra
ctice
provisions, with
the exce
ption of
th
e f
ollowing best practice
prov
isions:
•
Best practice provision 3.1.2. vii.: No
specific holding term of five
y
ears apply to the unvested stock awards
granted
to
the
sole
member
of
our
Managing
Board,
our President
and
Chief
Executive
Officer,
under
th
e
LTIP.
This
element
is
p
art
of
th
e
employment
conditions
on
th
e
basis
of
which
the
so
le
member
of
th
e
Managing
Board
accepted
his
responsibilities
in
2005.
Those
cond
itions
are
among
ot
hers
based
on
t
he
international
context
in
whic
h
we
ope
rate,
indu
stry
s
tandards
an
d
ap
plicable
laws,
and
in
line
with
our
remuneration policy
updated
by
our 2021 AGM.
•
Best
practice
provision 3.2.3:
The remuneration
in
the
event
of
dismissal
of
the
sole
member
of
our
Managing Board exceeds one year’s salary and is equal to a
gross
lump sum payment in th
e amount of two
years
of
the
last
gross
annual
s
alary,
p
lus
th
e
variable
(b
eing
the
av
erage
of
the
last
three
-year
payout),
subject
to
an
y
an
d
all
legal,
regulat
ory
an
d/or
con
tractual
deductions
applicab
le.
Furthermore,
the
Unvested
Stock
Awards
allocated
to
the
s
ole
member
of
our
Managin
g
Board
under
the
Un
v
ested
Stock
Awards Plan that
are not exercisable and
vested will become fully
exercisable and fully
vested without
any
condition linked to this accelerated vesting. The remuneration in the event
of dismissal shall be paid only if
the employment agreement is terminated by us. This element is part of the employment conditions on the
basis of
which
the sole m
ember
o
f
the Managing
Boar
d accepted
his re
sponsib
ilities
in 2005.
Those
conditions were among oth
ers based on the international context in wh
ich we opera
te, industry s
tandards
and ap
plicable laws
, and
in
line with
our
,
at th
at tim
e,
remuneration
policy
as
approv
ed by
our 2005
AGM
and
th
e
updat
ed
remuneration
policy
by
our
2021
AGM
.
This
departu
re
is
expected to
co
ntinue
for
more
than one finan
cial year.
•
Best practice provision 3.4.1: We believe we comply with mos
t elements of this best practice
provision but
do no
t disclos
e certain
select
compensat
ion information
, a
mong oth
ers, to
the
extent
that
we believe
it
is
99
competitively sensitive in
formation
that
if disclosed co
uld harm our ability t
o attract and
retain executives
and other key p
ersonnel.
•
Best
practice
provis
ion
2.2.2:
The
term
of
office
o
f
Superv
isory
Board
members
may
from
time
to
time
exceed
th
e
maxi
mum
t
erm
mention
ed
in
th
e
D
CGC.
However,
if
the
maximum
term
is
exceeded,
this
is
always ap
proved
by
our sharehold
ers as
members of
our
Supervis
ory Board
are
appointed
by
our General
Meeting
of
Sharehold
ers.
As
mention
ed
in
ou
r
Supervisory
Board
Cha
rter,
we
cons
ider
that
it
may
not
always be in our bes
t interests to limit
th
e number
of terms members may
serve on our Su
pervisory Board.
However,
no
ne
of
the
current
me
mbers
of
our
Su
pervisory
Board
cu
rrently
exceed
the
maximum
ter
m
mentioned in the DCGC.
•
Best practice provision 2.1.7: As
explained in the report of our Supervisory Board, our criteria deviate from
the
criteria as
in
cluded
in best
practice
pro
vision
2.1.7
of
the DCGC,
s
pecifically
it
em
iii. of
s
uch
b
est
practice
provisions,
but
are in
conformity
with
governance
listing
standards
of th
e
NYSE and
our
Corporate
Governance
Charter
as
appro
ved
by
our
shareholders
in
the
2004
AGM.
This
departure
is
expected
to
continue for more than o
ne financial y
ear.
•
Best
practice
pro
vision
2.3.4:
The
Chairman
of
our
Supervisory
Board
is
als
o
the
Chairman
of
the
Compensation
Committee.
This has
been a
standing p
ractice for
many y
ears and
is functionin
g well within
our governance. This d
eparture is expected to co
ntinue for
more than one finan
cial year.
5.1
1. Major Shareholders
Holders
o
f
our
shares
(including
certain
comparable
instruments
,
su
ch
as
instruments
with
a
v
alue
(partly
)
dependent
on
shares
or
distribution
s
on
s
hares,
or
con
tracts
creating
an
economic
pos
ition
similar
to
sh
ares)
or
voting rights (including
p
otential interests, such
as via
options or convertible
bo
nds) may
have disclosure obligations
under Dutch
law.
Any
person or
entity
whos
e
d
irect
or
indirect interest
in our
s
hare
cap
ital
or
voting rights
(including
potential
in
terest)
reaches,
exceeds
or
falls
below
a
certain
thresh
old
must
make
a
d
isclosure
to
the
AFM
immediately.
The
threshold
percentag
es
are
3%,
5%, 10%,
15%, 20
%, 25%,
30%,
40%,
50
%,
60%,
75%
and
95%.
If
a
person’s
direct or
indirect
interest
in th
e shar
e cap
ital or
vo
ting rights
pas
sively
reaches
, exceeds
or fal
ls b
elow th
e
abovementioned thresholds
(e.g. as a
result of a change in
the capital of
th
e company), the person in question mu
st
give
notice
to
the
AFM
no
later
th
an
the
fourth
tradin
g
day
after
the
AFM
has
p
ublished
the
change
in
th
e
share
capital and/or voting rights in the public register. In addition, a notification requirement applies in respect of shares
with special statu
tory rights (e.g. priority s
hares), regardless o
f the abovementioned perc
entages.
Furthermore,
each
p
erson
w
ho
is
or
ought
to
be
aware
that
the
sub
stantial
holdin
g
he
holds
in
th
e
Company,
reaches,
exceeds
or
falls
belo
w
any
of
the
abovementioned
thresh
olds
v
is
-à-vis
his
most recent
notification
to
the
AFM, which
chang
e relates
to
the compos
ition o
f the
notification
a
s
a
result
of certain
acts
(e.g. (i)
the
exchange o
f
certain
financial
instruments
f
or
sh
ares
or
depositary
receipts
for shar
es,
(ii)
the
exchange
of
sh
ares
for
depos
itary
receipts
for
shares,
or
(iii)
as
a
res
ult
of
th
e
exer
cise
of
rights
pursuant
to
a
co
ntract
for
the
acquisition
of
votin
g
rights)
must
give
notice
to
the
AFM
no
later
than
the
fourth
tra
ding
day
after
he
became
or
ought
to
be
aware
of
this change.
For
th
e
p
urpose
of
calculati
ng
the
percentage
of
capita
l
interest
or
voting
rights,
among
ot
h
ers,
the
following
interests must be taken into account: (i) those directly held by him; (ii) those held by his controlled undertakings for
purposes
of
the
Dutch
Finan
cial Supervis
ion
Act;
(iii)
shares
held
by
a
third
party
for
such pers
on’s
account
and
t
he
votes
such
third
party
may
e
xercise;
(iv)
the
votes
held
by
a
third
party
if
such
person
has
concluded
an
oral
or
written v
oting
agreement
wit
h
such
p
arty
which
provid
es
for
a
lasting
common
policy
o
n
votin
g; (v)
th
e
votes
held
by
a
third
p
arty
if
such
person
has
concluded
an
oral
or
written
agreement
with
such
party
which
pro
vides
for
a
temporary
and
paid
transfer o
f th
e v
otes;
and
(vi)
th
e
votes
which
a
person
may
exercise
as
a
proxy
but in
his o
wn
discretion.
A
person
who
has
a
3%
or
larger
interest
i
n
the
sh
are
cap
ital
or
votin
g
rights
and
who
ceases
to
be
a
controlled undertaking must without delay notify
th
e AFM. As of
that moment, all notification obligations under
th
e
Dutch Financial
Supervision
Act w
ill
beco
me
ap
plicable
to
the
former
con
trolled undertaking itself.
The
manag
ement
company
of
a
common
fund
(beleggingsfonds)
sh
all
be
deemed
to
have
the
disposal
of
the
shares
held
by
the
depositary and the
related voting rights. The
deposita
ry of
a common fund shall be
deemed
not
to
have
th
e disposal
of
shares
or
voting
rights.
Fu
rthermore,
special
rules
apply
to
the
attribution
of
the
ordinary
shares
which
are p
art
of the property of a
partnersh
ip or other community of property. A holder of a
pledge or right of usufruct in respect
100
of o
ur
shares
can
also
be
subject
to
a n
otification
obligation
if
such
person
has,
or
can
acquire,
the
right
to
vote on
our shares. If a pledgor or usufructuary acquires su
ch voting rights, this may also trigger a notification obligation for
the
holder
of
our
shares.
A
p
erson
is
also
d
eemed
to
hold
s
hares
if
he
has
a
financial
in
strument
(i)
whose
rise
in
value depends in
part on
th
e r
ise in value
of the underlying
shares or on
dividend or
other
payments on those
shares
(in other
words,
a lon
g pos
ition
must
be held
in
those s
h
are
s), an
d (ii)
which do
es not
entit
le him
to
acquire s
hares
in
a
listed
company
(i.e.,
it
is
a
cash
-settled
financial
instrument).
In
addition,
a
p
erson
who
may,
b
y
virtu
e
of
an
option,
be
obliged
to
buy
shares
in
a
listed
company
is
also
equated
with
a
s
harehold
er.
Moreover,
a
person
who
has
entered
into
a
con
tract
(other
than
a
cash
-settled
finan
cial
instru
ment)
that
gives
him
an
economic
pos
ition
comparable
to
that
of
a
shareholder
in
a
listed
company
is
als
o
deem
ed
to
ho
ld
s
hares
for
the
purposes
of
th
e
disclosure obligation
.
The holder of a financial ins
trument representing a s
hort position in
our shares is required to n
otify the AFM if such
short
position,
express
ed in
a cap
ital perc
entage, reach
es
or cros
ses
a th
reshold
percentage.
The
threshold
percentages are
the s
ame as
referred
to ab
ove in
this
section. Sh
ort po
sition
refers to
the gross
sh
ort position
(i.e.,
a long positio
n held by t
he holder cannot
be offset agains
t the s
hort positio
n). There is als
o a requirement to n
otify
the
AFM
of
the
net
short
position
(i.e.,
long
p
ositions
are
offset
against
short
positions)
if
such
s
hort
position,
expressed
in
a
capital
percentage,
reaches
o
r
cross
es
a
threshold
percentage;
The th
reshold
percentages
are
0.2
%
and
each
0.1%
ab
ove
that
.
Notifications
as
of
0
.5%
an
d
each
0.1%
above
that
will
be
publis
hed
by
th
e
AFM.
The
notification shall
be made no later than
3:30 pm CET on the
following trading day
.
Under Dutch law, the sole
member of our Managing Board and e
ach of the me
mbers of our Supervisory Board m
ust
without delay notify the AFM of any changes in his interest or potential interest in
our share capital or voting rights.
Under
th
e
E
uropean
Market
Abuse
Regulation,
th
e
sole
member
of
our
Managing
Board,
th
e
members
of
the
Executive
Committee
and
eac
h
of
t
he
members
of
our
Sup
ervisory
Board,
as
well
as
any
other
person
who
wou
ld
have
the
power
to
take
managerial
decisions
affecting
th
e
future
develop
ments
and
business
prosp
ects
of
th
e
Company having regular
acces
s to
inside information re
lating, directly
or
indirectly,
to
the
Company
, must
notify the
AFM of an
y tra
nsactions
conducted for h
is or
her own
account relating
to
the shares or
in financial
instruments
the
value of
which is
also based
on the valu
e of
the shares. In
addition, certain
persons
who are c
losely
associated with
members
of
the
Managing
Board
,
the
Executiv
e
Com
mittee
and
Supervisory
Board
or
any
of
the
oth
er
p
ersons
as
described above, are required
to notify the
AFM of
any transactions conducted for their
own account relating to the
shares or
in financial instruments t
he value of which is a
lso based on the value of the s
hares.
The AFM
publishes all notifications on
its public
website (www.afm.nl).
Non
-compliance with
the notification
obligations under
European or
Dutch law
can
le
ad to
impriso
nment or crim
inal fines,
or administrativ
e
fines or
oth
er
administrative sanction
s. In addition, non-compliance with these notification obligations may lead to
civil sanctions,
including,
without
limitation,
suspension
of
the
voting
rights
attaching
to
our
shares
held
by
th
e
offender
for
a
maximum of three years, (suspension and) nullification of a resolution adopted by our share
holders’ meeting (if it is
likely
that
such
resolution
would
not
have
been
ado
pted
if
th
e
offender
had
not
voted)
and
a
proh
ibitio
n
for
the
offender to acquire our sh
ares or v
otes for a period
of no more than five years. Sh
areholders are advis
ed to consu
lt
with their own legal advis
ers to determine whether no
tification
obligations a
pply to them.
The following table sets
forth certai
n information w
ith respect to t
he ownership of our
issued common s
hares as of
December 31, 2021 bas
ed on information a
vailable to us
:
Common Shares Owned
Shareholders
Number
%
STMicroelectronics Ho
lding N.V. (
“
ST Holding
”
)
250,704,754
27.51
Public
(1)
655,813,303
71.97
Treasury shares
4,758,863
0.52
Total
911,276,920
100.0
(1)
Accor
ding to the
report available on
Schedule 13G filed with the
SEC on February 7,
2022, we understand that
as of
December 31, 2021
BlackR
ock,
Inc. i
s
the
be
neficial
owner
of
69,
309,935
of
our
comm
on
shares
(representing
approximatel
y
7.6%
of our
outstanding
comm
on
shares).
101
We are n
ot aware
of any
significant
change ov
er the
past three y
ears in
the p
ercentage ownership
of ou
r shares
by
ST
Holdin
g,
our
major
shareholder.
ST
Holding
does
not
h
ave
any
different
voting
rights
from
those
of
our
other
shareholders.
According
to
th
e
report
on
Schedu
le
13G
(“S
T
Holding
13
G”)
jointly
filed
with
the
SEC
on
February
11,
2020
by
ST
Holding,
th
e
Italian
Ministry
of
th
e
Economy
and
Fina
nce
(the
“
MEF”),
Bpifrance
Participations
S.A.,
a
successor
to
its former
who
lly-owned subsidiary FT1CI,
(“Bpifrance” and together
with the MEF,
th
e “STH Shareholders”)
and the
Italian Gov
ernment and
the
French
Government,
each ind
irectly throu
gh th
e MEF
and
Bpifrance, respective
ly, h
old
14.1% of our share capital a
s of December 31, 2019. The o
wnership percen
tages o
f each the MEF a
nd Bpifrance are
based
on
891,434,489
sh
ares
outstan
ding
as
of
December
31,
2019
.
As
of
th
is
date,
no
repo
rt
on
13G
in
respect
of
the STH Shareholders was filed subsequent to
th
e ST
Holding 13G.
On
November 17, 2016,
Commissariat à
l
’Energie
Atomique
et
au
x
Énergies
Alternatives
(“CEA”)
an
d
Bpifrance,
which
were,
at
the
ti
me,
the
shareholders
of
FT1CI,
entered in
to
a
share
purchase
agreement
purs
uant
to
which CEA
tra
nsferred
721,513
shares
of
FT1CI to
Bpifran
ce.
As a result of the
transaction, Bpifrance increased its shareholding in FT1CI
f
rom 79.2% to 95.1%, with CEA retaining
the rem
aining 4.9%
in FT1CI. On
November 16,
20
18, CEA
a
nd Bpifrance
entered into
a second purchase
agreement,
pursuant
to w
hich
CEA
transferred
222,265
shares,
representing
its
remaining
ownership interest
in
FT1CI,
to
Bpifrance.
As
a
result
of this
t
ransact
ion,
Bpifrance
became
th
e s
ole
shareholder
of
F
T1CI.
On
Jun
e 21,
2019, F
T1CI
merged with and into
Bpifrance and ceased t
o exist
.
All
tra
nsactions
with
major
shareholders
were
in
complian
ce
with
prov
isions
of
the
201
6
Dutch
Corp
orate
Governance Code.
5.11. Shareholders’ Agreements
5.11.1. STH Shareholde
rs’ Agreemen
t
The
filers of
the ST
Holding 13G
h
ave
entered
into
a shareholders
agreement which
governs relations
between
them,
including
for
certain
matters
relating
to
the
owners
hip
of
o
ur
shar
es
and
the
action
s
of
our
m
anagement
to
the
extent
s
hareholder
approval
is
required
(the
“STH
Shareholders
Agreement”).
Below
is
a
brief
su
mmary
of
certain
details from the ST Hold
ing 13G.
5.11.1.1.
Standstill
The
STH
Shareholders’
Agree
ment
contain
s
a
standstill
provision
that
precludes
any
of
the
parties
and
the
partie
s’
affiliates
from
acqu
iring,
directly
or
ind
irectly,
any
of
our
co
mmon
shares
or
any
instrument
prov
iding
for
the
right
to
acquire
an
y
of
our
common
shares
other
than
through
ST
Holding.
The
standstill
is
in
effect
for
as
long
as
such
party
holds
our
common
s
hares th
rough
ST
Holding.
The pa
rties
agreed
to
con
tinue
to
hold
th
eir s
takes
in
us
at
all
times through the cu
rrent holding stru
cture of ST Holding, s
ubject to certain limited e
xceptions.
102
5.11.1.2.
Corporate Gove
rnance
The
STH Shareholders’ A
greement provides for a
balan
ced corporate governance between the STH
Shareholders for
the
duratio
n
of
th
e
“Balance
Period”,
despite
actu
al
differ
ences
in
in
direct
econo
mic
in
terest
in
us.
The
“Balanc
e
Period” las
ts as
long
as
each STH
Shareholder
owns
at
any time
a vo
ting sta
ke in
ST
Holding
equal
to at
least
47.5%
of the total votin
g stakes of ST Holding.
Managing
Board
and
Supervisory
Board
members
can
only
be
appoin
ted
by
the
General
Meeting
of
Shareholders
upon
a pro
posal
by the
Supervisory
Board.
The
Sup
ervisory
Board p
asses
resolutions
, including
on s
uch a
prop
osal,
by at
least
three quarters
of th
e votes
of th
e members in
office.
The STH
Shareholders
Agreement,
to which
STM
is
not a
party,
furthermore
provid
es that
: (i)
each
of th
e
STH S
hareholders,
Bpifrance, on
th
e one
hand,
and
the
MEF
,
on
the
other
han
d,
may
propose
the
same
number
of
members
for
election
to
the
Supervisory
Board
by
our
shareholders,
an
d
ST
Holding s
hall
vote
in
favor
of
such
members;
and
(ii)
any
decision
relatin
g to
the
voting
rights
of
ST
Ho
lding
shall
require
t
he
unanimous
approval
of
the
S
TH
Shareholders.
ST
Ho
lding
may
therefore
be
in
a
position to ef
fectively control actions that
require shareholder
ap
proval, including, as discussed
above, the
proposal
of six out of
nine me
mbers for election to our Supervisory Board (three members by each STH Shareho
lder) and the
appointment
of
our
Managing
Board,
as
well
as
corporate act
ion
s,
an
d
the
issuan
ce
of
new
s
hares
or other
securities.
As
a
result
of
the
STH
Shareholders
Agreement,
the
Chairman
of
our
Supervisory
Board
is
p
roposed
by
an
STH
Shareholder
for
a
three-year
term,
and
the
Vice-Chairman
of
our
Supervisory
Board
is
proposed
by
the
other
STH
Shareholder
for
the
same
period,
and
vice
-versa
for
the
following
three-y
ear term.
The
S
TH
Shareholder
propos
ing
the
appointment
of
the
Chairman
may
furthermore
propose
the
app
ointment
of
the
As
sistant
Secretary
of
our
Supervisory
Board,
an
d
th
e
STH
Sharehold
er
propos
ing
the
appointment
of
Vice
-Chairman
proposes
the
appointment
of
the
Secreta
ry
of
our
Supervisory
Board.
Finally,
each
STH
Shareholder
also
propo
ses
the
appointment of a Fin
ancial Controller to th
e Supervisory Board
.
The
STH
Shareholders
further
more
agreed
that
during
the
Balance
Period
,
any
other
decision,
to
the
extent
that
a
resolution of
ST
Holding is required, must
b
e pursuant to
the unanimous approval of
th
e shareholders of
ST
Ho
lding.
At the
end of the
Balance Period i.e.,
once a shareholder’s voting
s
take in
ST Holding has decreased
under the 47.5%
threshold,
such
STH
Shar
eholder
b
eing
th
ereafter
referred
to
as
“minority
sharehold
er”
and
th
e
other
one
being
referred to
as
“majority
s
hareholder”,
the
members of our
Superviso
ry Board
and those
of
ST
Holding designa
ted by
the
minority
s
hareholder
of
ST
Holding
will,
pursua
nt
to
the
Shareholders’
Agreement,
immediately
resign
upon
request of ST Holding’s maj
ority s
hareholder.
After
the
end
of
the
Balance
Period
,
u
nanimous
app
roval
b
y
the
s
hareholders
of
ST
Holding
remains
required
to
approve:
i.
As
long
as
any
o
f
th
e
STH
Sharehold
ers
indirectly
owns
at
least
the
lesser
of
3%
of
our
issued
and
outsta
nding
share capital
or
10%
o
f
the
S
TH Shareholders’
aggregat
e
s
take
in
us at
such time,
with
respect to
ST
H
olding,
any
chan
ges
to the
articles of
asso
ciation, any
issue,
acquisition
or
disp
osal
o
f
shares
in
ST Holding
or
change
in the rights of its shares, its liquidation or dissolution and any legal merger, de
-merg
er, acquisition o
r joint
venture agreement to which
ST Holding is p
roposed to
be a party.
ii.
As
long
as
any
of
the
STH
Shareholders
indirectly
owns
at
least
33%
of
the
STH
Shar
eholders’
aggregat
e
stake
in
us,
certain
changes
to
our
articles
of
as
sociation
(including
an
y
alteration
in
our
autho
rized
shar
e
capital,
or
any
iss
ue
of
share
capita
l
and/or
financial
instru
ment
giving
the
right
to
subs
cribe
for
o
ur
common
shares,
changes
to
the
rights
attached
to
our
shares
,
changes
to
the
preemptive
rights,
iss
ues
relating
to
the form, rights and tran
sfer mechanics of the shares, the compositio
n and
op
eration of the Managing and
Supervisory
Boards
,
matters
su
bject
to
the
Supervisory
Board’s
app
roval,
th
e
Su
pervisory
Board’s
voting
procedures,
extraordinar
y
General Meetings
o
f Shar
eholders
an
d qu
orums for
v
oting at
General
Meetings
of Shareholders).
iii.
Any decision to v
ote our sh
ares held by ST Holding a
t our General M
eeting of Shareholde
rs with respect to
any
substan
tial
and
material merger
d
ecision.
In
the
event
of
a
failure b
y
the
STH
Shareholders
to
reach
a
common decision
on
the
relevant merger proposal, our
shares attributable to
the minority shareholder and
held
b
y
ST
H
olding
will
be
co
unted
as
p
resent
for
purposes
of
a
quorum
of
sharehold
ers
at
one
of
our
103
General
Meeting
of
Sharehol
ders,
but
will
not
be
vo
ted
(i.e.,
will be
ab
stained
from
the
vote
in
a
way that
they will not be coun
ted as a negative vote o
r as a positive v
ote).
iv.
In
add
ition,
the
minority
s
hareholder
will
have
the
right
to
designate
at
least
o
ne
member
of
th
e
list
o
f
candidates
for
the
Supervis
ory
Board
to
be
proposed
by
ST
Holding
if
that
sharehold
er
i
ndirectly
owns
at
least 3% of our
total issued a
nd o
utstand
ing share capital, with
the majority S
TH Sharehol
der retaining the
right
to
appoint
th
at
number
of
memb
ers
to
th
e
Supervisory
Boa
rd
that
is
at
leas
t
proportional
to
su
ch
majority sharehold
er’s voting stake.
Finally, at the
end of the
Balance Period, the
unan
imous approval required for
other decisions taken at
the
STMicroelectronics
N.V.
level
shall
only
be compuls
ory to
the extent
possib
le, taking
into
account
the actu
al power
attached to the d
irect and indirect shareholdin
g together held b
y the STH Shareholders in
our company
.
5.11
.1
.
3.
Ownership o
f ST Shares
The
S
TH
Shareholders
Agreement
pro
vides
that
each
STH
Shareholder
retains
th
e
right
to
cau
se
ST
H
olding
to
dispos
e
of its stake in us at its
so
le discretion pursuant to the issuance
o
f financial instruments, an equity swap, a structured
finance
deal
or
a
straight
sale;
however,
except
in
the
ca
se
of
a
public
offer,
no
sales
by
any
party
to
the
STH
Shareholders
Agre
ement
may
be
made
of
any
of
our
shares
or
any
s
hares
of
Bpifrance
or
ST
Holdin
g
to
any
of
ou
r
top ten
competitors
or an
y company
controlling
such
a competitor.
The STH
Shareholders
Agreement
also
requires
all
o
f
the parties
to
the
STH Shareholders
Agre
ement
to
hold their
stakes in
us at
all time
through the
current holding
structure of ST Holding, su
bject to certain limited exceptions, and preclud
e
s all such parties and their affiliates from
acquiring any o
f our common shares
other than throu
gh ST Holding.
5.11.1.4.
Change of Control Provis
ion
The STH Shareholders Agree
ment provides for ta
g-along righ
ts, pre-emptive rights
, and provision
s with resp
ect to a
change
of
con
trol
of
any
of
the
STH
Sh
areholders,
on
the
o
ne
hand
,
and
th
e
Italian
Ministry
of
th
e
Economy
and
Finance,
on
the
other
hand.
The
STH
Shar
eholders
may
transfer
shares
of
ST
Holding,
to
any
of
their
respective
affiliates, which could in
clude entities u
ltimately controlled
by the Italian Gov
ernment or the French Govern
ment.
5.11.1.5.
Deadlock
In
the
event of
a d
isagreement
th
at
cannot
be
resolved
between
the
p
arties
as
to
the
conduct
of
the
business
and
actions contempla
ted
by the
STH
Sh
areholders’ Agre
ement, e
ach
party has
the
right to
offer
its interest
in ST
Holding
to
the
other,
which
then
has
the
right
to
acquire,
or
to
have
a
third
party
acquire,
such
interest.
If
neither
party
agrees to acquire or have acquired the
other party’s in
terest, then together the parties are obligated to try to find a
third party t
o acquire their collective interests
, or such part thereof as is
suitable to r
esolve the deadlock.
5.11.1.6.
Duration
The
STH
Shareholders’
Agreement
wi
ll
r
emain
in
force
as
long
as
the
Italian
State,
on
the
one
hand
and
Bpifrance,
on the other han
d, are shareholders of ST Holding.
6.
Dividend Policy
Our
dividend
policy
reads
as
follows:
“
STMicroelectron
ics
seeks
to
us
e
its
av
ailable
cash
in
order
to
develop
and
enhance its
pos
ition in a
competitive
semiconductor
market
while at
the s
ame time
managing
its
cash
resources
to
reward its
shareholders
for
t
heir inves
tment
and
trust
in
STMicroelectronics.
Based
on
its results
, projected
cap
ital
requirements as well as
business condition
s and prospects, the Managing Board
proposes on a
n annual basis to the
Supervisory
Board,
whenever
deemed possible
and
desira
ble
in
line
with
STMicro
electronics’
objectives
and financial
situation,
the
distribution
of
a
quarterly
cash
d
ividend,
if
any
.
The
Superv
isory
Board,
upon
the
prop
osal
of
the
Managing Board, decides
or propos
es on
an
annual
b
asis, in
accordance with this policy, which portion
of the
profits
or distrib
utable
reserves sh
all not
be
retained in
reserves
to
fund
future growth
or
for
other
purposes
and
makes
a
proposal con
cerning the amount, if a
ny, of the quarterly cas
h dividend.”
104
On
May
27,
2021,
o
ur
shareholders
approved
a
cas
h
dividend
of
US$0
.24
per
outs
tanding
sh
are
of
our
common
stock, which was distributed in quarterly installments of US$0.0
6 in each of the second, third and fourth quarters of
202
1 and will als
o be distrib
uted in the first q
uarter of 202
2
. Future divid
ends, if any,
and their timing and amou
nts
may be
affected by
our
accumulated profits,
our
capacity to
generate cash
flow, ou
r financial s
ituation, th
e general
economic
situation
and
pros
pects
and
any
oth
er
factors
that
the
Supervis
ory
Board
,
upon
the
recommendat
ion
of
our
Managing
Board,
shall
deem
important.
For
a
history
of
dividends
paid
by
u
s
to
our
shareho
lders,
see
Note
7.6.21.7
of
our Consolidated Financial St
atements.
7.
Consolidated fin
ancial statements
7.1. Consolidated income statement
Year ended
In millions of USD except p
er share a
mount
Notes
December
31,
2021
December
31,
2020
Sales
7.6.26
12,729
10,181
Other revenues
7.6.26
32
38
Total revenues
12,761
10,219
Cost of sales
7.6.28
(7,708
)
(6,819
)
Gross profit
5,053
3,400
Selling, general and a
dministrative
7.6.28
(1,319
)
(1,123
)
Research and development
7.6.28
(1,388
)
(1,272
)
Other income
7.6.29
176
292
Other expenses
7.6.29
(70
)
(64
)
Operating profit
2,452
1,233
Finance income
7.6.30
13
105
Finance costs
7.6.30
(441
)
(544
)
Share of profit of join
t ventures
-
2
Profit before inco
me tax
2,024
796
Income tax expense
7.6.32
(307
)
(100
)
Net profit
1,717
696
Attributable to:
The equity holders o
f the parent
1,711
694
Noncontrolling in
terest
6
2
Net profit
1,717
696
Earnings per s
hare attributable to the equity h
olders of the
parent
Earnings per s
hare (Basic)
7.6.33
1.89
0.78
Earnings per s
hare (Diluted)
7.6.33
1.85
0.76
The accompanyin
g notes are an in
tegral part of these con
solidated financial statements
105
7.2. Consolidated statement of comprehensive income
Year ended
In millions of USD
Notes
December
31,
2021
December
31,
2020
Net profit
1,717
696
Other com
prehensive income (loss), net of tax:
Items that will not be r
eclassified to pr
ofit or loss
Re
-measurements of e
mployee benefit obligation
s
40
—
Income tax effect
(3
)
—
Re
-measurements
of employee bene
fit obligations, net
of tax
37
—
Changes in Fair v
alue of unquoted equity
securities at
FVOCI
7.6.15.1
—
(2
)
Income tax effect
—
—
Net changes in Fair value o
f equity instrumen
ts at
FVOCI
—
(2
)
Total items that will not
be reclassified to pr
ofit or loss
37
(2
)
Items that may b
e subseq
uently reclassified to profit or
loss
Exchange differenc
es on translation of for
eign
operations
(188
)
202
Cash flow hedges
7.6.31
(68
)
39
Income tax effect
9
(4
)
Net movemen
t on cash flow h
edges
(59
)
35
Changes in Fair v
alue of debt instru
ments at FVOCI
7.6.15.1
(1
)
—
Income tax effect
—
—
Net changes in Fair value o
f debt instrum
ents at FVOCI
(1
)
—
Total items that m
ay be subsequ
ently reclassified to pr
ofit or
loss
(248
)
237
Other com
prehensive income (loss), net of tax
(211
)
235
Total compreh
ensive income, net o
f tax
1,506
931
Attributable to:
The equity holders o
f the parent
1,500
929
Noncontrolling in
terest
6
2
Total compreh
ensive income, net o
f tax
1,506
931
The accompanyin
g notes are an in
tegral part of these con
solidated financial statements
106
7.3. Consolidated statement of financial positio
n
In millions of USD
Notes
December
31,
2021
December
31,
2020*
Non
-current assets
Property, plan
t and equipment
7.6.11
5,778
4,778
Goodwill
7.6.14
295
312
Intangible ass
ets
7.6.13
1,407
1,294
Other non-current finan
cial assets
7.6.15.1
65
68
Deferred tax assets
7.6.32
438
482
Other non-current as
sets
7.6.16
596
698
Total non-curr
ent assets
8,579
7,632
Current assets
Inventories
7.6.17
1,978
1,838
Trade accounts receivable
7.6.18
1,759
1,465
Other current financial as
sets
7.6.15.1
6
259
Other receivables an
d assets
7.6.19
575
520
Short-term depos
its
7.6.15.1
291
581
Cash and ca
sh equivalents
7.6.20
3,225
3,006
Total current
assets
7,834
7,669
Total assets
16,413
15,301
Equity
Equity att
ributable to the equity holders o
f the parent
9,517
8,263
Noncontrolling in
terest
64
58
Total equity
7.6.21
9,581
8,321
Non
-current liabilities
Interest-bearing loans
and borrowings
7.6.15.3
2,391
1,821
Other non-current finan
cial liabilities
7.6.15.2
755
625
Employee benefits
7.6.23
564
616
Deferred tax liabilities
7.6.32
48
63
Other non-current liab
ilities
109
101
Total non-curr
ent liabilities
3,867
3,226
Current liabilities
Interest-bearing loans
and borrowings
–
current
portion
7.6.15.3
143
796
Trade accounts p
ayable
7.6.24
1,582
1,166
Other payables a
nd accrued liabilities
7.6.24
266
274
Employee benefits
–
current portion
7.6.23
775
696
Current provision
s
7.6.22
6
6
Other current financial liabiliti
es
7.6.15.2
125
732
Income tax payab
le
7.6.32
68
84
Total current
liabilities
2,965
3,754
Total equity and liabilities
16,413
15,301
The accompanyin
g notes are an in
tegral part of these con
solidated financial statements
*Comparative
figures
have bee
n
adjusted
to
reflect
a
change
in
accounting policy, following the
IFRIC
agenda
decision
is
sued
in
2021.
The
change
in
accounting
po
licy
affects
pension
acco
unting
for
defined
benefit
plans
with
certain characteristics found in retirement indemnities plans in one of the
countries where the Group operates. T
h
e
change
in
accounting
policy
was
applied
retrospectively
and
resu
lted
in
a
decrease
in
non
-current
liabilities
for
107
employee
benefits
of
$18
million
and
a
reduction
in
non
-current
deferred
tax
assets
of
$5
million
as
of
December
31, 2020.
108
7.4. Consolidated statement of changes in equity
For the year ended Dec
ember
31, 2021
In millions of USD
Notes
Ordinary
shares
Capital
surplus
Treasury
shares
Other
reserves
Retained
earnings*
Equity
attributable
to
the equity
holders
of
the
parent*
Non
controlling
interest
Total
equity*
As at January 1, 2021
1,157
2,272
(93
)
1,723
3,204
8,263
58
8,321
Net profit
—
—
—
—
1,711
1,711
6
1,717
Other comprehensiv
e income, net of
tax
—
—
—
(211
)
—
(211
)
—
(211
)
Total compreh
ensive income
—
—
—
(211
)
1,711
1,500
6
1,506
Settlement of senior conv
ertible
bonds
7.6.15.3
—
11
220
—
—
231
—
231
Transfer of cash flow h
edge reserve to
inventories
—
—
—
6
—
6
—
6
Repurchase of common s
tock
—
—
(485
)
—
—
(485
)
—
(485
)
Employee share award s
cheme
7.6.21.5
—
—
158
220
(158
)
220
—
220
Dividends
—
—
—
—
(218
)
(218
)
—
(218
)
As
at
Decemb
er
31, 2021
1,157
2,283
(200
)
1,738
4,539
9,517
64
9,581
The accompanyin
g notes are an in
tegral part of these con
solidated financial statements
*Comparative
fi
gures
have
been
adjusted
to
reflect
a
change
in
acco
unting
policy,
fo
llowing
the
IFRIC
agenda
decision
issued
in
2021.
T
he
c
hange
in
accounting
policy
affects
pension accounting for
defined
benefit plans wit
h certain c
haracteristics found
in retirement i
ndemnities plans
in one
of the
co
untries where the
Group o
perates. The c
hange in
accounting policy was applied retrospectively and resulted in an increase in Retained Earnings of $13 million, ne
t of deferred income tax, as of December 31,
2020.
109
For the year ended Dec
ember
31, 20
20
In millions of USD
Notes
Ordinary
shares
Capital
surplus
Treasury
shares
Other
reserves
Retained
earnings*
Equity
attributable
to
the equity
holders of
the
parent*
Non
controlling
interest
Total
equity*
As at January 1, 2020, as r
eported
1,157
2,189
(328
)
1,317
2,751
7,086
68
7,154
Change in accountin
g policy*
—
—
—
—
13
13
—
13
As at January 1, 2020, as r
estated
1,157
2,189
(328
)
1,317
2,764
7,099
68
7,167
Net profit
—
—
—
—
694
694
2
696
Other comprehensiv
e income, net of
tax
—
—
—
235
—
235
—
235
Total compreh
ensive income
—
—
—
235
694
929
2
931
Settlement of senior conv
ertible
bonds
7.6.15.3
—
83
258
—
—
341
—
341
Transfer of cash flow h
edge reserve
to inventories
—
—
—
(2
)
—
(2
)
—
(2
)
Repurchase of common s
tock
—
—
(125
)
—
—
(125
)
—
(125
)
Employee share award s
cheme
7.6.21.5
—
—
102
173
(102
)
173
—
173
Dividends
—
—
—
—
(152
)
(152
)
—
(152
)
Dividends to
noncontro
lling interest
—
—
—
—
—
—
(12
)
(12
)
As
at
Decemb
er
31, 2020*
1,157
2,272
(93
)
1,723
3,204
8,263
58
8,321
The accompanyin
g notes are an in
tegral part of these con
solidated financial statements
*Comparative
fi
gures
have
been
adjusted
to
reflect
a
change
in
acco
unting
policy,
fo
llowing
the
IFRIC
agenda
decision
issued
in
2021.
T
he
c
hange
in
accounting
policy
affects
pension accounting for
defined
benefit plans wit
h certain c
haracteristics found
in retirement i
ndemnities plans
in one
of the
co
untries where the
Group o
perates. The c
hange in
accounting policy was applied retrospectively and resulted in an increase in Retained Earnings of $13 million, ne
t of deferred income tax, as of December 31, 2
020.
110
7.5. Consolidated statement of cash flows
Year ended
In millions of USD
Note
December 31,
2021
December 31,
2020
Cash flows from operating activities
Net profit
1,717
696
Items to reconcile net result and cash flows from operating a
ctivities:
Depreciation and amortization
1,349
1,262
Interest and amortization of issuance costs o
n convertible bonds
39
47
Change in fair value of embedded non-eq
uity derivative instruments
392
410
Share-based compensation
230
174
Other non-cash items
(131
)
(158
)
Deferred income tax
20
(67
)
Share of profit of jo
int ventures
—
(2
)
Impairment, restructuring charges and other r
elated closure costs, net of
cash payments
41
107
Changes in net working capital:
Movement of trade receivables, net
(307
)
(72
)
Movement of inventories, net
(188
)
(84
)
Movement of trade payables
95
161
Movement of other assets and liabilities, net
479
94
Interests paid
(8
)
(12
)
Interests received
13
40
Income tax paid
(279
)
(138
)
Net cash from operating activities
3,462
2,458
Cash flows used in investing activities
Payments for purchases of tangible assets
(1,830
)
(1,283
)
Proceeds from sale of tangible assets
2
4
Net proceeds from (investments in) short
-term deposits
7.6.15.1
290
(577
)
Proceeds from matured marketable securities
7.6.15.1
132
—
Payments for purchase of intangible assets
(444
)
(371
)
Net payments for financial assets
7.6.16
(17
)
—
Proceeds from sale of equity investment
2
1
Payment for business acquisitions, net o
f cash acquired
—
(113
)
Net cash used in investing activities
(1,865
)
(2,339
)
Cash flows from (used in) financing act
ivities
Proceeds from interest-bearing loans a
nd borrowings
7.6.15.3
788
4
Repayment of interest-bearing loans a
nd borrowings
7.6.15.3
(134
)
(184
)
Net proceeds from issuance of co
nvertible bonds
7.6.15.3
—
1,567
Repayment of issued convertible bonds
7.6.15.3
(1,263
)
(750
)
Payment of lease liabilities
7.6.15.3
(64
)
(59
)
Repurchase of ordinary shares
(485
)
(125
)
Dividends paid to equity holders of the parent
(205
)
(168
)
Dividends paid to noncontrolling interest
(6
)
(6
)
Net cash from (used in) financing activities
(1,369
)
279
Effect of changes in exchange rates
(9
)
1
Net cash increase
219
399
Cash and cash equivalents and restricted cas
h at the beginning of the period
3,006
2,607
Cash and cash equivalents and restricted cas
h at the end of the period
3,225
3,006
The accompanyin
g notes are an in
tegral part of these con
solidated financial statements
111
7.6. Notes to the consolidated financial statements
7.6.1. Corporate infor
mation
STMicroelectronics
N.V.
(“the
Company”),
with
Commercial
Register
N
o.
33194537
and
RSIN
008751171,
is
organized under the laws of the Netherlands with its corporate legal seat in Amsterdam, the Netherlands, and head
offices
at
WTC
Schiph
ol
Airport,
Schiphol
Boulevard
265,
1118
BH
Schiph
ol,
the
N
etherlands.
Headquarters
and
operational offices are
managed through STMicroelectronics International N.V., a
wholly owned
sub
sidiary of
STMicroelectronics
N
.V.,
and
are
located
at
39
Chemin
du
Champ
des
Filles,
1228
Plan-les-Ouates,
G
eneva,
Switzerland.
The Compan
y an
d
its subsidiaries
(together “
the Group
”)
are a
global
independent
semicondu
ctor grou
p of
companies
that
designs
,
develops,
manufactu
res
an
d
markets
a
broad
range
of
products,
in
cluding
discrete
and
standard
commodity
components,
application
-
specific
in
tegrated
circuits
(“ASICs”),
full
custom
d
evices
and
semi
-
custom
devices
and
application-
specific
standard
p
roducts
(“ASSPs”)
for
analo
g,
digital
and
mixed
-signal
applications.
In
addition,
the
Group
participates
in
th
e
manufacturing
value
ch
ain
of
smartcard
produ
cts,
which
includes the pro
duction and sale of both
silicon chips
and smartcards.
The
Group’s
products
are
used
in
a
wide
variety
of
applications
for
th
e
four
end
-markets
the
Group
addresses:
automotive,
indus
trial,
pers
onal
electronics
and
commun
ications
equ
ipment,
computers
and
peripherals.
For
the
automotive
and
indu
strial
markets,
the
Group
add
resses
a
wide
customer
bas
e,
p
articularly
in
ind
ustrial,
with
a
broad
and
d
eep
product
portfolio.
In
p
ersonal
electronics
and
communications
equipment,
computers
and
peripherals,
the
Group
has
a
selective
approach
both
in
terms
of
the
cus
tomers
the
Grou
p
serves,
as
well as
in
the
technologies and p
roducts it offers.
The
Company
is
a
publicly
traded
company
,
listed
on
th
e
N
ew
York
Stock
Exch
ange,
on
Euronext
Paris
and
on
the
Borsa Italiana
(Italian Stock Exchange).
These
con
solidated
financial
statements
hav
e
b
een
ap
proved
by
the
Supervisory
Board
on
March
23
,
2022
for
submission
to the Annual General Meeting o
f Shareholders.
7.6.2. Basis of prepar
ation
The con
solidated
financial
s
tatements
have
been
prepared
on
a
historical
cos
t
basis,
except for
derivat
ive
financial
instruments,
debt
and
equity
financial
as
set
s
that
have
been
measured
at
fair
value.
The
cons
olidated
financial
statements are
presented in
d
ollars of
the United
States of
A
merica and
all values
are rounded
to
the
nearest million
($
million)
except
when
oth
erwise
stated.
Under
Article
35
of
the
Comp
an
y’s
Articles
of
Association,
the
financial
year extends from Jan
uary 1 to December
31, which is
the period-end o
f each fiscal year.
7.6.3. Statement o
f compliance
These
cons
olidated financial
statements are
prepared for
D
utch statutory
purposes in
acc
ordance with
Internation
al
Financial Reportin
g Stand
ards
(“IFRS”) as
adopted
by
the
European
Union.
These cons
olidated
financial
statements
also
comply
with
Article
362.9
of
Book
2
of
the
Dutch
Civil
Code.
For
internal
and
external
financial
reporting
purposes
, the Group uses
generally accepted accoun
ting principles in t
he United States (“
U.S. GA
AP
”)
as its primary
set of reporting s
tandards
.
112
7.6.4. Basis of consolidat
ion
The consolidated financial statements comprise the
financial statements of the
Company and its subsidiaries
for the
year ended December
31, 2021
.
Subsidiaries
are
fully
con
solidated
from th
e
date
of
acquisition,
b
eing
the
date
on
which
the
Group
obtain
s
c
ontrol
and continu
es to be consolidated until the dat
e that such control ceases. Subs
idiaries are all entities over which th
e
Group
has
contro
l.
The
Grou
p
contro
ls
an
entity
when
the
Grou
p
is
exposed
to
,
or
has
rights
to,
variable
returns
from
its
inv
olvement
with
the
entity
and
has
the
ab
ility
to
affect
tho
se
returns
through
its
power
to
direct
th
e
activities of the entity
. If the Group los
es control ov
er a subsidiary, it
:
•
Derecognizes t
he assets (in
cluding goodwill) and lia
bilities of the sub
sidiary
•
Derecognizes t
he amount of any
non
-controlling interest
•
Derecognizes t
he cumulative tra
nslation d
ifferences, recorded in equity
•
Recognizes the fair v
alue of th
e consideration received
•
Recognizes the fair v
alue of an
y investment retained
•
Recognizes an
y surplu
s or deficit in profit or loss
•
Reclassifies
the
parent’s
share
of
components
previously
recognized
in
other
comprehensive
income
to
profit or loss.
The
financial
s
tatements
of
the
s
ubsidiaries are
prepared f
or
the
same
reporting
period
a
s
the
parent company,
using
consistent accounting
policies. All
intra
-group
assets
and
liabilities,
equ
ity,
income,
expenses
and
cas
h
flows
resulting
from intra-group trans
actions are eliminated in
full on conso
lidation.
Non-controlling
interest
is
the
sh
are
of
equity
in
a
s
ubsidiary
not
attrib
utable,
directly
or
indirectly,
to
th
e
parent
company.
Non-controlling
interest
is
presented
separately
in
the
con
solidated
income
s
tatement
,
consolidated
statement
of
comprehensiv
e
income,
consolida
ted
statement
of
financial
pos
ition
and
consolidated
statement
of
changes in equity
respectively
.
Changes
in
a
parent’s
ownersh
ip
interest
in
a
subsidiary
that
do
not
result
in
a
loss
of
control
are
accounted
for
as
equity transact
ions.
7.6.5. Changes in accou
nting p
olicies
The
accounting
policies adopted
are
consistent
with
those f
ollowed
in
the
preparati
on
of
the
Group’s
annual
financial
statements
for
the
year
ended
December
31,
20
20
.
New
accounting
guidance
was
effective
and
adopted
by the Group on
January 1, 2021
, w
ith no material eff
ect on the G
roup’s consolidated financial statements. Changes
to significant accou
nting policies are describ
ed below:
Amendments to
existing standards adopte
d in 202
1
The Group adopted t
he following new or amended s
tandards
on
J
anuary 1, 2021
:
Amendments to
IFRS
9, IFRS
7,
IFRS 4
and
IFRS
16, Interest Rate
Benchmark (IBOR)
Reform (Phase
2)
:
the
amendments
add
ress
issues
that
arise
during
the
reform of
an
interest
rate
bench
mark,
including
the
replacement
of
one benchmark
with
an alternative
one. The
amendments correspond
to the
second
phase of
the
project
undertaken
by
the
IASB
to
co
nsider
what
reliefs,
i
f
an
y,
to
give
from
the
eff
ect
o
f
the
IBOR
reform.
The
Phase
1
amendments,
as
adopted
on J
anuary
1,
2020,
prov
id
ed
temporary
reliefs
fro
m
ap
plying
specific
h
edge
accou
nting
requirements
to
relationships
affected by
uncertainties
arisin
g as
a
result of
the
IBOR refor
m. The
Phase
2
amendments
address
issues
that
arise
from
th
e
implementation
of
the
IBOR
reform,
incl
uding
th
e
accounting
for
changes
in
th
e
b
asis
for
determining
contractual
cash
flows
as
a
resu
lt
of
the
IBOR
reform,
the
prospective
cease
-
application
of
Phase
1
reliefs,
additional
temporary
exceptions
from
app
lying
specific
h
edge
accounting
requirements and the
requ
irements for
ad
ditional disclosures related
to the IBOR
r
eform. The Phase 2
amendm
ents
113
were
endorsed
b
y
the
European
Union,
with
January
1,
2021
as
effective
date.
These
am
endments
did
not
have
a
significant impact up
on adoption.
The
follo
wing
ame
ndments
to
existing
s
tandards
also
became
effective
in
2021,
with
no
material
impact
on
the
accounting policies, finan
cial position
or performance of the Group:
•
Amendments
to
IFRS
3
Bus
iness
Combinations
,
IAS
16
Property,
Plant
and
Equipment,
IAS
37
Pr
ovision
s,
Contingent Liabilities an
d Contingent Ass
ets and Impro
vements to IFRS (2018
-2020)
•
Amendments to IFRS 4 In
surance Contracts
–
deferral of IFRS 9
•
Amendments to IFRS 16 Leas
es COVID
-19 - Related Rent
Concession
s
beyond June 30,
2021
7.6.6. Standards
and amendmen
ts issued b
ut not yet effective
Standards
and
amended
standards
issued
but
n
ot
yet
effective
up
to
th
e
d
ate
o
f
is
suance
o
f
th
e
Group’s
financial
statements are listed b
elow. The detailed descriptions of new or amended s
tandards and
interpretation
s issued are
those th
at th
e Group
reasonably
expects
to
have an
impact
on
disclosures,
financial
position
or performanc
e when
applied at a futu
re date. The Group intend
s to adopt th
ese standards when they b
ecome effective.
Amendments to IAS 1, Presentation of Financial S
tatements
: the amendments specify the requirements for
classifying
liabilities
as
current
or
non-current
by
clarifying
the
requirements
of
IAS
1
when
an
entity
expects
to
refinance
or
roll
over
an
obligation
und
er
an
existing
loan
facility.
The
amendments
also
have
implications
on
the
requirements
related to
covenant
breaches.
The amendmen
ts clarify:
what
is meant b
y a right
to d
efer settlement;
that
a
right
to
defer
must
exist
at
the
end
of
the
reporting
period
and
that
the
cla
ssification
is
not
affected
by
the
likelihood
that
an
entity
will
exercise
its
deferral
right
and;
that
only
if
an
embedded
derivative
in
a
convertible
liability
is
itself
an
equity
instru
ment
would
the
ter
ms
of
a
liability
not
impact
its
classific
ation.
I
AS
1,
as
am
ended,
has
n
ot
been
endors
ed
by
the
Eu
ropean
Union
yet.
The
Group
will
apply
these
amendments
when
effective.
The
presentation
on
th
e
consolidated
statement
of
financial
po
sition
of
the
convertible
bonds
issued
in
2020
is
in
th
e
scope of the amended gu
idance, which is n
ot expected to hav
e a significant impact u
pon adoption
.
Amendments
to IAS
1,
Pre
sentation
of
Finan
cial State
ments
and
IFRS
Practice
Statement
2:
Disclosure
of
Accounting
Polic
ies
:
th
e
amen
dments
requ
ire
entities to
d
isclose
their
material
accoun
ting
policy
information rather
than
th
eir
significant
account
ing
policies.
IAS
1,
as
amend
ed,
has
been
endorsed
b
y
the
European
Union
and
will
become
effective
on
Janu
ary
1,
2023.
The
Group
w
ill
apply
these
amend
ments
when
effective
and
will
modi
fy
its
disclosures
related
to
the
Group’s
accounting
p
olicies
accordingly.
These
amendments
are
not
expected
to
have
a
material impact upon
adoption.
Amendments to
IAS 8, Accou
nting Policies, Chan
ges in
Accounting Estimates an
d Err
ors:
Def
inition of Acco
unting
Estimates
:
the
amendm
ents
introduce
the
definition
o
f
accoun
ting
estimates
(defined
as
monetary
amounts
in
financial
statements
that
are
subject
to
measurement
uncerta
inty)
and
clarify
the
distin
ction
between
changes
in
accounting
estimates
and
changes
in
accounting
p
olicies.
IAS
8,
as
amended,
has
been
end
orsed
b
y
the
Eu
ropean
Union and will become effective on January 1,
2023. The Group will apply these amendments when
effective. These
amendments are n
ot expected to h
ave a materi
al impact upon
adoption.
Amendments to
IAS
12, Income Taxes:
Deferred Tax
Related to
Assets and
Liabilities
Arising from
a Single
Transaction
: the amendments require
to
recognize deferred tax
on
transactions that, on
initial recognition, give
rise
to
equal
amounts
of
taxable
and
deductible
temporary
differences. IAS
12,
as
amended, has
n
ot been
endors
ed by
the
E
uropean
Union
yet.
The
amendm
ents
should
b
e
applied
on
a
modified
retrospe
ctive
b
asis.
The
Group
will
apply the
amended standard
when effective
a
nd will
r
ecognize a
deferred tax
ass
et
–
to
t
he e
xtent
that it
is probable
that
taxable
profit in
the
co
rresponding jurisdictions
will
be
available
against
which
the
deductible
temporary
difference
can
be
utilized
–
and
a
deferred
tax
liability
for
all
deductib
le
and
taxable
temporary
differences
in
the
114
scope
of
the
guidan
ce,
including
lease
accountin
g
and
th
e
recognition
of
d
eferred
tax
on
outstanding
convertible
bonds.
The fo
llowing
new
s
tandard
and
amendments
to
existing
s
tandards
ar
e n
ot
expected
to
ha
ve
a
material
impact on
the accounting p
olicies, financial pos
ition or performance o
f the Group:
•
IFRS 17: Insurance Contracts
an
d amendments
to IFRS 17 an
d IFRS 9
–
Co
mparative Information
7.6.7. Summary of sign
ificant ac
counting policies
7.6.7.1.
Business combinations
and goodwill
The Group app
lies the acquisition
method to accou
nt for busines
s combinations
. The consideration t
ransferred in a
business
comb
ination
(including
any
deferred
and
contin
gent
cons
ideration)
is
measured
at
fair
value.
Acquisition
-
related costs are expens
ed as incurred.
Each
identifiab
le
asset
and
li
ability
are,
with
li
mited
excep
tions
as
set
forth
in
the
pu
rchase
accoun
ting
method,
measured
initially
at
the
acquisition-date
fair
valu
e.
Only
components
of
noncon
trolling
interest
th
at
constitu
te
a
present
ownersh
ip
interest
and
entitle
their
holder
to
a
p
roportionate
sh
are
of
th
e
entity’s
n
et
assets
in
the
event
of
liquidation
are
measu
red
at
either
fair
value
or
at
the
present
ownersh
ip
interests
’
proportionate
share
of
the
acquiree’s
net identifiab
le assets. All other components o
f noncon
trolling interest are measured at their acquisition
date fair value.
Goodwill arises when ther
e is a positiv
e difference between:
•
the
aggregate
of
consideration
transferred,
any
n
oncontrolling
interest
in
the
acquiree
and,
in
a
business
combination
achieved
in
sta
ges,
the
acquisition
-
date
fair
value
of
the
acquirer’s
previously
held
equity
interest in the acqu
iree; and
•
the fair value of the
net identi
fiable assets a
cquired.
Goodwill is
initially recorded at cost. If
the acquirer
has made a
gain
f
rom a bargain
pu
rchase, that gain
is
re
cognized
in the cons
olidated income sta
tement.
After
initial
recognition,
goodwill
is
not
subject
to
amortization
but
is
tested
at
least
annually
for
impairment.
For
the
purpose
of
im
pairment
testing,
goodwill
acquired
in
a
bus
iness
combination
is,
fr
o
m
the
acq
uisition
date,
allocated
to
each
of
the
Group
’s
cash
generating
units
(“CGU
”)
that
ar
e
expected
to
benefit
from
the
s
ynergies
of
the combination, irresp
ective of whether other as
sets or liab
ilities of the acquiree are ass
igned to those u
nits.
A
cash-generating
unit
is
the
smallest
identifiable
group
of
assets
that
generates
cas
h
inflows
that
ar
e
largely
independent of the cas
h inflows from other as
sets or groups o
f assets.
Goodwill
impairment
tests
are
undertaken
annu
ally
or
more
frequently
if events
or
changes
in
circumstances
indicate
a
potential
impairmen
t.
The
impair
ment
test
determines
whether
th
e
recoverab
le
amount
of
each
cas
h
-
generating unit, which is the higher
of its assets’ fair value less costs of
d
isposal and its value
in use, is lower than its
total
carrying
amount.
If
low
er,
an
impa
irment
loss
is
rec
ognized
for
the
excess
o
f
the
carrying
amount
over
the
recoverable
amou
nt.
If
th
e
i
mpairment
loss
exceeds
the
boo
k
value
of
goodwill,
alloc
ation
is
made
on
a
p
ro
rata
basis
over
the
remaining
ass
ets
of
the
CGU.
In
determinin
g
th
e
value
in
us
e
of
a
cash-gen
erating
unit,
the
Group
usually
estimates
th
e
expected
discounted
future
cash
flows
associated
with
the
unit.
Significant
management
judgments and
estimates are u
sed in forecasting
the futu
re discounted
cash flows, includin
g: the applicab
le
industry’s
sales
volume
forecast
and
selling
price
evolution,
the
cash
-
generating
u
nit’s
market
p
enetration
and
its
revenue evolution
, the market acceptan
ce of certain rec
ent technologies
and pro
ducts, or
the relevant cos
t
structure.
The pre
-tax dis
count
rates ap
plied are
based
on
various
scenarios
incorporating
a weigh
ted average
cost
of capital and th
e perpetuity rates used in
calculating cash
flow terminal values.
7.6.7.2.
Foreign currency
translatio
n
The U.S.
dollar
is
the functional currency
for the Company
and the presentation currency f
or the G
roup, which
is the
currency
of
the
primary
economic
environ
ment
in
which
th
e
Group
operates.
The
worldwide
semiconductor
industry
115
uses
the
U.S.
dollar
as
a
cu
rrency
of
re
ference
for
a
ctual
pricing
in
the
market.
Furthe
rmore,
th
e
majority
of
the
Group’s transactions are
d
enominated in
U.S. dollars, and
revenues from
external sales in
U.S. dollars largely
exceed
revenues
in
any
other
currency
.
However,
certain
s
ignificant
costs
are
largely
incurred
in
the
countries
of
the
Eurozone an
d other non
-U.S. dollar currency a
reas.
The
functional
currency
of
each
subsidiary
throughout
the
Group
is
either
the
local
currency
or
th
e
U.S.
dollar,
determined on
the basis of
the economic environment
in which each
subsidiary
operates. For conso
lidation
purposes, ass
ets and liab
ilities included in t
he statement of finan
cial position o
f the Group’
s subsidiaries h
aving the
local
currency
as
function
al
currency ar
e tra
nslated
into
the
presentation
currency
of
the Group
at
current
rates
of
exchange
at
th
e
reportin
g
da
te.
Income
and
expense
items
and
cash
flow
items
are
translated
at
the
prevailing
exchange rate in which they are recognized. The currency trans
lation adjustments (“CTA”
) generat
ed by the
conversion
of
the
finan
cial
position
and
results
of
op
erations
from
local
functional
currencies
are
reported
as
a
component
of
other comprehensive
income
in
the
consolida
ted
statement
of comprehensive
income
and
the
consolidated s
tatement of changes
in equity.
Goodwill and fair v
alue adjus
tments arising on
the acquisitio
n of a foreign entit
y are trea
ted as as
sets and
liabilities
of
th
e
foreign entity
an
d translated
into
th
e
p
resentation currency
of the
Group at
closin
g
r
ate.
Exchange differences
arising are recognized in o
ther comprehensiv
e income.
Assets, liabilities, revenues,
expenses, gains or losses arising from transactions denominated in
foreign currency are
recorded
in
the
functional
currency
of th
e
recording
entity
at
the
prevail
ing
exchange
rate.
At
each
reporting
date,
monetary as
sets
and
liabilities
denominated
in a
currency
oth
er than
the
recording
entity’s
functional
currency
are
re
-measured
into the
functional
currency
at
the exchange
rate
p
revailing
at
the reporting
date.
T
he
related exchange
gains and loss
es are recorded in the con
solidated income s
tatement as “Other incom
e” or “Other expens
es”.
7.6.7.
3.
Revenue recog
nition
Arrangements
with
custom
ers
are
considered contracts
if
all the
following
crit
eria
ar
e
met: (a)
parties
have
approved
the contra
ct and
are
committed to
perform
their r
espective obligation
s; (b)
each p
arty’s rights
regarding
the
goods
or services to be tra
nsferred can b
e identified; (c) payment
terms for the good
s or services
to be trans
ferred can
be
identified;
(d)
the
contra
ct
has
commercial
subs
tance
and
(e)
collectability
of
the
consideration
is
probable.
The
Group recognizes r
evenue from prod
ucts sold t
o a custo
mer, including distrib
utors, when it satis
fies a performance
obligation
b
y
transferring
con
trol
over
a
product
to
th
e
customer.
In
certain
circumsta
nces,
the
Group
may
enter
into
arrangements
that
con
cern
principally
revenues
from
services
wh
ere
th
e
performan
ce
obligation
is
satisfied
over
time.
The
ob
jective
when
allo
cating
the
transact
ion
price
is
to
allo
cate
th
e
trans
action
price
to
each
performance obligation (or
dis
tinct good
or
s
ervice) in
an amount that depicts
th
e amou
nt of
con
sideration to w
hich
the
Group
expects
to
be
entitled
in
exchan
ge
for
transferrin
g
the
promised
goods
o
r
s
ervices to
th
e cu
stomer.
The
payment terms ty
pically range between 30 an
d 90 days
.
Consistent with standard business
practice in
th
e
semicond
uctor industry, price protection
is
granted
to
distribution
customers
on
their
existin
g
inventory
of
the
Grou
p’s
pr
od
ucts
to
compensate
th
em
for
changes
in
market
prices.
The G
roup
accrues
a
p
rovision
for
price
protection
based
o
n
a
rolling
histo
rical
price tren
d
computed
monthly
as
a
percentage
of
gross
distributor
sales.
This
h
istorical
price
trend
represents
differ
e
nces
i
n
recent
months
between
the invoiced price and
the final p
rice to the distribu
tor, adjus
ted to accommodate a s
ignificant chan
ge in the
selling
price. The s
hort o
utstanding
inventory time,
visibility in
to the in
ventory
product pricing a
nd lon
g distributo
r pricing
history
have
enabled
the
Group
to
reliably
estimate
price
protection
provision
s
at
period
-end.
The
Group
records
the accrued amounts
as
a
deduction
of “Sales” in
the consolidated income
statem
ent at the time of the s
ale.
The Group’s
customers
occasionally
return the
Group’s p
roducts for techn
ical reasons
. The Group’s
standard
terms
and
conditions
of
sale
provide
that
if
the
Group
determin
es
that
products
do
not
conform,
the
Group
will
repair
or
replace
the
non
-conforming
products,
or
issue
a
credit
note
o
r
rebate
of
the
purch
ase
price.
Quality
returns
are
identified shortly after s
ale in
customer quality co
ntrol testing. Q
uality returns a
r
e us
ually associated with
end-user
customers,
not with
distribution chan
nels. The Group
records
the accrued
amounts
as a
d
eduction
of “
Sales” in
the
consolidated
income
s
tatement
,
using
h
istorical
and
current
conditions
to
form
a
reas
onable
estimate
of
fut
ure
returns.
116
The
Group
records
a
p
rovision
for
warranty
costs
as
a
charge
against
“Cost
of
sales”
in
the
con
solidated
income
statement,
based
on
historical
trends
of
warranty
costs
in
curred
as
a
percentage
of
sales,
which
management
has
determined
to
be
a
reasonable
estimate
o
f
the
p
robable
losses
to
be
incurred
for
warranty
claims
in
a
period.
Any
potential warranty cla
ims are subject to the Group’s determination t
hat the Group is at fault for damages, and such
claims
usu
ally
must
be su
bmitted
within
a s
ho
rt
period
of
time follo
wing
the
date
of
sale.
This
warranty
is
given
in
lieu
of
all
other
warranties,
conditions
o
r
terms
expressed
or
implied
by
statute
or
common
law.
The
Group’s
contractual
terms
an
d
conditions
typically
limit
its
liability
to
the
sales
v
alue
of
the
products
which
gav
e ris
e to
the
claims.
The
Group’s
ins
urance
policy
relating
to
product
liability
covers
third
party
physical
damages
and
bodily
injury,
indirect financial damag
es as well as immaterial non
-cons
equential d
amages caused by
defective prod
ucts.
In
addition
to
product
sales,
the Grou
p
enters
into
arrangements
with
custo
mers con
sisting in
tra
nsferring licens
es
or
related
to
license
services.
The
revenue
generated
from
these
arrangements
are
reported
on
the
line
“
Other
revenues”
of
the
cons
olidated
income
statement.
Other
re
venues
also
includ
e
patent royalty
income, s
ale
of
scrap
materials and manu
facturing by
-products.
7.6.7.
4.
Other significant
categories of income
Funding
The
Group
receives
funding
mainly
from
governmental
e
ntities
and
income
is
recognized
when
all
contra
ctual
conditions
for rec
eipt of
these
funds
are
fulfilled.
The
Group
’s p
rimary sou
rces for
government
funding
are
French,
Italian
and
other
country
gov
ernmental
entities.
Such
fund
ing
is
generally
provided
to
encourage
research
,
development
and
other
in
novative
activities
,
industrialization
and
local
economic
d
evelopment.
The
conditions
to
receive govern
ment funding
may
include
eligibility restricti
ons,
appr
oval
by
the European
U
nion
(“EU”)
auth
orities,
annual
budget
app
ropriations,
compliance
with
Eu
ropean
Commission
regulations,
as
well
as
sp
ecifications
regarding
objectives
and
results.
Certain
s
pecific
contracts include
ob
ligations
to
maintain
a
minimum
level
of
employment
and
investment
during
a
certain
period.
There
could
b
e
penalt
ies
if
these
objectives
are
not
fulfilled.
Other
contracts
contain
penaltie
s
for
late
deliveries
or
for
b
reach
of
con
tract,
which
may
result
in
repayment
obligations.
Funding related to
these contracts
is recorded when the
con
ditions requ
ired by the contra
cts are met.
The Group’s funding programs are
classified under three
general categories: funding for
research
,
development and
other
innovative activities,
capital investments,
and
loa
ns.
The Group
also benefits
from tax
credits f
or
R&D
act
ivities
in several countries (n
otably in France
and Ita
ly) as they are generally a
vailable to all com
panies.
Funding for research
,
develo
pment
and ot
her innovative
activities
Funding
for
research
,
development
and
innov
ative
activities
is
th
e
most
common
form
of
funding
that
the
Group
receives.
Public
funding
for such
activities
is
recorded
as
“Other
income”
in
the
Group’
s
consolidated
income
statement. The funding
is recognized ratably as the
related costs are
incurred once the agreement
with the
respective
govern
mental
age
ncy
h
as
been
signed
and
all
applicable
condition
s
are
met.
The
majority
of
this
pub
lic
funding
is
not
received
for
developmen
t
pro
jects
recognized
by
the
Group
as
intangible
ass
ets,
in
which
case
th
e
Group would hav
e recognized s
uch funding as a
reduction of the correspond
ing intangible as
sets.
The
Group
receives
ce
rtain
s
pecific
project
-related
re
search
tax
credits
–
“Crédit
Impôt
Recherche”
an
d
“Credito
d’Imposta Ricerca e Svilup
po”
–
in the French and
Italian tax ju
risdictions, r
espectively. The Group cons
iders the tax
credits
received
as
governme
nt
grants
based
on
th
e
fact
that
the
tax
credits
are
received
independently
fro
m
tax
payments
of
the
Group.
The
Group
recognizes
these
credi
ts
as
long
-term
or
short
-term
receivables
dependin
g
on
the
expected
time
of
collection.
These
credits
are
dedu
cted
from “
Research
and
development”
in
th
e
consolidated
income statement or record
ed
as a reduction
of intangible assets
, as described in n
ote 7.6.7.5.
Capital investments
Capital
investment
f
unding
is
recorded
as
a
reduction
of
“Property,
plan
t
and
equipment”
in
th
e
consolidated
statement
of
financial
pos
ition
and
is
recognized
in
th
e
Group’s
consolidated
income
statement
by
offsetting
the
depreciation
charges
of
the
funded
assets
durin
g th
eir
useful lives.
The
G
roup
also
receiv
es
capital
funding
in
It
aly,
117
which
can
be
recovered
through
the
reductio
n of
various
government liabilities,
i
ncluding
income
tax,
value
-added
tax and employee-r
elated social ch
arges.
When
the
funding
h
as
been
classified
as
a
long-term
re
ceivable
with
no
tax
attribu
te
or
leg
al
restriction,
it
is
reflected
in the cons
olidated sta
tement of financial po
sition at its
discounted
net present valu
e. The subs
equent accretion of
the discount
is recorded as
a
non
-operating income
in “Fin
ance income”.
Loans
The Group
receives
certain
loans
,
mainly
related
to
large
capital
investment
pro
jects,
at preferential
interest
rates
.
The
se
loans
are
measured
and
recognized
in
accordan
ce
with
IFRS
9.
The
benefit,
if
any,
is
calculated
as
the
difference between the in
itial carrying amount of the loans determined in
accordance with IFRS 9 an
d the pro
ceeds
received and is recognized in
accordan
ce with the policy de
scribed in the p
receding paragraphs
.
Finance income
Finance income is calculated by applying the
effective interest rate to the gross carrying a
mount of a financial asset,
except
for
financial
assets that
subsequently
become
credit
-impaired. For
credit-impaired financial
assets,
the
effective interest rate is
applied to the n
et carrying amount o
f the financial ass
et.
7.6.7.
5.
Research and
development
Research
and
d
evelopment
expenditu
res
include
cos
ts
incurred
by
the
Group,
the
Group
’s
share
of
costs
incurred
by oth
er research
and
development in
terest group
s an
d costs
associated
with co
-development
contracts.
Research
costs
are
expensed
as
incurred
and
are
reported
net
of
research
ta
x
credits
received
in
the
French
and
Italian
tax
jurisdictions
, as described in note 7.6.7.
4.
Expenditures
incurred
on
development
p
rojects,
mainly
related
to
the
design
an
d
testing
o
f
new
or
improved
products
controlled
by
th
e
Grou
p,
are
recognized
as
“Intangible
as
sets”
in
the
consolidated
statement
of
financial
position when
it is
probable
that
th
e
pro
ject
will be
a
success considering
its
econ
omic
prof
itability and
technological
feasibility,
and
costs
can
be
measured
reliably
,
as
described
in
note
7.6.7.
10.
Certain
research
tax
credits
are
also
recognized as
a reduction
of intangible assets for
the portion that can
be reliably allocated to
development projects.
Development
expenditures
re
cognized
as
as
sets
are
amortized,
when
ready
for
intended
us
e,
over
th
eir es
timated
useful
lives,
not
exceeding
three years
(
refer
to
note
7.6.7.10
).
Ot
her
development
costs
are
expensed
as
incurred.
Development
expenditures
recognized
as
expens
es
are
not
recognized
as
as
sets
in
a
s
ubsequent
period.
Amortization
expens
e
re
cogn
ized
on
capitalized
development
cos
ts
in
u
se
is
recorded
as
“Cost
of
sales”
in
the
consolidated
income
statement.
Amortization
expens
e
on
technologies
and
licenses
purchas
ed
by
the
Group
from
third
par
ties
or
acquired
in
a bu
siness
combination
to
facil
itate
the
Group’
s
research
is
recorded
as
“Research
and
development” in the con
solidated income sta
tement.
An
impairment test
is performed
whenever a
triggering
event questions the
future
recoverability, or
at
least
annually,
for
the
capitalized
development
projects
still
not
in
use.
A
loss
is
recognized
in
th
e
consolidated
income
statement as “Cos
t of sales” for the amount
by which the ass
et’s carrying amoun
t exceeds its recoverable amoun
t.
7.6.7.
6.
Current and defer
red income tax
The
inco
me
ta
x
b
enefit
(expense)
in
the
consolidated
income
statement
for
th
e
p
eriod
comprises
current
and
deferred
income
ta
x.
Current
income
tax
represents
the
income
tax
expected
to
be
paid
or
th
e
income
tax
benefit
expected
to
be
r
eceived
related
to
the
current
y
ear
taxa
ble
profit
or
los
s
in
each
tax
jurisdiction.
Management
periodically
evalu
ates
po
sitions
taken
in
tax
returns
with
respect
to
situation
s
in
which
applicable
ta
x
regulation
is
subject
to
interpreta
tion.
The
Group
determin
es
wheth
er
it
is
prob
able
that
the
taxing
au
thorities
will
accept
an
uncertain
ta
x
treatment that
has
been taken
or is
expect
ed
to be
taken on
a tax
return
and
the
accou
nting
for
income
tax is d
etermined consis
tently with
that
tax t
reatment.
If the Group
conclud
es it is
not p
robable that
the treatment
will
be
accepted,
the
effect
o
f
the
un
certainty
is
reflected
in
its
income
tax
accounting
in
th
e
period
in
which
that
determination is
made.
The G
roup
measures th
e impact
of the un
certa
inty usin
g the
method th
at best predicts
the
resolution
of
the
uncertainty
;
either
the
mos
t
likely
amount
method or
th
e
expected
valu
e method
.
In
most
cases,
the
Group
applies
the
most
likely
amoun
t
method
to
determine
the
amou
nt
of
uncertainty
to
be
refle
cted
in
th
e
118
consolidated finan
cial statements, a
s the assessment generally
relies on probab
ilities of possible ou
tcomes that are
either binary or concentra
ted on one v
alue.
Deferred tax assets and liabilities are recorded for temporary differences arising
between the tax and book bases of
assets and liabilities
and
for
the benefits of
tax credits and operating
los
s carry-forwards. However, deferred income
tax
is
not
accou
nted
for
if it
arises from
initial
recognition
of an
asset or
liability in
a
trans
acti
on
other
than a
b
usiness
combination
that,
at
the
time
of
the
transaction
,
affects
neither
accountin
g
no
r
ta
xable
profit
or
loss
.
Moreover,
deferred
tax
liabilities
ar
e n
ot
recognized
if
they
aris
e f
rom
the
initial
recognitio
n
of
good
will.
Deferred
inco
me
tax
is
determined
using
tax
rates
an
d
laws
that h
ave
been
enacted
or
substantively
enacted b
y
the
reportin
g
date
and
are expe
cted
to
apply
when
the
related
d
eferred
income
tax
asset
is
realized
or
the
d
eferred
inco
me tax
liability
is
settled. Deferred inco
me tax
assets a
re recognized to the
extent that
it is probab
le that future taxab
le profit will be
available agains
t which the temporary d
ifferences can be utilized.
Items
recogniz
ed
in
other
co
mprehensive
income
or
direc
tly
in
equity
are
recognized
net
of
tax.
Income
taxes
are
recognized as cash
flows from (us
ed in) operating activ
ities in the cons
olidated statement of cas
h flows.
7.6.7.
7.
Earnings per s
hare
Basic
earnings
per
share
are
computed
by
div
iding
net
earnings
attributable
to
the
equity
ho
lders
of
the
parent b
y
the
weighted
averag
e
number
of
ordinary
shares
outstanding
during
th
e
period.
Diluted
earnings
per
share
are
computed
by
dividin
g
net
earnings
at
tributable
to
the
equity
holders
of
th
e
parent
(add
ing
-back
finan
ce
costs
,
net
of tax effects, related to co
nvertible debt
if determined t
o be dilut
ive) by the weighted a
verage number of o
rdinary
shares
and potentia
l ordinary s
hares ou
tstanding durin
g the period.
The weighted
average
shares
used to
compute
diluted
earnings
per
s
hare
include
the
incremental
s
hares
of
ordin
ary
sh
ares
relating
to
unvested
shares
or
s
tock
options
granted
an
d
convertible
debt
to
the
extent
su
ch
incremental
shares
are
dilutiv
e.
Unvested
shares
with
performance condition
s are included in
the computation o
f diluted e
arnings per share if their cond
itions hav
e been
satisfied at
the reportin
g date an
d if the
awards are
dilutive. If
all th
e conditions h
ave not been
satisfied by
the end
of
th
e
p
eriod,
the
number
of
con
tingently
issuable
shares
included
in
the
diluted
earni
ngs
per
share
calculation
is
based
on
the
number
of
shares
that
would
be
issuable
if
the
end
of
the
period
were
the
end
of
the
contingency
period.
7.6.7.
8.
Cash and cash
equivalents
Cash
an
d
cash
equivalents
include
cash
on
han
d,
deposits
held at
call
with
external
financial
institutions
an
d
other
short-term h
ighly
liquid
investments with
original
maturities
of th
ree months
or
less. They
are
b
oth
readily
convertible
to
known
a
mounts
of
cash
and
so
near
their
maturity
that
they
present
insignificant
ris
k
of
changes
in
value because of chan
ges in interest ra
tes.
Short-term
deposits
representing
cash
equivalent
with
original
maturity
beyond
three
months
are
repo
rted
as
current assets
in t
he line “Sh
ort
-
term deposits
” of the consolidated s
tatement of financia
l position.
7.6.7.9.
Inventories
Inventories
are
stated
at
the
lower o
f
cost
and
net
realizable v
alue.
Cost
is
based
on th
e weight
ed
av
erage
cost
by
adjusting stan
dard cost to a
pproximate actual manufacturi
ng costs; th
e cost is therefore dependent on t
he Group’s
manufacturing
perfor
mance.
In
the
cas
e
of
und
erutilization
of
manu
facturing
facilities,
the
cos
ts
ass
ociated
with
unused
capacity
are
not
included
in
the
valu
ation
of
inventories
but
are
charged
directly
to
cost
of
sales.
Net
realizable value is the estimated s
elling price in the ordinary course of business, less
reasonably
predictable costs of
completion, disp
osal and t
ransportation
.
As
described
in
Note
7.6.7.
15,
the
Group
hedges
a
portion of
its
Euro
-denominated
front-end
manu
facturing
cos
ts
of semi-finish
ed goods
as
well
as
certain Singapo
re dollar
-d
enominated for
ecasted tra
nsactions
. The
Group ad
justs
the
initial
carry
ing
amount
of
inv
entory
by
the
cumulative
amount
of
th
e
hedging
ins
trument
fair
value
chan
ges
recorded as other comprehen
sive income for s
ettled hedging tra
nsactions.
119
The Group
performs,
on
a
continu
ous
basis,
write-offs of
fi
nished
pro
ducts,
which h
ave
the ch
aracteristics
of
slow
-
moving, old pro
duction d
ates and
technical obso
lescence. T
he Group evaluat
es its invent
ory to id
entify obsolete
or
slow-selling
items,
as
well
as
inventory
that
is
no
t
of
saleable
q
uality
and
records
a
specific
reserve
i
f
the
Group
estimates
the
inventory
will
eventually
become
obsolet
e.
Reserve
for
obs
olescence
is
estimated
for
exc
ess
uncommitted inventory based on the previous
quarter
s
sales, order backlog and
production plans. Inventory
associated
with
obs
olete
or
uncommitted
inventory
is
expensed
to
“Cos
t
of
sales”
in
the
con
solidated
income
statement.
7.6.7.
10.
Intangible assets
with
de
finite useful
lives
Intangible as
sets
acquired
separately are
recognized
at cos
t in
the
consolidated
statement
of financial
position
and
include
technologies and
licenses purchased
from third
p
arties
and
p
urchased
software.
The
cos
t
o
f
inta
ngible
ass
ets
acquired in a b
usiness combin
ation is th
e acquisition-dat
e fair value.
Expenditures
incurred
on
development
p
rojects,
mainly
related
to
the
design
an
d
testing
o
f
new
or
improved
products
controlled
by
the
Group
,
and
intern
ally
generated
s
oftware
developed
for
the
Group’s
inter
nal
use
are
recognized as intan
gible assets when t
he Group can d
emonstrate all of the following
:
•
the
technical
feas
ibility
of
completing
th
e
item
u
nder
dev
elopment
s
o
that
it
will
b
e
av
ailable
for
u
se
or
sale;
•
its in
tention to complete the item und
er dev
elopment and a
bility to us
e it or sell it;
•
how the item un
der development wil
l generate probab
le future economic ben
efits;
•
the
availability
of
adequate
te
chnical,
financial
and
other
resources
to
complete
the
development
and
to
use or sell the it
em under development; and
•
its a
bility to measure reliably t
he expenditures attrib
utable to the p
roject during its d
evelopment.
Refer to
Note 8.3.11
for
composition
of
Company’s legal re
serves, which
includ
es capitalize
d development
costs and
internally developed s
oftware.
Expenditures incurred
on
de
v
elopment
projects
that
do
not
meet
these
criteria
and
all
research
activities
are
recognized as expenses
when incurred.
Development
costs
are
amortized,
when
the
develop
ment
is
complete,
on
a
straight
-line
bas
is
over
the
period
o
f
their expected benefits, n
ot exceeding three years.
Amortization
begins
when
the
in
tangible
asset
is
available
for
its
intended
use.
Amortization
reflects
the
pattern
in
which
the
asset’s
economic
benefits
are
consumed,
which
us
ually
consists
in
applying
the
straight
-line
method
to
allocate the
cost of the
intangib
le asset over
th
e estimated useful
li
fe
. The amortization period and the
amortizatio
n
method for an inta
ngible asset with a
de
finite useful life are
reviewed at least
at each financial year end
.
A summary of the policies a
pplied to the Group
’s intangible a
ssets is as follows
:
Technologies an
d
licenses
Purchased
software
Internally
developed
software
Capitalized
development
costs
Useful lives
Definite
Definite
Definite
Definite
Amortization method us
ed
Straight line basis
over estimated
useful life / 3-
8
years
Straight line basis
over estimated
useful life / Max 4
years
Straight line basis
over estimated
useful life / Max 4
years
Straight line basis
over estimated
useful life / Max 3
years
Internally generated or acq
uired
Acquired
Acquired
Internally
generated
Internally
generated
Intangible
assets
n
ot
ready
to
use,
such
as
capitalized
dev
elopment
expenditures,
are
tested
ann
ually
for
impairment. The carrying value of intangible assets
with
de
finite useful lives and subject to amortization is assessed
120
for
impairment
at
the
level
of
a
CGU
whenever
there
is
an
indication
that
intangible
assets
may
b
e
impaired.
An
impairment
loss
is
recognized
in
th
e
consolidated
income
statement
for
the
amount
by which
the
carrying
amou
nt
exceeds the recoverable amount.
The recoverable amount is the hi
gher of an ass
et’s fair value less costs of disposal
and value in use. In determining recoverability, the Group usually estimates the value in use based on the projected
discounted future
cash flows
as
sociated with
the intangible
as
sets. The
Group
makes maximum use
of market
in
puts
and
minimizes
the
use
of
unobservable
inputs
when
measuring
fair
value.
Prior
impairment
charges
on
intangible
assets oth
er than goodwill are reviewed for pos
sible reversal at each r
eporting date.
7.6.7.
11.
Property, plant an
d equipment
Property,
p
lant
and
equipment
are
s
tated
at
historical
cost, n
et
of
gov
ernment
fundin
g,
accumulated
depreciation
and any
impairment losses. Property,
plan
t
and equipment
acquired in a
bu
siness combination are
recogniz
ed
at fair
value
at
the
acquisition
date.
Major
additions
and
improvements
are
capitalized,
while
minor
replacements
and
repairs
are
expensed
and reported
as
“Cost
of
sales”, “S
elling, general
and
administrative”, or
“Research
and
development” in the con
so
lidated
income statement acco
rding to t
heir intended use.
Land is n
ot depreciated. Depreciation on fixed a
ssets is co
mputed using t
he straight
-line method o
ver the following
estimated useful lives:
Nature of tangible as
set
Estimated
useful life
Buildings
33 years
Facilities & leasehold improv
ements
5-10 years
Machinery and equ
ipment
2-10 years
Computer and R&D equ
ipment
3-6 years
Other
2-5 years
The
Group
evalu
ates
in
each
period
wheth
er
t
he
assets
’
residual
values
and
us
eful
lives
should
be
reviewed,
and
adjusted if appropriate, at the end of each reporting period. The Group als
o evaluates in each period whether there
is
a
reason
to suspect
that
tangible
assets
or
groups
of
assets m
ight
not be
recoverable. Se
veral
impair
ment
indicators
exist
for
making
t
his
assessment
such
as:
restructuring
plans,
significant
changes
in
the
technology,
market,
econo
mic
or
legal
en
vironment
in
which
the
Group
operates,
available
ev
idence
of
obsolescence
of
the
asset, or indication that its economic performance is, or will be, worse
than expected. For the purpos
es of assessing
impairment,
assets
ar
e
grou
ped
at
the
lowest
levels
for
wh
ich
there
are
separat
ely
id
entifiab
le
cas
h
flows
(
cash
-
generating units
). An
impairment
loss is
recognized
in the
consolidated
income statement
for the
amount b
y which
the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair
value less cos
ts of dispo
sal and value in
use. The
fair valu
e is
usually
estimated by th
e Group bas
ed on ind
ependent
market appraisals and the val
ue in use by
applying the income approach. The Group makes maximum
u
se of market
inputs and minimizes th
e use of unob
servable inputs when meas
uring fair value.
When
property,
plan
t
and
equipment
are
retired
or
otherwise
dis
posed
of,
the
net
b
ook
value
of
the
assets
is
removed from
the
Group’s
books
and
the
net gain
or
loss
is included
in
“Other incom
e” or
“Other
expenses”
in th
e
consolidated in
come statement.
7.6.7.12.
Leases
The
Group
ass
esses
at
contract
inception
whether
a
con
tract
implying
the
u
se
of
an
ass
et
is,
or
contains,
a
lease,
which
is
the
case
if
the
contr
act
conveys
th
e
right
to
control
the
use
of
an
identified
as
set
for
a
period
o
f
time
in
exchange
for
consid
eration.
Th
e Group
recognizes
right
-
of
-u
se
assets
at
the commence
ment d
ate
of
the
lease
as
a
category of “Property, plant and equipment” in the consolidated statement of financial position. The corresponding
lease
liabilities
are
reported
on
the
line
“Other
n
on
-
current
financial
liab
ilities”
on
the
con
solidated
statement
of
financial position when
payment is
expected beyond t
welve months, and i
n the
line “Other current
financial
liabilities”
for
the
current
po
rtion
of
the
lease
obligations.
Lease
arrangements
wi
th
a
sum
of
lease
payments
not
exceeding
$5,000
or
a
total
duration
lower
than
twelve
month
s w
ithout
a
purchas
e
option
are
excluded
from
capitalization.
121
The right-
of
-use
asset
is initially
measured
at cos
t, and subsequently
at
cost less
accumulated d
eprec
iat
ion an
d any
impairment
losses
or
adjusted
for
certain
re
-measuremen
ts
of
the
lease
liability
when
deemed
necessary.
For
income statement
purpos
es, the depreciation
charge on
right
-
of
-use as
sets is
recorded on
a straight
-line
basis over
the
lease
period
and
reported
as
“Cos
t
of
sales”,
“Selling,
general
and
ad
ministrative”,
o
r
“Research
and
development” in the con
solidated income sta
tement accord
ing to
th
e intended use
of the leased asset
.
The lease liability is
initially measured at th
e present value of
the lease p
ayments that are n
ot paid at the
commencement
date,
discou
nted
using
the
interest
rate
implicit
in
th
e
lease
or,
if
that
rate
cannot
be
readily
determined,
th
e
Grou
p’s
in
cremental
borro
wing
rat
e.
Gen
erally,
the
Group
u
ses
its
incremental
borrow
ing
rat
e
as
the
d
iscount rate.
The
lease
lia
bility is
subsequently
in
creased
by the
interest
cost of
the
leas
e
liability
an
d decre
ased
by the lease payments. The interest cost is reported i
n the line “Finance costs” of
the consolida
ted income
statement.
The
Group
h
as
applied
judgment
to
d
etermine
the
lease
t
erm
for
s
ome
leas
e
con
tracts
with
renewal
options. The
assessment of
whether
th
e
Group
is
reas
onably ce
rtain
to
exercise
su
ch
options
im
pacts the
lease term
,
which affects the amount of reported lease liabilities and corresponding right
-
of
-use assets. The carrying amount of
lease
liabilities
is
remeasured
if
there
is
a
modification,
a
change
in
the
lease
term,
a ch
ange in
the
lease
payment
s
or
a
change
in
the
assessment
of
an op
tion to
purch
ase
the u
nderlying
asset
. Variable
lease
payments
based
on
an
index
or
a
rate
are
initially
me
asured
usin
g
the
index
or
rate
as
at
th
e
comm
encement
date.
Potentia
l
future
increases
in
variable
lease
payments
based
on
an
index
or
rate
are
not
includ
ed
in
the
lease
liability
until
they
take
effect.
When
adju
stments
to
lease
payments
based
on
an
index
or
rate
take
effect,
the
lease
liability
is
reassessed
and
adjusted a
gainst the right-
of
-us
e asset.
For cas
h flow
presentation
purpos
es, cash
payments
for th
e principal
portion
of th
e lease
liabilities
are report
ed as
cash
flows
used
in
financing
activities.
T
he
in
terest
expense
re
corded
on
the
subsequent
measurement
of
lease
liabilities
are
reported
within
cas
h
flows
from
o
perations,
cons
istent
with
th
e
Group
’s
cash
flow
presentation
for
interest
paid
.
Short-term
l
ease
pay
ments
and
payments
fo
r
leases
of
low
-value
as
sets
are
reported
as
op
erating
outflows.
7.6.7.
13.
Financial Assets
7.6.7.13.1.
Offsetting
financial instruments
Financial
as
sets
and
liabilities
are
offset
an
d
the
net
amount
reported
in
the
con
solidated
statement
of
financial
position when t
h
ere
is a
legally
enforceable right
to offset
the recognized
amou
nts and
there
is
an
inten
tio
n to
settle
on a net bas
is or realize the asset an
d settle the liability s
imultaneously.
7.6.7.
13.2.
Classification
The Group classifies its fin
ancial as
sets accordin
g to the following measurement categori
es:
•
Those measured at fair valu
e
,
either at
fair v
alue through other comprehensive income (“
FVOCI
”)
or at fair
value through p
rofit or loss (“
FVPL
”
);
•
Those measured at amort
ized cost.
Publicly
trad
ed
equity
s
ecurities
are
measu
red
at
FVPL
while
the
Group
has
made
the
irrevocable
election
to
measu
re
equity securities
with
no re
adily determ
inable
fair value
at FVOC
I,
with
s
ubsequent changes
in
fair value
not re
cycled
through
earn
ings.
Derivative
ins
truments
th
at
are
not
desi
gnated
as
hedging
in
struments
are
me
asured
at
FVPL.
Debt
instruments,
loans
and
receivables
are
measured
at
amortized
cos
t
or
FVOCI,
depending
on
the
Group’s
business
model
in
managing
the
as
sets.
When
the
contractual
terms
of
cash
flows
do
not
solely
correspond
to
payments of prin
cipal and interest (the “SPPI
criterion”), th
e financial asset is
mandatorily measu
red at FVPL.
7.6.7.13.3.
Recognition and
measurement
Regular
purchas
es
an
d
sales
of
finan
cial
ass
ets
are
recognized
on
the
trad
e
date
—
the
date
on
which
the
Group
commits to
purchas
e or
sell the
asset.
Investments
are in
itially recognized
at fair
value
plus
transaction
costs for
all
financial as
sets not carried
at fair
value
th
rough profit
or loss.
Financial ass
ets carried at
fair valu
e through pro
fit or
loss
are initially recognized
at fair
value,
and tran
saction costs
are exp
ensed in
the cons
olidated income s
tatement.
Financial as
sets
are derecogni
zed when
the rights
to
recei
ve
cash
flows fro
m the
investments
hav
e expired
or hav
e
been transferred and t
he Group h
as transferred sub
stantially all risks and rewards o
f ownership.
122
Debt instruments
Subsequent measu
rement of debt instru
ments depends
on the Group’s business
model for
man
aging the ass
et and
its cas
h flow
characteristics.
The contractu
al cas
h flows
related
to
all d
ebt instru
ments h
eld
by th
e Group
meet th
e
SPPI criterion. There ar
e two measurement
categories into wh
ich the Group clas
sifies its debt ins
truments:
•
Amortized
cost:
Ass
ets
that
are
held
for
collection
of
contra
ctual
cash
flows
are
measured
at
amorti
zed
cost. T
hese
as
sets t
ypically cor
respond to
trade
acco
unts
receivable,
oth
er
receivables
,
lon
g
-term loans
an
d
long-term
receivab
les.
They
ar
e
reported
as
curr
ent, e
xcept
f
or
maturities greater
th
an
tw
elve
month
s
after
the reporting date, which
are class
ified as non
-current.
•
FVOCI:
Ass
ets
that
are
held
for
collection
of
contractual
c
ash
flows
or
for
selling
are
m
easured
at
FVOCI.
Movements in
the carrying
amou
nt
are
ta
ken
through OCI,
except for
the
r
ecognition of
i
mpairment losses,
interest
income
an
d
foreign exchange
gains and losses,
which are
recognized in
the consolidated
sta
tement
of
income.
When
the
finan
cial
asset
is
derecognized,
the
c
umulative
gain
or
loss
previously
recognized
in
OCI
is
recycled
from
equity
to
earnings,
within
“
Other
in
come”
or
“Other
expenses”
in
th
e
consolida
ted
income statement,
when the
trans
actions for
such instruments
are related
to the
Group’s
operating
activities. Gains an
d losses a
rising from finan
cial assets n
ot related to the op
erating activ
ities of the
Group
are
presented
within
“Finan
ce
income”
an
d
“Fina
nce
costs”
in
the
consolidated
in
come
statement.
Debt
instruments measu
red at FVOCI are in
cluded in n
on
-current a
ssets un
less management in
tends to d
ispose
of the
investment
within twelve
months after
the reportin
g date
or if they
represent
investments
of funds
available for current op
erations.
Equity securities
The Group
subsequ
ently
measures
all
equ
ity
securities
at
fair
valu
e. The
Group
has
elected
to
irrevocably
measure
equity
s
ecurities
with
no
readily
determinable
fair
value
at
FVOCI,
with
no
sub
sequent
reclassification
of
fair
valu
e
gains and loss
es, including impairment, from
equity to earnings
following the derecogniti
on of the fin
ancial ass
ets.
Gains
and
losses
arising
from
changes
in
the
fair
value
of
p
ublicly
traded
equity
securities,
which
are
measured
at
FVPL, are
presented in the
con
solidated income
s
tatement within “Other
income” or “Other
expenses
” in
th
e period
in which
th
ey ari
se, when
the transactions for
su
ch
instruments are
related to
the Group’s
operating activities. Gains
and
losses
arising
from
changes
in
fair
v
alue
of
these
financial
assets
not
related
to
the
operating
activities
of
the
Group were presented within
“
Finance income” and
“Financ
e costs” in t
he consolidated income statement.
The Company d
id not hold any material equity
securities as a
t December 31, 2021 and
December 31, 2020.
7.6.7.13.4.
Impairment of financial as
sets
The
Group
as
sesses
on
a
fo
rward
-looking
b
asis
th
e
expected
credit
losses
associated
w
ith
its
debt
instrume
nts
carried
at
amortized
cos
t
and
FVOCI.
The
impair
ment
meth
odology
applied
depends
on
whether
there
has
been
a
significant increase
in credit
risk. The
impairment methodology
by category
of financial assets
is further
d
escribed in
Note 7.6.36
.
For
trade
receivables,
the
Group
app
lies
the
simplified
ap
proach
permitted
by
I
FRS
9,
which
requ
ires
expected
lifetime credit losses to be recognized from
initial recognition
of the
rece
ivables as further described in Note 7.6.
18
.
7.6.7.
14.
Trade accounts receivab
le
Trade
accounts
receivable
are
amoun
ts
due
from cus
tomers
for
goods
sold
or
services
rendered
to
third
parties
in
the
ord
inary
course
of
business.
The
accounts
receivable
are
recognized
in
itially
at
transaction
price
and
subsequently
measured
at
amortized
c
ost
using
the
effective
interest
method,
les
s
provision
for
expected
credit
losses.
The
carry
ing
amount
of
the
ass
et
is
reduced
through
the
use
of
a
credit
loss
allowance,
and
the
amount
o
f
the credit
loss
is recognized
as
“Selling, general
and
administrat
ive”
in the
consolida
ted income statement.
When
a
trade
receivable
is
uncollectib
le, it
is
written-of
f aga
inst
the
impairment
account
for
tra
de
receivables.
Subs
equent
recoveries of
amounts
previously written
off are
credited
against “selling,
general and ad
ministrative” in the
consolidated in
come statement. The impairm
ent policies on
trade receivables are furthe
r described in N
ote 7.6.3
6
.
123
In the event o
f sales of r
eceivab
les and factoring, th
e Grou
p derecognizes
the receivable
s and accou
nts for th
em as
a
s
ale
only
to
the
extent
that
the
receivables
have
been
trans
ferred o
utside
the
conso
lidated grou
p
and
the
Group
has transferred sub
stantially all the risks
and rewards of ownersh
ip of the receivables.
7.6.7.
15.
Derivative financial
instruments and
hed
ging activities
Derivative financial instru
ments are classified as finan
cial instruments measured at FVPL unless t
hey are designated
as
effective
h
edging
instruments.
All
derivatives
are
carri
ed
as
assets
when
their
fair
values
are
pos
itive
and
as
liabilities when their fair valu
es are n
egative.
Derivative financial instrum
ents
not designated as a hedg
e
The
worldwide
operations
of
the
Group
lead
to
an
exposure
to
adverse
movements
in
foreign
currency
exchang
e
rates.
The
Grou
p
enters
in
to
foreign
currency
forward
con
tracts
and
currency
op
tions
to
reduce
its
exposure
to
changes
in
exchange
rates
and
the
ass
ociated
risk
arising
from
the
denomination
of
certain
assets
and
liabilities
in
foreign currencies at the
Group’s subsidiaries. In
addition, forward contracts and currency
option
s, including collars,
are
also
used
by
the
Group
to
reduce
its
exposure
to
U.S
.
dollar
fluctuations
in
E
uro-denominated
forecasted
intercompany transaction
s that cover a large
p
art of research and development expenditures and certain corporate
expenses
incurred
on
behalf
of
S
TMicroelectronics
Internation
al
N.V.
by
s
ubsidiaries.
Thes
e
intercompany
transactions
are
not closely linked
to ultimate transactions with
th
ird parties
and consequently, these
derivat
ives do
not qualify as
hedging instruments und
er the requirements of IFRS 9.
These
d
erivative
financial
ins
truments
are
initially
and
subsequently
recorded
at
fair
value.
Fair
value
adjustments
and
realized
gains
and
losses
are
recognized
in
the
con
solidated
income
statement
i
n
the
line
“Other
income”
or
“Other expenses”.
Derivative financial instrum
ents d
esignated as h
edge
These
instruments
correspond
to
forward
currency
contracts
and
cu
rrency
options,
includ
ing
collars,
which
ar
e
entered into by th
e Group to hedge exposure to forei
gn currency fluctuat
ions.
For
the
p
urpose
of
hedge
ac
counting,
the
hedging
transactions
are
clas
sif
ied
as
cash
flow
h
edge
as
th
ey
hedge
exposure to variab
ility in cash flows of highly p
robable forecas
ted transaction
s.
The following criteria mus
t be in p
lace before the Group
ap
plies hedge accoun
ting:
•
at
the
inception
of
the
transaction
,
the
Group
for
mally
d
ocuments
the
economic
relationship
between
hedging in
struments
and
hedged
items, as
w
ell as
its
ris
k managem
ent ob
jectives
and
strategy
for
undertaking th
e hedge;
•
the Group
also documents
its
assessment,
both at
hedge
inception and
on an
ongoin
g basis, of
whether the
derivatives
that
are used
in
hedging transact
ions
are highly
effective in
offsetting
changes
of cas
h flows
of
hedged items; and
•
the
h
ighly
prob
able
forecasted
transact
ions
des
ignated
as
hedged
items
will
ultimately
affect
the
consolidated in
come statement.
To
furth
er
reduce
its
exposu
re
to
U.
S.
dollar
exchange
rate
fluctu
ations,
the
Group
h
edges
a
portio
n
of
its
Euro
-
denominated forecas
ted intercompan
y purchas
es of products
with und
erlying front-end
manufacturing pro
duction
costs of semi-finished goods incurred in Euros, since these transactions are considered highly probable to occur and
are
closely
link
ed
to
ultimate
tra
nsactions
with
th
ird
parties. Additionally,
the
Group
hedges
certain
Singa
pore
dollar
-
denominated manufacturing
forecas
ted transaction
s.
These
derivative
financial
in
struments
are
initially
recogniz
ed
at
fair
value.
The
effective
portion
of
the
gain
or
loss
on
the
hedging
instru
ment
is
recognized
in
other
comprehensiv
e
income.
The
Grou
p
has
elected
to
des
ignate
the
full change in fair valu
e, including the time valu
e of options or
combination of optio
ns, as the hedging ins
trument.
124
7.6.7.16.
Employee benefits
The
Group
op
erates
various
pos
t
-employment
schemes,
including
both
defined
benefi
t
and
d
efined
contribution
pension plan
s.
Pension obligations
The
Group
spon
sors
various
pens
ion
schemes
for
its
e
mployees.
Thes
e
schemes
conform
to
local
regulation
s
and
pr
actices
of
the
countries
in
which
th
e
Group
operates.
Defined
benefit
pension
plans
define
amounts
of
pension
benefits that employ
ees will receive
on retirement,
usually d
ependent on on
e or more fa
ctors s
uch as age, y
ears of
service and compensat
ion. The liab
ility recognized i
n t
he line “Employ
ee benefits” in t
he consolidated s
tatement of
financial
pos
ition
in
respect
o
f
defined
benefit
pens
ion
plan
s
is
the
present
value
of
th
e
d
efined
benefit
obligation
at the
reportin
g date
less the
fair value
of plan assets.
Significan
t estimates are
u
sed in
determining the
assumptions
incorporated in th
e calculation of the pension obligat
ions, which is supported b
y input from independent actuaries.
The
de
fined
benefit
obligation
is
calculated
annually
using
the
pro
jected
u
nit
credit
method.
The
present
value
of
the defined
benefit obligation
is determined
by
discounting the
estimated futu
re cash
outflows u
sing
in
most
cases
interest
rates
of
high
-quality
corporate
bonds
that
are
denominated
in
th
e
currency
in
which
the
benefits
will
be
paid, and
that have terms to maturity a
pproximating the terms o
f the related pension o
bligation.
Actuarial gains and losses arising from
experience adjustme
nts and changes in actuarial assumptions are charged or
credited
to
equ
ity
in
other
comprehensive income
in
th
e
p
eriod in
which they
arise. Past
service
cos
ts are
recognized
immediately in profit or los
s.
Comparative
figures have
been adjusted
to ref
lect
a change
in
accounting policy,
following
th
e
IFRIC agenda
decision
issued
in
2021.
The
change
in
accounti
ng
p
olicy
affects
p
ension
acco
unting
for
defined
benefit
p
lans
with
certain
characteristics found in retirement
indemnities plans in one of
the countries where
th
e Group operates. The
change
in
accounting
policy
was
ap
plied
retrospectively
and
resulted
in
a
decrease
in
no
n-current
liabilities
for
employee
benefits
o
f
$18
million,
a
r
eduction
in
non
-current
deferred
tax
assets
of
$5
million
and
an
increase
in
retained
earnings of $13 million
, net of deferred in
come tax, as
of December 31, 202
0.
For
d
efined contribution
p
lans,
the
Grou
p
pays contributions
to
publicly or
privately administered
pension
in
surance
plans
on
a
mandatory,
con
tractual
or
voluntary
basis.
The
Group
has
no
f
urther
payment
obligations
once
th
e
contributions
have
been
paid.
The
con
tributi
ons
are
recognized
as
employee
benefit
expense
when
they
are
due.
Prepaid
contrib
utions
are
recognized
as
an
asset
to
the
extent
that
a
cash
refund
or
a
re
duction
in
the
future
payments is a
vailable.
Other long-term em
ployee benefits
The
Group
prov
ides
long-ter
m e
mployee
benefits
such
as
s
eniority
awards
in
certain
countries
.
The
entitlement
to
these
benefits
is
usu
ally con
ditional
on
the
employee
completing
a
minimum
servic
e p
eriod.
The
expected
costs
of
these
benefits
are
accrued
o
ver
the
period
of
empl
oy
ment.
Actuarial
gains
and
loss
es
arising
from
exp
erience
adjustments
,
and
changes
in
act
uarial
assumptio
ns,
are
charged
or
credited
to
earnings
in
t
he
period
o
f
chan
ge.
These obligations are v
alued annually
with the assista
nce of independent qualified ac
tuaries.
Termination benefits
Termination benefits
are payable
when e
mployment is terminated
by the
Group before
the normal
retire
ment date,
or
whenever
an
employ
ee
accepts
volu
ntary
termination
in
exchan
ge
for
these
ben
efits.
The
Group
reco
gnizes
termination
bene
fits
at
the
earlier
of
th
e
following
dates:
(
a)
when
the
Group
can
no
lo
nger
withdraw
the
offer
of
those
benefits;
and
(b)
when
the
entity
recognizes
costs
for
a
restru
cturing
that
is
within
th
e
scope
of
IAS
37
and
involves the
payment of
termina
tion benefits.
In the
case
of an
offer
made to
encourage voluntary
leaves, the
Group
bases
the
measurement
of
te
rmination
benefits
on
the
number
of
employees
accepting
the
offer.
Benefits
falling
due more than twelve
months after the reportin
g date are dis
cou
nted to pres
ent value.
125
Profit-sharing and bonus p
lans
The Group recognizes a
liability and an e
xpense for bonuses
an
d profit
-sharing plans when it
is contractually obliged
or where there is a p
ast practice that has
created a constru
ctive obligation.
Share-based compen
sation
All the share plan
s of the Group
are equity s
ettled.
The
fair
value
of
the
employee
s
ervices
received
in
exchange
for
the
grant
of
share
-based
award
s
is
recognized
as
an
expense
and
as
a
corresponding
increase
in
sh
areholders’
equ
ity.
The
to
tal
amount
to
be
expensed
over
the
vesting period,
which is
th
e
p
eriod
over
which all
of the
specified
vestin
g
con
ditions are
to
be satisfied,
is
determined
by
reference
to
th
e
fair
value
of
the
awards
granted
at
the
date
of
grant,
reduced
by
th
e
present
value
o
f
the
dividends
expected
to
be
pai
d
on
th
e
shar
es
during
the
requis
ite
service
period.
Non
-market
performance
and
service
con
ditions
are
in
cluded
in
assumptions
ab
out
the
number
of
instruments
that
are
expected
to
v
est.
Any
applicable
employee
social
charges
are
also
expens
ed
ratab
ly
o
ver
the
same
p
eriod
as
the
share-bas
ed
compensation expens
e.
At the end of
each reporting period, the
Group revises its es
timates of the number of
instruments that are expected
to vest bas
ed on the no
n-market
vesting conditio
ns. It reco
gnizes the impact
of the revis
ion to origina
l estimates, if
any, in th
e consolidated income statement, with a
correspondin
g adjustment to equity
.
7.6.7.
17.
Financial Debt
Bank loans
Bank
loan
s
are
recogn
ized
in
itially
at
fair
v
alue,
net
of
tra
nsaction costs
incurred,
if any.
The
y
are
s
ubsequently
stated
at
amortized
cost;
any
difference
between
the
proceeds
(net
of
transaction
costs)
and
the
redemption
value
is
recognized
within
“Finance costs”
in
the consolidated
income
s
tatement
o
ver the
period of
the borrowings
usin
g
t
he
effective interest method.
Borrowings are classified as current liabilities unless the G
roup has an
u
nconditional right to defer settlement of
th
e
liability for at least
twelve months a
fter the reporting date.
Hybrid financial instrumen
ts
The
Group
issued
in
2017
and
2020
con
vertible
bonds
that
can
be
converted
to
share
capital
at
the
option
of
the
holder an
d that
are callable
by
the Group,
in
certain events
and
circumstances,
but for
which
the number
of s
hares
to be issued d
oes vary.
The
issuer’s
call
option
an
d
the
bond
ho
lder’s
conversion
option
are
embedded
non
-equ
ity
derivative
instru
ments
and are
recognized separately
from
the debt host
con
tract. Upon initial
recognition, the derivatives are
me
asured at
fair
value,
and
th
e
debt
is
measured
as
a
residual
amou
nt.
The
debt
is
s
ubsequently
measured
at
amortized
cost
using
th
e
effective
interest
method.
The e
mbedded
derivat
ives
are
measured
at
fair v
alue
thro
ugh
pro
fit
and
loss
,
with
changes
in
fair
value
reported
i
n
the
line
“
Finance
cos
ts”
or
“Finance
income”
in
the
cons
olidated
income
statement.
7.6.7.18
.
Equity
Ordinary share capita
l
The
Company
has
issued
ordinary
shares
that
are
class
ified
as
equity.
In
cremental
extern
al
costs
that
are
directly
attributable to t
he issuance of these sh
ares are recognized in equ
ity, net of tax.
Treasury shares
Own
equity
instruments
which
are
acquire
d
(treasury
s
hares)
are
deducted
from
equity
for
th
e
consid
eration
paid
including
any
directly
attrib
utable
incremental
costs
(net
of
taxes).
No
gain
or
loss
is
recognized
in
the
income
statement on the p
urchase, sale, issu
e or cancellation of the Compan
y’
s o
wn equity ins
truments.
126
Dividends on ordinary share
capital
Dividends on o
rdinary shares are recogniz
ed as a liability
and deducted from equity
when they a
re approved b
y the
Company’s s
hareholders.
Dividends for
the year
that
ar
e approved
after the
re
porting date are
dealt with
as an e
vent after
th
e re
porting date.
7.6.7.19.
Trade payables
Trade accounts
pay
able are
obligations
to
pay
for goods
or s
ervices that
have
been acq
uired in
the
ordinary
course
of
bu
siness
from
sup
pliers.
Trade
payab
les
are
recognized
initially
at
fair
value
and
subsequently
measu
red
at
amortized cost us
ing the effective in
terest method when
maturity of th
e payables exceeds o
ne year.
7.6.7.
20.
Provisions
Provisions
for
restru
cturing
cos
ts
an
d
legal
claims are
recognized w
hen:
the
Grou
p
has
a
present
legal or
con
structive
obligation
as
a
result
of
past
events
;
it
is
p
robable
th
at
an
outflow
of
resources
embodying
economic
benefits
will
be required to settle the obligation; and the amount has been reliably estimated. Restructu
ring provisions primarily
comprise provision
s for employee termination
payments. Pro
visions a
re not recognized for future op
erating losses.
If th
e
effect
of
ti
me
value
of
money
is
mater
ial,
prov
isions
are
dis
counted
usin
g a
current
pre
-tax
rate
th
at
reflects
current
market
assessments
of
the
time
v
alue
of
money
and,
when
ap
propriate,
the
risk
specific
to
the
obligation.
The increase in the prov
ision due to p
assage of time is recognized
a
s finance cos
t.
7.6.7.
21.
Contingencies
The Group is sub
ject to the possibility
of loss contingencies aris
ing in the ord
inary course of busin
ess. These include
but
are
not
limited
to:
warranty cost
o
n
the
prod
ucts
of
th
e
Group,
b
reach
of
con
tract
c
laims,
claims
for
u
nauthorized
use of
third
party
intellectual
property,
tax
claims and
prov
isions
for s
pecifically identifie
d income
tax
exposures
as
well as
claims for
environ
mental
damages. In
determining
loss
contin
gencies, the
Group cons
iders the
like
lihood of
a loss of an asset or the incurrence of a liability
as well as the ability to reasonab
ly estimate the amount of such loss
or liability.
The Group regularly evaluates claims
to determine whether
provision
s need
t
o be
recorded based on the
most
current
information
available
to
the
Group.
Chan
ges
in
these
evaluations
could
result
in
adverse,
material
impact on the Group’
s results of operations
, cash flows o
r its financial position
for the period in which th
ey occur.
7.6.7.
22.
Segment repo
rting
Operating
segments
are
de
fined
as
a
compon
ent
of
the
entity
that
(i)
engages
in
business
activities
from
which
it
may
earn
revenu
es
and
incur
expenses,
(ii)
whose
operating
results
are
regularly
rev
iewed
b
y
the
entity’s
Chief
Ope
rating
Decis
ion
Maker
(Sole
member
of
Managing
Bo
ard),
under
the
extensive
ov
ersight
of
the
Company
’s
Supervisory
Board,
to
make
decisions
about
resources
to
be
allo
cated
to
the
segments
an
d
asses
s
its
p
erformance
and (iii) for which dis
crete financial in
formation is
available.
For
th
e
compu
tation
of
the
segments’
internal
financial
measurements,
the
Group
uses
certain
intern
al
ru
les
o
f
allocation for the costs not directly chargeable to the
s
egments, including cost of sales, selling, general and
administr
ative
expenses
and
part
of
research
an
d
develop
ment
exp
enses.
In
compliance
with
the
Group’s
in
ternal
policies,
certain
cos
ts
are
not
allocated
to
the
segments
.
Thes
e
cos
ts
comprise
u
nused
capacity
charges,
including
reduced
manufacturing
activity
due
to
C
OVID-19
pan
demic,
impairme
nt,
restru
cturing
charges
an
d
other
related
closure
cos
ts,
management
reorganization
expenses,
phase-out
and
s
tart-up
costs
o
f
certain
manufacturing
facilities,
an
d other
unallocated expenses
such
as: strategic
and special
research and
d
evelopment
p
rograms
,
certain
corporate-level
operating e
xpenses
, p
atent claims
and
litigations,
and
other cos
ts th
at are no
t allocated
to
product
groups, as well as o
perating earnings o
f other products
.
7.6.8.
Critical accou
nting estimate
s and judgmen
ts
Estimates and
judgments are
continually e
valuated and
are
based on
historical experience
and
other factors,
including expectations of
future events
that are
be
lieved to be
reasonab
le under current circumstances.
The
COVID-
19
outbreak
declared
by
the
World
Health
Organization
in
March
2020
and
the
measures
ta
ken
worldwide
by
governments to
limit the spread of
the pandemic have generated uncertainties
on future economic conditions, with
127
a direct
impact on the
Group’s forward
-loo
king growth
an
d financial outlook. The
G
roup operated in
202
1 with
s
olid
fundamentals
and
a
strong
capital
structure,
while
ta
king
the
n
ecessary
measu
res
to
protect
th
e
health
and
safety
of
its
employees.
There
are
no
con
ditions
and
events
,
despite
th
e rece
nt
COVID
-19
pan
demic,
which raise
s
ubstan
tial
doubt about the
Group’s ability
to continue a
s
a
going concern, in
light with:
its current
financial
condition, including
its
liquid
ity
sources;
its
ob
ligations
–
due
or
anticip
ated;
the
funds
necessary
to
main
tain
the
Group’s
operations
;
and other con
ditions and events, if an
y.
The
uncertain
ties
arisen f
rom these
u
nprecedented
business
condition
s
hav
e
been
factore
d
in
the
critical accounting
estimates
and
judgements
made
in
preparing
these
con
solidated
financial
statements,
on
th
e
basis
o
f
all
known
consequences of th
e pandemic a
nd reas
onable and supportable forecast o
f future conditio
ns. However, the impact
on
future
economic
per
formance
can
not
b
e
fully
det
ermined and
is
closely m
onitored
on
an
on
-going basis
by
means
of different scenarios, wh
ich are highly depend
ent on the furt
her development of the pan
demic.
No events
or changes
in
circumstances, including the recent
COVID-19 pandemic, indicated in
2021 that
the carrying
amount
of
major
tan
gible
assets,
includ
ing
lease
right
-
of
-use
ass
ets,
might
not
be
recov
erable
or
that
useful
lives
might not
be ap
propriate.
The
Group did
not
enter in
to an
y
significant
rent con
cessions
as
a direct
consequence
of
the
COVID-19
pandemic
or
significant
modifications
to
existing
lease
agreements.
The
Group
concluded
that
no
material
impairm
ent
was
to
b
e
recorded
on
its
tangible
ass
ets
as
at
December
31,
2021.
The
Group
also
reviewed
the
recov
erability
of its
intangible assets, including
cap
italized
development costs.
On
th
e
latter, the
Group recorded
a total impairment
charge of
$
39
million. R
efer to note
7.6.1
3 for further d
etails on a
mounts
capitalized, amortized
and impaired du
ring the year
.
There
is
no
major
contingency
to
be
reported
as
at
December
31,
2021
related
to
the
recent
CO
VID-
19
pandemic.
The
tax
loss
carryforwards
capitalized
as
deferred
tax
as
sets
are
d
eemed
recoverable
in
all
major
tax
jurisdictions.
To consider any potentially increased risk of
default on accounts
receivable, the Group adjusted the expected credit
loss
assumption
s
to
reflect
current
conditions
,
reasonable
and
supporta
ble
forecast
of
future
conditions
and
how
current
uncertain
ties
may
impact
customers’
and
other
debtors’
future
credit
quality.
This
reas
sessment
d
id
not
have
any
material
effect
on
the
expected
credit
loss
allowances
reported
by
the
Group
on
its
major
categories
of
financial assets
as at December
31
, 202
1
.
The
Group
makes
estimates
and
as
sumptions
concerning
the
future.
The
res
u
ltin
g
acc
ounting
estimates
will,
by
definition, seldom equal th
e related actual results. Estimates a
nd assumptions that have a significant ris
k of causing
material
adjustments
to
th
e
carrying
amounts
of
assets
and
liabilities
within
th
e
next
financial
y
ear
are
d
escribed
below.
7.6.8.1.
Right-
of
-
use assets and lease l
iabiliti
es
Significant assumptions and judgements
may be
made in applying the
requirem
ents of
lea
se accounting, such
as the
exercise of extension
or renewal options
and the
determination
of applicable discou
nt rates.
The
Group
determines
the
lease
term
as
the non
-cancellable term
of
the
lease,
together
with
an
y
periods
cov
ered
by
an
option
to
extend
the
leas
e
if
it
is
r
easonably
certain
to
be
exercised,
or
any
p
eriods
covered
by
an
option
to
terminate the lease, if it is
reasonab
ly certain not to b
e exercised.
The Group
has
elected n
ot to
recognize ri
ght
-
of
-use
assets an
d lease
liabilities
for some
leases
of low
-value
and
for
leases
which
term
ends
within
12
months
with
no
pu
rchase
option
at
the
date
of
initial
application
(primarily
for
certain
office
and
IT
small
eq
uipment).
Th
e
Group
leases
lan
d,
buildings,
cars
an
d
certain
equipment
(including
IT
equipment)
which
have
rema
ining
lease
terms
betw
een
l
ess
than
one
year
and
48
year
s.
Certain
lease
contracts
contain
options to
extend
the leases
by
up
to 30 y
ears. The
Group
applies ju
dgement in
evaluat
ing if
and
when it
is
reasonably certain
for the Group
to exercise that optio
n. In add
ition, the Group mad
e an accountin
g policy e
lection
for all
th
e
asset
class
es to
no
t accoun
t
for
short
-term
leases
,
as
described
in
note
7.6.7.1
2.
The
Group
considers
all
relevant
factors
that
create
an
economic
incentive
to
ex
ercise
an
y
existing
op
tion
to
extend
or
rene
w
a
lease
arrangement.
After
th
e
commencement
d
ate,
the
Group
reas
sesses
th
e leas
e term
i
f th
ere
is
a
significant
event
or
change in
circumsta
nces that is
within its control
and affe
cts its
ability to
exercise or
not exercise
th
e option.
In most
cases,
the
Group
has
included
the
exten
sion
or
renewal
o
ption
as
part
of
the
lease
term
of
plant
s
,
buildings
and
128
equipment
wh
en
the
controlled
use
of
the
leased
assets
is
significant
and
critical
to
its
operations
.
These
leases
generally include
a non-cancellable period and
th
ere will
b
e a
significant negative effect
o
n the
no
rmal course
of
the
Group’s bu
siness
, should
a replacement not b
e readily available.
In calculatin
g the
present
value of leas
e payments
, the
rate
implicit in
the leas
e shou
ld be
used
whenever that
rate
is
readily
determinable.
In
m
ost
cases,
this
rate
is
not
readily
determinable
and
th
e
Group
uses
its
inc
remental
borrowing
rate,
which
is
derived
from
infor
mation
available
at
the
lease
commencement
date.
The
Group
gives
consideration to
its re
cent
d
ebt
issuance
as w
ell
as
p
ublicly
av
ailable
data f
or
instruments w
ith
similar
characteristics
when
calculating
its
incremen
tal
borrowing
rates.
Due
to
immateriality
of
any
intra
-quarter
discoun
t
rate
chan
ges,
the Group determine
s the discou
nt rate bas
ed on the mid-
quarter dat
e.
Lease term and discou
nt rate are as follo
ws:
As at December 31,
2021
As at December 31,
2020
Weighted average remaining l
ease term (in years
)
9
9
Weighted average discoun
t rate
2.69%
2.71%
7.6.8.
2.
Income taxes
The
Group
is
required
to
ma
ke
estimates
and
judgments
in
determining
income
tax
for
th
e
period,
comp
rising
current an
d deferred
inco
me tax.
The
Group
needs to
ass
ess
the income
tax
expected
to
be paid
or
the in
come tax
benefit
expected
to
be
rece
ived
related
to
th
e
current
y
ear
income
(loss
)
in
each
tax
jurisd
iction
and
recognizes
deferred
income
tax
for
tempora
ry
differences
arisin
g
between
the
tax
bases
of
assets
and
liabilities
an
d
their
carrying
amount
in
th
e con
solidated
finan
cial s
tatements
,
except
when
th
e
initial
recogni
tion
exception
applies,
as
described in
note
7.6.7.7.
Furthermore,
the Group
is
required to
assess
all material
open income ta
x pos
itions in
all
tax jurisdiction
s to determine any u
ncertain tax p
ositions, and to record a pro
vision for those, if any.
The
Group
is
also
required
t
o
ass
ess
the
likelihood
of
re
covery
of
its
d
eferred
tax
assets
originated
by
the
net
operating
los
ses
carried
forward.
This
ass
essment
requires
the
exercise
of
judgm
ent
with
respect
to,
among
other
things,
benefits
that
could
b
e
realized
from
available
tax
strategies
and
future
taxable
income,
as
we
ll
as
oth
er
positive and
negative
factors. T
he
u
ltimate
r
ealization of
deferred
ta
x
assets is
dependent
up
on, among
other thing
s,
the
Group’s
ability
to
generate
future
taxable
inco
me
that
is
s
ufficient
to
utilize
loss
car
ry
-forwards
or
tax
credits
before
their expiration
or the Group’s
ability to implement prud
ent and feasible tax
planning strategies.
As
of
December 31,
20
21
,
the
Group
re
ported
deferred
t
ax
assets
of
$
43
8
million
(20
20
:
$
48
2
million)
on
the
consolidated
sta
tement
of
financial
po
sition.
A
significant
portion
of
thes
e
deferred
tax
as
sets
was
recorded
in
relation to
n
et operating
los
ses incurred
in certain
ta
x jurisdictions.
These net
operating losses may not
be realizable
before their expiration, u
nless the Group is
capable of identifying fa
vorable tax strategies.
The
Group
cou
ld
reduc
e
the
amount
of
total
def
erred
tax
assets,
resultin
g
in
a
decrease
in
th
e
total
as
sets
and,
consequently, in
equity,
if
th
e
estimates
of
p
rojected
future
taxable
income
an
d
benefits f
rom
availab
le
tax
strategie
s
are re
duced as a
res
ult of
a change in the
ass
essment or
d
ue to
other factors,
or if
ch
anges in current
ta
x regulations
are enacted that impose re
strictions on the timing or
extent of the G
roup’s ability to utilize net operating losses and
tax
credit
car
ry
-forwards
in
the
future.
Likewise,
a
chan
ge
in
the
tax
rates
applicable
in
the
various
ju
risdictions
or
unfavorable
outcomes
of
any
ongoing
tax
au
dits
could
h
ave
a
material
impact
on
the
future
tax
provisions
in
th
e
periods in which
these changes cou
ld occur.
The Group op
erates in man
y juris
dictions with
highly complex and v
aried tax regimes.
Management ap
plies
professional
judgement in
assessing
whether relevant
tax
authorities will
accept reported
tax treatments
und
er tax
law.
Those
un
certainties
may
arise
when
tax
laws
ar
e
not
clear
or
not
consistently
understood,
which
generates
ambiguity
in
the
ta
x
law
interpretatio
ns
and
application.
Those
un
certainties
are
par
ticularly
present
in
tax
jurisdictions
o
r
ta
x
regimes
where
the
exp
ected amount
to be
paid
or
the
expected tax
benefit to
be
recognized arise
from complex, lengthy
and technical negotiations
or require possible settlements inv
olving a high degree of
subjectivity a
nd discretion.
Assumptions
and
estimates used in
the assessment of
uncertainties ov
er income
tax treatments include, but
are not
limited to: wheth
er certain
income tax
treatments
are considered
jointly
or separately
when assessing
their degree
129
of
uncertainty
;
the
as
sumptions
th
e
Group
makes
about
the
examination
of
tax
treatments
by
ta
xing
authorities;
how
the
Group
determines
taxable
profits,
deductions
taken
on
tax
returns, un
used
tax
losses,
unused
tax
credits
,
applicable tax rates, the probability of acceptance
of these income tax treatments by the rele
vant taxing authorities
or on
the
contrary
to
what ex
tent the
income
tax treat
ments
as
applied
by
the Group
may
be dis
allowed, includ
ing
the outcome of unresolved disputes or settlements on existing tax audits
; and consideration of changes in facts and
circumstances requiring a r
easses
sment of ap
plied judgments an
d assumptions.
As
of
December
31,
2
0
21
an
d
Decemb
er 31,
20
20
,
the
Group
reported
unrecognized
tax
b
enefits
for
uncertain
ta
x
treatments totaling $118 million and $
48
million, respectively. It is
reasonably possible that certai
n of these
uncertainties over tax treatments could increase
or decrease within the next 12 months due
to
changes in facts and
circumstances,
such
as
ongoing
ta
x
audits
or
taxing
au
thority
new
decision
s.
The
Group
is
not
able
to
make
an
estimate of
th
e range
o
f the
r
easonably possible change.
Accrued interest and
p
enalties amounted
to $7 million and
$7 million as at
December
31, 20
21
and December 31, 20
20
, respectively. The
tax years that re
main open for re
view
in the Group’s maj
or tax jurisdictions
, includi
ng France, Ita
ly, United States and I
ndia, are from 1997 to
2021
.
7
.6.8.
3.
Impairment of non
-financial assets
An
impairment
exists
when
the
carrying
value
of
an
ass
et
or
cash
generating
unit
exceeds
its
recoverable
amount,
which
is
the
higher
of
its
fair
value
less
cos
ts
of
disposal
and
its
v
alue
in
use.
The
fair
value
less
costs
of
disposal
calculation
is
bas
ed
on
observab
le market
p
rices
less
incre
mental
costs
of
disp
osing
the
ass
et,
in
order
to
measure
the
p
rice
at which
the
asset
could be
sold i
n an
orderly
tra
nsaction betwe
en
market participants at
the
measurement
date.
In
case
observab
le
market
prices
are
not
av
ailable,
fai
r
value
less
costs
of
d
isposal
could
be
measured
based
on
data
from
binding
sales
transactions
in
arm’s
length
tra
nsactions
of
similar
assets.
For
the
current
y
ear
’s
annual
impairment
test,
the
recov
erable
amou
nt
of
th
e
CGUs
was
determined
b
ased
on
value-
in
-use
calculations.
N
on-
financial
ass
ets
are
tested
or
reviewed
for
impair
ment
in
accordan
ce
with
accoun
ting
polic
ies
sta
ted
in
N
otes
7.6.7.1
,
7.6.7.
10
, 7.
6.7.11 an
d 7.6.7.1
2. Cons
iderable manag
ement
judgment
is
necessary
to identify
impairm
ent in
dicators
and to estimate f
uture sales and e
xpenses, which underlie the
d
iscounted future cash flow
p
rojections. Factors such
as changes in the plann
ed use of property, plant and equipment, the closure of facilities, the change in the us
e or in
the market acceptan
ce of cert
ain new techn
ologies, could r
esult in s
hortened useful lives
or impair
ment charges to
be recognized in the period in
which s
uch determination is
made.
7.6.8.
4.
Pension obligation
s
The
Group
s
ponsors
various
pens
ion
sch
emes
f
or
its
employees.
The
expens
e
incurred
under
the
defined
benefit
pension
plans
is
based
upon
statistical
and
actuarial
calculations
and
is impact
ed
by ass
umptions
on
discount
rates
used
to
reach
the
present
value of
future
pension
liabilities,
expected
ret
urn
that
will
be
made
on
existin
g
pension
assets, futu
re salary increases as
well as future pension
increases and
statistical
-bas
ed assumptions co
vering future
withdrawals of participan
ts from the plan
and estimates o
f life expectancy. Refer to n
ote 7.6.2
3
.
The
actuarial
assumption
s
used
may
differ
material
ly
from
actual
results
d
ue
to
changes
in
market
an
d
economic
conditions,
higher
o
r
lower
withdrawal
rates
or
longer
or
shorter
life
sp
ans
of
participants
and
may
significantly
impact
the
amou
nt
of
pensio
n
costs
and
pension
liabilities
to
be
recognized
in
the
period
in
which
su
ch
determination is made.
130
7.6.8.
5.
Capitalized devel
opment costs
Development costs are
capita
lized in
accordan
ce w
ith the
ac
counting policy described in
notes 7.6.7.
5
.
and
7.6.7.
10
.
Initial
capitaliza
tion
of
costs
is
based
on
management’s
judgment
th
at
economic
p
rofitability
and
technological
feasibility
are
con
firmed,
usually
when
a
product
or
techn
ology
has
reached
a
certain
maturity level
in
p
roduct
life
cycle
model
us
ed
by
the
Group.
In
d
etermining
the
amoun
ts
to
be
capitalized,
management
makes
as
sumptions
regarding the expected future cash generation of a
project and the expected period of
benefits. As
of
December 31,
20
21,
the
carrying
amount
of
cap
italized
develop
ment
cos
ts
was
$
96
9
million
(20
20
:
$8
49
million).
Refer
to
note
7.6.13 for disclosure of amou
nts ca
pitalized, amortized and impaired d
uring the period.
7.6.8.
6.
Inventory obso
lescence reserves and
normal
manufacturing capa
city thresh
olds
Inventory
is
stated
at
th
e
lower
of
cost
or
net
realizable
value.
Cost
is
bas
ed
on
the
weighted
average
cost
by
adjusting
th
e
stand
ard
cost
to
approximate
actual
man
ufacturing
costs
on
a
periodic
basis;
therefore,
the
cos
t
is
dependent
on
the
Group’s
manufacturing
performance.
In
case
of
underutiliza
tion
of
th
e
manufacturing
facilities,
the
Group
estimates
the
costs
associated
with
the
excess
capacity.
These
costs
are
not
included
in
the
valuation
of
inventory
b
ut
are
charged
directly
to
cos
t
of
sales.
For
the
year
ended
December
31,
2021,
th
e
un
used
cap
acity
charges
amounted
to
$
16
million,
includin
g
reduced
manufacturing
act
ivity
due
to
the
COVID-19
pandemic,
compared to $153
million for
the year ended D
ecember 31,
2020
. N
et realizable
value is t
he estimated se
lling price
in
the
ordinary
course
of
business,
less
predictable
costs
of
comp
letion,
d
isposal
an
d
transp
ortation
.
Refer
to
n
ote
7.6.17
.
The
Group
performs,
on
a
continuou
s
bas
is,
inventory
write
-offs
of
finis
hed
products
.
The
valuation
of
inv
entory
requires
to
estimate
a
res
erve
for
obsolet
e in
ventory
as
w
ell as
inventory
th
at
is
not
of
saleab
le q
uality.
Provis
ions
for
ob
solescence
ar
e
estimated
for
excess
uncommitted
inv
entories
ba
sed
on
th
e
previous
quarters
sales,
ord
er
backlog and
production
plans. To the ext
ent that
future negativ
e market cond
itions generate
order backlog
cancellations and
declining sales, or if future cond
itions are less favorab
le than the projected revenue as
sumptions,
the Group
cou
ld
be required
to record additional
invento
ry reserve,
which would have
a
negative
impact on
its gross
margin.
131
7.6.9. Investments in su
bsidiaries
The following
table lists
th
e Company’s
consolida
ted subsidiaries
and
its percentage
ownership
as
of
December 31,
20
21:
Legal Seat
Name
Percentage
own
ership
(direct or indirect)
Australia, Sydney
STMicroelectronics PTY L
td
100
Austria, Vienna
STMicroelectronics Au
stria GmbH
100
Belgium, Diegem
Proton World International
N.V.
100
Brazil, Sao Paulo
South America Com
é
rc
io de Cart
õ
es In
teligentes Ltda
100
Brazil, Sao Paulo
STMicroelectronics Ltda
100
Canada, Ottawa
STMicroelectronics (Can
ada), Inc.
100
China, Beijing
STMicroelectronics (B
eijing) R&D Co. Ltd
100
China, Sha
nghai
STMicroelectronics (Ch
ina) Investment Co.
Ltd
100
China, Shen
zhen
Shenzhen
STS Microelectronics Co. Ltd
60
China, Shen
zhen
STMicroelectronics (Sh
enzhen)
R&D Co. Ltd
100
Czech Republic,
Prague
STMicroelectronics Design an
d Application
s.r.o.
100
Denmark, Aarhus
STMicroelectronics A/S
100
Egypt, Cairo
STMicroelectronics Egypt SSC
100
Finland, Nummela
STMicroelectronics Finlan
d OY
100
France, Crolles
STMicroelectronics (Crolles
2) SAS
100
France, Gren
oble
STMicroelectronics (Alp
s) SAS
100
France, Gren
oble
Exagan SAS
80
France, Gren
oble
STMicroelectronics (Gren
oble 2) SAS
100
France, Le Man
s
STMicroelectronics (Gran
d Ouest) SAS
100
France, Montrouge
STMicroelectronics S.A
.
100
France, Le Bou
rget-
du
-Lac
BeSpoon SA
S
100
France, R
ousset
STMicroelectronics (R
ousset) SAS
100
France, Tou
rs
STMicroelectronics (Tou
rs) SAS
100
Germany, Asch
heim-Dornach
STMicroelectronics GmbH
100
Germany, Asch
heim-Dornach
STMicroelectronics Ap
plication GmbH
100
Hong Kong, Kowloon
STMicroelectronics Ltd
100
India, New Delhi
ST
-Ericsson India Pvt Ltd
100
India, Noida
STMicroelectronics Pv
t Ltd
100
Israel, Netanya
STMicroelectronics Lim
ited
100
Italy, Agrate Brianza
STMicroelectronics S.r.
l.
100
Italy, Naples
STMicroelectronics Serv
ices S.r.l.
100
Japan, Tokyo
STMicroelectronics KK
100
Malaysia, Kuala Lumpu
r
STMicroelectronics Marke
ting SDN BHD
100
Malaysia, Muar
STMicroelectronics SDN BHD
100
Malta, Kirkop
STMicroelectronics (Ma
lta) Ltd
100
Mexico, Gua
dalajara
STMicroelectronics Marke
ting, S. de R.L. d
e C.V.
100
Morocco, Casa
blanca
Electronic Holding S.A
.
100
Morocco, Casa
blanca
STMicroelectronics S.A
.S. (Maro
c)
100
The Netherlands,
Amsterdam
STMicroelectronics Finan
ce B.V.
100
The Netherlands,
Amsterdam
STMicroelectronics Finan
ce II N.V.
100
The Netherlands,
Amsterdam
STMicroelectronics In
ternational N.V.
100
Philippines, Calamba
STMicroelectronics, I
nc.
100
Philippines, Calamba
Mountain Drive Proper
ty, Inc.
40
Singapore, An
g Mo Kio
STMicroelectronics Asia Pac
ific Pte Ltd
100
Singapore, An
g Mo Kio
STMicroelectronics Pte L
td
100
Slovenia, Ljubljana
STMicroelectronics d.
o.o.
100
Spain, Barc
elona
STMicroelectronics Ib
eria S.A.
100
Sweden, J
ö
nk
ö
ping
STMicroelectronics Sof
tware AB
100
Sweden, Kista
STMicroelectronics A.B
.
100
Sweden, Norrkoping
STMicroelectronics Silico
n Carbide A.B
.
100
Switzerland, Geneva
STMicroelectronics S.A
.
100
Taiwan, Tapei City
Exagan Taiwan Ltd.
80
Thailand, Ban
gkok
STMicroelectronics (
Thailand) Ltd
100
United Kingdom, Bristol
STMicroelectronics (R
esearch & Develop
ment) Limited
100
United Kingdom, Marlow
STMicroelectronics Lim
ited
100
United Kingdom, Marlow
Synad Techn
ologies Limited
100
United States, Cop
pell
STMicroelectronics Sof
tware Inc.
100
United States, Cop
pell
STMicroelectronics In
c.
100
United States, Cop
pell
STMicroelectronics (Nor
th America) Holding, I
nc.
100
132
7.6.1
0. Business Acqu
isitions
In
the
firs
t
half
of
2020,
the
Group
took
con
trol
of
the
French
Gallium
Nitride
(G
aN)
innovator
E
xagan.
E
xagan’s
expertise
in
epitaxy,
pro
duct
development
and
application
kn
ow
-
how
broaden
an
d
accelerate
S
T’s
power
GaN
roadmap
an
d
bu
siness
for
au
tomotive,
i
nd
ustrial
and
consumer
applications
.
The
act
ivities
of
this
busines
s
are
included in the Au
tomotive and Discrete Group
(ADG) reporta
ble segment.
In the
s
econd half
of 2020, the
Group closed the
acq
uisitions of
the entire
s
hare capital
of
Ultra Wide
Ban
d specialist
BeSpoon,
of
th
e
cellular
IoT
c
onnectivity
as
sets
of
Riot
Micro
and
of
the
radio
-frequenc
y
assets
of
SOMOS.
With
these
acquisitions,
th
e
Grou
p
further
strengthens
its
offer
for
wire
less
connectivity
i
n
the
roadmap
for
STM32
microcontrollers
and
secure
microcontrollers.
The
activities
of
th
ese
three
busin
esses
are
includ
ed
in
the
Microcontrollers and Digita
l ICs
Group (MDG) repo
rtable segmen
t.
In
2020,
the
Group
also
completed
another
minor
acqu
isition
in
the
Microcontrollers
and
Digital
ICs
Group
(MDG)
reportable segment.
In
2021,
th
e
purchas
e
price
all
ocation
o
f
the
ab
ove
bus
iness
acquis
itions
was
finalized
an
d
resulted
in
the
recogn
itio
n
of
a
$1
million
adjustment
relate
d
to
a
defined
benefit
pension
ob
ligation
,
with
the
correspond
ing
increase
in
goodwill. The fair value o
f the identifiable as
sets acquired a
nd liabilities as
sumed was as follows:
Fair value
recognized at
acquisition
date
Measurement
period adjus
tments
Fair value
recognized as a
result of acqu
isition
Property, plan
t and equipment
1
1
Technologies and
licenses
108
108
Technologies in p
rogress
10
10
Other intangible ass
ets
2
2
Deferred tax assets
5
5
Deferred tax liabilities
(18)
(18)
Net working capital
(4)
(1)
(5)
Goodwill
(1)
135
1
136
Total net assets at fair va
lue
239
239
Purchase cons
ideration
239
239
(1)
The items tha
t generate
d goodwill are work
force, synergie
s, future products and
access to ne
w markets. The goodwill is
allocated to
the ADG and M
DG reportabl
e segments as d
escribed in
Note 7.6
.1
4.
The
total consideration transfe
rred in
relation to the
business acquisitions concluded in
2
020
after f
inalization of
the
purchase
price
allocation
consisted
of
cash
paid
of
$104
million,
before
cash
acquired
of
$1
million,
deferred
consideration
of
$18
mi
llion
and
contingent
consideration
of
$117
m
illion.
The
fair
v
alue
of
the
con
sideration
transferred
was
determined
by
the
Group
with
the
assistance
o
f
a
third
party
as
part
of
the
preliminary
purchase
price
allocat
ion.
The
contingent
consideration
comprised
variab
le
p
ayment
components
contingent
upon
meeting
certain financial
an
d/or technical targets
b
y the
acq
uired businesses. T
he fair
valu
e
measurement of the
acqu
isition
-
date
contin
gent
cons
ideration
was
based
on
the
probability
that
the
mil
estones
defining
t
he
var
iable
comp
onents
of
th
e
cons
ideration will
be achieved
and w
as e
stimated by calculating
the present
valu
e of
the future
expected cash
flows.
As
at
December
31,
2021,
deferred
and
contingent
consideration
recognized
on
b
usiness
combinations
amounted
to
$19
million (2020:
$20
million) and
$77
million
(2020: $123
million). The
fair
value m
easurement of
the
contingent
consideration corres
ponds to a Level 3 fair value h
ierarchy measurem
ent and is
further described in Note 7.6.15.5.
133
7.6.1
1. Proper
ty, plant and equ
ipment
Property, plan
t and equipment cons
isted of the following:
As at December 31, 2021
In millions of USD
Gross value
Accumulated
depreciation
Net
value
Land
84
—
84
Buildings
958
(564)
394
Lease right-
of
-use ass
ets
333
(138)
195
Facilities and leasehold imp
rovements
3,506
(2,939)
567
Machinery and equ
ipment
17,352
(13,948)
3,404
Computer and R&D equ
ipment
396
(334)
62
Other tangible ass
ets
147
(97)
50
Construction in
progress
1,022
—
1,022
Total
23,798
(18,020)
5,778
As at December 31, 2020
In millions of USD
Gross value
Accumulated
depreciation
Net
value
Land
86
—
86
Buildings
1,002
(569
)
433
Lease right-
of
-use ass
ets
310
(122
)
188
Facilities and leasehold imp
rovements
3,562
(3,039
)
523
Machinery and equ
ipment
16,981
(13,987
)
2,994
Computer and R&D
equipment
404
(349
)
55
Other tangible ass
ets
118
(99
)
19
Construction in
progress
480
—
480
Total
22,943
(18,165
)
4,778
134
Changes in the n
et carrying amount of p
roperty, plan
t and equipment are detailed as
follows:
In millions of USD
Land
Buildings
Lease
Right-
of
-use
assets
Facilities and
leasehold
improvements
Machinery
and
equipment
Computer
and R&D
equipment
Other
tangible
assets
Construction
in progress
Total
Balance
as
at
Dec
ember
31,
2019
78
405
204
448
2,738
47
17
282
4,219
Additions
3
1
39
37
472
27
2
736
1,317
Business acq
uisitions
—
—
—
—
1
—
—
—
1
Transfers
—
29
—
88
455
—
—
(572)
—
Depreciation expense
—
(27)
(61)
(84)
(762)
(20)
(1)
—
(955)
Foreign currency trans
lation
5
25
6
34
90
1
1
34
196
Balance as at Decemb
er 31, 2020
86
433
188
523
2,994
55
19
480
4,778
Additions
2
1
80
55
670
32
34
1,402
2,276
Transfers
—
10
—
115
686
1
2
(814)
—
Disposals
—
—
(2)
—
—
—
—
—
(2)
Depreciation expense
—
(27)
(64)
(92)
(856)
(24)
(4)
—
(1,067)
Foreign currency trans
lation
(4)
(23)
(7)
(34)
(90)
(2)
(1)
(46)
(207)
Balance as at Decemb
er 31, 2021
84
394
195
567
3,404
62
50
1,022
5,778
In the year
ended December 31, 2021, capital investment f
unding totaled $
15
million (20
20
: $8 million) and w
ere accounted for as
a reduction of the
gros
s value
of the
related ta
ngible assets.
The impact
of capital
funding on
depreciation
expense for
the year end
ed December
31, 2021
is
a reduction
of $
12
million (20
20
:
$11
million). In 20
21, the Group
sold property, p
lant and equipment for cash p
roceeds of $
2 mil
lion (20
20
: $4
million).
135
7.6.1
2
.
Leases
The
Group
leases
lan
d,
buildings
,
cars
and
certain
equipment
(including IT
equip
ment)
w
hich
have
remaining
l
ease
terms
between
les
s
than
one
year
an
d
48
years.
E
xpenses
related
to
short‐term
and
low‐value
leases
wer
e
not
significant
in
2021
and
2020.
Cash
outflows
for
leases
totaled
$70
million
for
th
e
year
e
nded
December
31,
2021
(2020: $67 million).
Maturities of lease liabilities a
re as follows:
In millions of USD
December 31,
2021
2022
59
2023
46
2024
30
2025
18
2026
13
Thereafter
84
Total future un
discounted cash outflows
250
Effect of discounting
(47
)
Total lease liabilities
203
In millions of USD
December 31,
2020
2021
58
2022
44
2023
32
2024
21
2025
13
Thereafter
76
Total future
undiscounted cash outflows
244
Effect of discounting
(48)
Total lease liabilities
196
136
A reconciliation of opening a
nd clos
ing right
-
of
-use assets is prov
ided below:
In millions of USD
Land
Buildings
Machinery
and
equipment
Computer
and R&D
equipment
Other
Total
Right-
of
-use assets as at Dec
embe
r
31, 2019
38
145
1
8
12
204
Depreciation for the period
(1
)
(45
)
(1
)
(7
)
(7
)
(61
)
Additions
1
20
1
6
11
39
Foreign currency trans
lation
—
5
—
—
1
6
Right-
of
-use assets as at Dec
embe
r
31, 2020
38
125
1
7
17
188
Depreciation for the period
(2
)
(45
)
(1
)
(7
)
(9
)
(64
)
Additions
—
61
1
7
11
80
Disposals
—
(2
)
—
—
—
(2
)
Foreign currency trans
lation
—
(6
)
—
—
(1
)
(7
)
Right-
of
-use assets as at Dec
embe
r
31, 2021
36
133
1
7
18
195
Reported amounts related t
o lease arrangements
are described in
Notes 7.6.1
1, 7.6.15 and 7.6.30.
7.6.1
3. Intangible a
ssets
Intangible ass
ets consisted of the following:
As at December 31, 2021
In millions of USD
Gross value
Accumulated
amortization
Net value
Purchased techno
logies and licenses
978
(675
)
303
Purchased s
oftware
355
(289
)
66
Internally developed s
oftware
212
(196
)
16
Capitalized development
costs
3,209
(2,240
)
969
Technologies and
software in progress
52
—
52
Other intangible as
sets
72
(71
)
1
Total
4,878
(3,471
)
1,407
As at December 31, 2020
In millions of USD
Gross value
Accumulated
amortization
Net value
Purchased techno
logies and licenses
934
(623
)
311
Purchased s
oftware
332
(272
)
60
Internally developed s
oftware
206
(190
)
16
Capitalized development
costs
2,903
(2,054
)
849
Technologies and
software in progress
56
—
56
Other intangible as
sets
72
(70
)
2
Total
4,503
(3,209
)
1,294
In
the
year
ended
December 31,
2021,
specific
project-rela
ted
funding
totaled
$
28
million
(20
20
:
$29
million)
and
were accounted for as
a reduction of th
e gross valu
e of related capitalized development
costs.
137
Changes in the n
et carrying amount are d
etailed as follows
:
In millions of USD
Purchased
technologies
and
licenses
Purchased
software
Internally
developed
software
Capitalized
development
costs
Technologies
and
software
in progress
Other
intangible
assets
Total
Balance as at Decemb
er 31,
2019
121
41
18
892
119
—
1,191
Additions
28
21
—
296
49
—
394
Business acq
uisitions
108
—
—
—
10
2
120
Impairment / Write-o
ffs
(4
)
—
—
(110
)
—
—
(114
)
Transfer
100
17
5
—
(122
)
—
—
Amortization expense
(50
)
(21
)
(7
)
(229
)
—
—
(307
)
Foreign currency trans
lation
8
2
—
—
—
—
10
Balance as at Decemb
er 31,
2020
311
60
16
849
56
2
1,294
Additions
56
—
—
348
45
—
449
Impairment / Write-o
ffs
(1
)
—
—
(39
)
—
—
(40
)
Transfer
9
33
6
—
(48
)
—
—
Amortization expense
(61
)
(25
)
(6
)
(189
)
—
(1
)
(282
)
Foreign currency trans
lation
(11
)
(2
)
—
—
(1
)
—
(14
)
Balance as at Decemb
er 31,
2021
303
66
16
969
52
1
1,407
For
the
y
ear
ended
December 31, 2021
,
add
itions
of intangible
ass
ets
amoun
ted
to
$
449
million
(20
20
:
$
394
million).
The
2021
amortization
expen
se
includ
ed
$
205
million
(20
20
:
$
242
million)
in
costs
of
s
ales,
$
54
million
(20
20
:
$
45
million) in research and d
evelopment and
$
23
million (20
20
: $20
million) in selling, gener
al and ad
ministrative.
Development
cost
capitalized
on
p
rojects
that
are
still
in
progress
an
d
therefore
not
y
et
amortized
amou
nted
to
$
642
mill
ion
as
at
Decemb
er
2021
(20
20
:
$561
million).
F
ollowing
the
annual
impairment
test
p
erformed
in
the
second
h
alf
of
2021,
no
impairme
nt
was
recorded
on
intangible
as
sets
not
ready
for
use
,
excluding
capitalized
development
costs
as
d
etailed
below,
for
an
y
of
the
G
roup
’s
CGUs.
The
key-assumptions
u
sed
for
v
alue-
in
-us
e
calculations
are
based
on
the
mos
t
recent
b
udget
of
each
CGU
tested
.
Man
agement
determined
budgeted
gross
margin based on p
ast performance, and its
expectations for th
e market development.
The
impairment and write-of
fs for
2021 amounted to
$
40
million, recorded
in
costs
of sale
s for
$
39
million, resulting
from
write-offs of
capitalized development
costs related
to
certain projects that
we
re cancelle
d, and in
research and
development
for
$1 million
of
acquired
licenses
an
d
techno
logies
with
no
alternative
futu
re
use
.
The
impair
ment
and
write-offs
for
20
20
a
mounted
to
$
1
14
million,
recorde
d
in
costs
of
sales
for
$
1
10
million,
resulting
from
write-
offs
of
capitalized
dev
elopment
costs
related
to
certain
p
rojects
th
at
were
cancelled,
an
d
in
research
and
development for $
4 million of acqu
ired licenses an
d technologies with n
o alternative future u
se
.
7.6.1
4. Goodwil
l
Goodwill split by op
erating segment
is
as follows:
In millions of USD
Automotive
and
Discrete
Group
(ADG)
Analog,
MEMS
and Sensors
Group (AMS)
Microcontrollers
and Digital ICs
Group (MDG)
Total
As at January 1, 2021*
91
2
220
313
Foreign currency trans
lation
(8
)
—
(10
)
(18
)
As at December 31, 2021
83
2
210
295
138
*Comparat
ive
amounts
have
been
revised
to
reflect
measurement
period
adjustments
reported
on
certain
business
acquisition
s
as
detailed
in
Note 7.6.10.
As
at
December 31,
20
21
,
the
gros
s
value
of
goo
dwill
was
$
340
million
(20
20
:
$
35
8
m
illion)
and
th
e
accumulated
impairment was $
45
million (20
20
: $45 million).
Goodwill
is
allocated
to
the
Group
’s
CGUs.
The
recoverable
amount
of
a
CGU
is
determin
ed
bas
ed
on
value
-
in
-use
calculations. These
calculati
on
s use
cash
flow projections
based on
financial budgets
and management’s
best
estimates about futu
re developments, as
well as market and cu
stomer assumptio
ns.
The
Group
tes
ts
whether
good
will
has
suffere
d
any
impairment
on
an
annual
bas
is
du
ring
the
second
half
of
each
year.
In
the
2021
and
20
20
re
porting
periods,
no
good
will
impairm
ent
was
recorded
for
any
of
th
e
Grou
p’s
CGUs
.
For
the
an
nual
impairment
test,
the
key-ass
umptions
used
for
valu
e-
in
-use
calcu
lations
are
b
ased
on the
most rece
nt
five-year plan of e
ach CGU tested. The average
p
erpetuity growth rate was 1.5% (2020:
1.5
%) and discount rate was
10
%
(2020: 11%)
p
re-tax and i
n
ferred
from the
o
bservable volatility
of share
prices for co
mparable companies
in the
semiconductor
indus
try.
These as
sum
ptions
have
been
us
ed, as
app
licable,
for
the
analysis
of
each
CGU
within
the
operating
segments.
Managem
ent
determined
budgeted
gros
s
margin
based
on
pas
t
performance,
an
d
its
expectations
for
the
market
development.
The
av
erage
yearly
growth
ra
tes
used
a
re
consistent
with
the
forecast
included
in
indus
try
reports.
The
dis
count
ra
tes
us
ed
are
pre
-tax
and
reflect
specific
r
isks
relatin
g
to
th
e
relevant
CGUs. No reasonab
ly possib
le change in key assumptio
ns would lead to a s
ignificant impairment loss
.
139
7.6.1
5. Other finan
cial assets an
d financial liabilities
7.6.1
5
.1.
Other financia
l assets
In millions of USD
December 31,
2021
December 31,
2020
Other financial assets (inc
luding derivatives)
Other financial assets
Quoted debt s
ecurities at FVOCI
—
133
Unquoted equity s
ecurities at FVOCI
10
10
Quoted equity s
ecurities at FVPL
13
13
Other trading financial a
ssets at FVPL
16
12
Total other
financial assets
39
168
Current
—
133
Non-current
39
35
Derivative financial instrum
ents
Cash flow hedges
Foreign exchange for
ward contracts
2
24
Currency collars
1
8
Derivatives not designated as
hedges
Foreign exchange for
ward contracts
3
24
Currency collars
—
9
Embedded call option
- Senior u
nsecured conv
ertible bonds issu
ed on July 3,
2017 (Tranche B)
—
61
Embedded call option
- Senior u
nsecured conv
ertible bonds issu
ed on
August 4, 2020 (Tranche A
)
11
13
Embedded call option
- Senior u
nsecured conv
ertible bonds issu
ed on
August 4, 2020 (Tranche B
)
15
20
Total derivatives financial ins
trumen
ts
32
159
Current
6
126
Non-current
26
33
Total other financial assets (i
ncluding derivatives)
71
327
Total current
6
259
Total non-current
65
68
Risk management
po
licies relating
to
cre
dit risk
exposure to
derivatives counterparties
are f
urther described in
Note
7.6.36
.
140
Movements in other finan
cial ass
ets (excluding derivat
ives) recorded in 20
21 ar
e summarized a
s follows:
In millions of USD
Jan
1,
2021
Change in
fair value
included in
OCI*
Change in
fair value
included in
income
statement
Purchase
Proceeds at
maturity
Foreign
exchange
result
recognized in
OCI*
Realized
gain
Dec
31,
2021
Debt sec
urities issued
by
the U.S. Treasur
y
133
(1
)
—
—
(132
)
—
—
—
Quoted equ
ity
instrument
s at FVPL
13
—
—
—
—
—
—
13
Sub-total Quoted d
e
bt
and equity securiti
es
146
(1
)
—
—
(132
)
—
—
13
Unquoted e
quity
securities
at FVOCI
10
—
—
—
—
—
—
10
Other tradi
ng financi
al
assets at
FVPL
12
—
4
—
—
—
—
16
Total other financi
al
assets (excluding
derivatives)
168
(1
)
4
—
(132
)
—
—
39
*OCI:
Other co
mprehensive income
Movements in other finan
cial ass
ets (excluding derivat
ives)
recorded in 20
20
ar
e summarized
as follows:
In millions of USD
Jan
1,
2020
Change in
fair value
included in
OCI*
Change in
fair value
included in
income
statement
Purchase
Proceeds at
maturity
Foreign
exchange
result
recognized in
OCI*
Realized
gain
Dec
31,
2020
Debt sec
urities issued
by
the U.S. Treasu
ry
133
—
—
—
—
—
—
133
Quoted equ
ity
instrument
s at FVPL
12
—
1
—
—
—
—
13
Sub-total Quoted d
e
bt
and equity securiti
es
145
—
1
—
—
—
—
146
Unquoted e
quity
securities
at FVOCI
12
(2
)
—
—
—
—
—
10
Other tradi
ng financial
assets at
FVPL
11
—
1
—
—
—
—
12
Total other financi
al
assets (excluding
derivatives)
168
(2
)
2
—
—
—
—
168
*OCI:
Other co
mprehensive income
As at December 31,
2020, the Group held $133 million of
U.S. Treasury bonds,
measured at FVOCI, all
transferred to
a
financial
institution
with
high
credit
quality.
These
trans
actions
were
conclud
ed
in
compliance
wit
h
the
Group
’s
policy
to
optimize
the
r
eturn
on
its
short
-term
interest
rate
investments
,
always
placed
with
ins
titutions
with
high
credit
rating.
During
2021,
th
ese
debt
securities
reached
maturity
an
d
th
e
related
proceeds
of
$132
million
were
reported in the line
“Proceeds from matured marketable securities”
of
the consolidated statement of
cash flows for
the year ended December
31, 2021
.
Investments held in e
quity secur
ities
As
at
December 31,
20
21
,
the
Group
also
had
investments
in
quoted
equity
securities
for
an
aggregate
v
alue
o
f
$
13
million, measured a
t FVPL (December
31, 20
20
: $13 million
).
As
at
December 31, 20
21
,
the Group
also
reported other
tra
ding financial
assets
for
an
aggregate
valu
e
of $
16
million
(December 31, 20
20
: $
12
million
).
141
The Group irrevocably elected to m
easure at FVOCI
u
nquoted equity securities for an
aggregate
value of $
10
million
(December
31,
20
20
:
$
10
million).
Since
these
are
s
trategi
c
inv
estments,
the
Group
considers
this
classification,
which implies that
changes in fair value are n
ot subs
equently recycled to earnings, to b
e more relevant.
The changes
in fair
valu
e re
ported
on
the Group’s
investments held in
equity securities
for the
years ended
December 31, 2021 and
December 31, 20
20 were i
mmaterial.
Short-term d
eposits
To
optimize
the
r
eturn
yield
on
its
s
hort
-term
investment
s,
the
Group
in
vested
$
291
million
of
available
cash
in
short-term deposits as
at December
31, 2021, compared to
$581 million
as
at
D
ecember 31, 2020. These short-term
deposits
had
a
maturity
b
eyond
three
month
s
an
d
no
significant
ris
k
of
changes
in
fair
value
.
They
are
r
eported
in
the line
“
Short-
ter
m deposits”
of
the consolida
ted statement of
financial positio
n.
7.6.1
5
.2.
Other financia
l liabilities
In millions of USD
December
31,
2021
December
31,
2020
Lease financial liabilities
203
196
Deferred and
contingent consideration o
n business acqu
isitions
97
143
Derivative financial instrum
ents
Cash flow hedges
Foreign exchange for
ward contracts
18
—
Currency collars
7
—
Derivatives not designated as
hedges
Foreign exchange for
ward contracts
12
2
Currency collars
6
—
Embedded conversion
option
- Senior unsecured conv
ertible bond
s issued on July
3, 2017 (Tranche B)
—
676
Embedded conversion
option
- Senior unsecured conv
ertible bond
s issued on
August 4, 2020 (Tranche A
)
255
158
Embedded conversion
option
- Senior unsecured conv
ertible bond
s issued on
August 4, 2020 (Tranche B
)
282
182
Total other financial liabilitie
s (including derivatives)
880
1,357
Total current
125
732
Total non-current
755
625
Risk management
po
licies relating
to
cre
dit risk
exposure to
derivatives counterparties
are f
urther described in
N
ote
7.6.36. Lease financial lia
bilities are furth
er described in Note 7.6.1
2.
142
7.6.1
5
.3.
Interest
-bearing loans and
borrowings
In millions of USD
December 31,
2021
December 31,
2020
Funding program
loans from Euro
pean Investment Bank:
0.73% due 2021, floating in
terest rate at
Libor + 0.525%
—
30
0.75% due 2021, floating in
terest rate at
Libor + 0.572%
—
29
0.06% due 2028, floating in
terest rate at
Euribor + 0.589%
202
250
0.05% due 2029, floating in
terest rate at
Euribor + 0.564%
222
270
0.06% due 2031, floating in
terest rate at
Euribor + 0.583%
379
—
0.15% due 2031, floating in
terest rate at
Euribor + 0.660%
187
—
Credit Facility from Cassa De
positi e Prestiti Sp
A
0.15% due 2027, floating in
terest rate at
Eurib
or + 0.690%
156
—
Dual tranche sen
ior unsecured conver
tible bonds:
0.25% due 2024 (Tranch
e B)
—
675
Zero-coupon, du
e 2025 (Tranche A)
705
694
Zero-coupon, du
e 2027 (Tranche B)
677
665
Other Fund
ing program loans:
0.37% (weighted average
), due 2022
-2028, fixed inter
est rate
6
4
Total interest-bear
ing loans and b
orrowings
2,534
2,617
Total current
143
796
Total non-current
2,391
1,821
Interest-bearing loans
and borrowings are deno
minated in th
e following currencies:
In millions of USD
December 31,
2021
December 31,
2020
U.S. Dollar
1,382
2,093
Euro
1,152
524
Total
2,534
2,617
The
European
Investment
Bank’s
loans
d
enominated
in
E
uro
s
,
but
dra
wn
in
US
dollar,
are
classified
as
US
dollar
denominated debt.
Aggregate
contra
ctual
maturities
of
interest
-bearing
loans
and
borrowings
outstanding,
excluding
repay
ments
of
coupons a
nd interests, are as follows:
In millions of USD
December 31,
2021
December 31,
2020
2021
—
121
2022
143
62
2023
143
62
2024
143
812
2025
893
812
2026
142
62
Thereafter
1,188
903
Total
2,652
2,834
143
The difference between the total aggregated future maturi
ties in the preceding table and the total carrying amount
of
lon
g-term
debt
is
due
to
un
amortized
debt
discoun
t
and
issu
ance
cos
ts
on
the
d
ual
tranche
senior
uns
ecured
convertible bonds
.
Senior convertible b
onds
On
July 3,
2017,
the
Company
issued
$1,500
million
principal
amou
nt
dual
tranche
senior
unsecured
convertible
bonds (T
ra
nche
A
for $750 million
and
Tran
che
B
for
$750
million),
due
2022
an
d
2024,
res
pectively.
Tranche
A
bonds
were
is
sued
at
101.265%
as
zero-coupon
bond
s
while
Tranch
e
B
bond
s
were
issu
ed
at
par
and
bear
a
0.25%
per
annum nominal intere
st, payable semi-annually. The conversion price
at issuance was
$2
0.54, equivalent to
a 37.5
%
premium
on
both
tranches,
which
correspon
ds
to
9,737
equivalent
shares
per
each
$200,000
bo
nd
par
value.
The
bonds we
re
convertible by
the
bondh
olders
or
callable
by the
issuer
upon ce
rtain conditions,
on
a net-share
settlement
basis
,
except
if
the
iss
uer
elect
ed
a
full-
cash
or
full-sh
are
conversion
as
an
alternative
settlement.
The
net proceeds from the bon
d offering were $1,5
02 mil
lion, after deducting is
suance cos
ts payable by t
he Group.
The
issuer’s
call
option
an
d
the
holder’s
conversion
option
were
identified
as
embedded
non
-equity
derivative
instruments,
resulting in the recognition of th
e options separately from the debt host con
tract. Upon initial
recognition, the derivatives were measured at fair value based on the
income approach, the debt being determi
ned
as a
residual
amount of
the $1.5
b
illion tota
l proceeds.
The valu
e of
the issuer’s
call option was
deemed to
be n
il at
initial
recognition.
The value
of
the
holder’s conversion
op
tion
was estimated
at $248
million at
issuance date,
which
determined
the
initial
r
ecognition
of
the
liability
co
mponen
t
at
$1,261
million
befor
e
allocation
of
issu
ance
costs.
The fair value measurement of the embedded derivativ
e instruments correspon
ded to a Level 3 fair
value hierarchy
measurement.
The
Group
elected
to
alloca
te
is
suance
costs,
totaling
$7 million,
to
the
debt
component.
The
debt
was subs
equently measured at amortized
cost using t
he effective interest method
.
The
call
option
av
ailable
to
the
Company
for
the
early
redemption
of
Tranche
A
was
exercised
in
July
20
20.
As
a
consequence,
bondh
olders
exercised
th
eir
conversion
righ
ts
on
Tranche
A.
As
the
Co
mpan
y
elected
to
net
-share
settle
the
bonds,
each
conversion
exercised
by
the
bond
holders
followed
the
pro
cess
defin
ed
in
the
original
terms
and
con
ditions
of
th
e
sen
ior
unsecured
con
vertible
bond
s,
which
determin
ed
the
act
ual
number
of
shar
es
to
be
transferred upon
each conversion.
The Company
settled the
bond
s
up
on
conversion, b
y
redeeming
throu
gh
cash the
$750
million
p
rincipal amount
an
d
by
s
ettling
th
e
resid
ual
consideration through
the delivery
of
11.4
million treasury
shares. The
n
et-share settlement was
fully completed
as
of
Octob
er 1,
2020. The
consider
ation transferred in
shares
was a non
-cash item and, as
such, was
not reported in
the cons
olidated statement
of cash flows
for the y
ear ended
December 31,
2020. The
Com
pany allocated
the total
cons
ideration transferred
bet
ween the
carrying amount
o
f
th
e
debt
and
the
non
-equity
derivative
ins
truments,
by
measuring
at
fair
value
the
non
-equity
derivative
instru
ment
s
prior
to
settlement.
T
ranche
A
liability
component,
net
of
unamortized
issuan
ce
costs
,
as
measured
at
amort
ized
cost
prior
to
settlement,
amounted
to
$71
2
million.
The
holder’s
conversion
op
tion
totaled
$341
million
and
was
measured
based
on
the
intri
nsi
c
value
of
th
e
option.
The
fair
value
measurement
of
the
non
-equity
embedded
derivative instruments and the extinguishment of the liability component against the $750 million cash paid
generated
a
ch
arge
o
f
$64
million
reported
on
the
l
ine
“
Finance
costs”
on
the
consolidated
income
statement
for
the year ended December
31, 2020.
The
call
option
av
ailable
to
the
Company
for
th
e
early
redemption
of
Tranche
B
was
exercised
in
J
uly
2021.
As
a
consequence, bondhold
ers exercised
their conversion rights on the full Tranche B. Each conversion exercised by the
bondholders followe
d
the
process
defined
in
the
original
terms
and conditions
of
the
2017 Se
nior
Unsecured
Convertible
Bonds,
which
determined
th
e
actual
consid
eration
to
be
tran
sferred
to
bondh
olders
upon
eac
h
conversion. Out
of the
3,750 bonds composing
Tranche B,
the
Company elected
to settle 1,238
bon
ds on
a net
-share
basis
for
a
total
con
sideration
of
$479
million,
th
rough
the pay
ment
of
th
e
$248
million
nominal
value
in
cash
and
the
delivery
of
ap
proximately
5.8 million
treasury
s
hares.
Th
e
remaining 2,512
bonds
were
s
ettled
on
a
full
cash basis
for a
total con
sideration
of $
1,015 mi
llion. Th
e settle
ment
was fully
completed
during
th
e second
half
of 202
1. Th
e
consideration transferred in shares was
a non
-cash item and,
as such, was not
reported in
the consolidated
statement
of
cash
flows
for
th
e
year
ended
De
cember
31,
2021.
The
Company
allocated
the
tota
l
consid
eration
transferred
between
th
e
carr
ying
amount
of
th
e
d
ebt
and
the
non
-equity
derivativ
e
in
struments,
by
measuring
at
fair
v
alue
the
non
-equity
derivat
ive
instruments
p
rior
to
settlement.
Tranch
e
B
lia
bility
component,
n
et
of
unamortized
issuance
costs,
as
measured
at
amortized
co
s
t
prior
to
settlement,
amounted
to
$690
million.
The
144
holder’s
convers
ion
option
totaled
$744
million
and
was
measured
bas
ed
on
the
intrinsic
v
alue
of
the
option.
The
fair value measu
rement of the n
on
-equity embedded d
erivative ins
truments and
the extinguis
hment of the liab
ility
component
again
st
the
$750
million
cash
paid
g
enerated
a
charge
of
$121
mill
ion
reported
on
the
line
“Finance
costs” on
the consolidated income statement
for the year end
ed December 31, 2021.
On August
4,
20
20
, the
Company
issued $1,500 million in
principal
amount of
dual
tranche senior unsecured
convertible
bonds
(Tranche
A
for
$750
million
and
Tranche
B
for
$750
mil
lion),
due
202
5
and
2027,
resp
ectively.
Tranche
A bonds w
ere
iss
ued
at 105.8%
as zero-coupon
b
onds
while
Tranche B
bonds
wer
e
iss
ued
at 104.5%
as zero-
coupon
bonds.
The
conversion
price
at issuance
was
$43.62
for
Tranche
A equivalent
to
a 47.5%
conv
ersion
premiu
m
and
$45.10
for
Tranche
B,
equivalent
to
a
52.5%
conversion
premium.
These
conversion
features
corres
pond
to
an
equivalent of 4,585 sh
ares per each Tranche A bo
nd $200
,000 par v
alue and a
n equivalent of 4,435 shares
per each
Tranche B
bond
$200
,000 par
value
. The
bond
s are
convertible
by the
b
ondholders or
are callable
by the
issu
er up
on
certain cond
itions,
on a
net-shar
e settlement
basis
, except
if the
issuer elects
a
full-cash
or full-sh
are conversion
as
an
alternative
settlement
.
The
net
proce
eds
from
the
bond
o
ffering
were
$1,5
67
million,
after
d
educting
issuance
costs payable b
y the Group.
The issuer’s call option and the holder’s conversion option have been identi
fied as embedd
ed non-equity derivativ
e
instruments,
resulting in the recognition of th
e options separately from the debt host con
tract. Upon initial
recognition, the derivatives were measured at fair value based on the income approach, the debt being determined
as a
residual
amount of
the $1.5
b
illion tota
l proceeds.
The valu
e of
the issuer’s
call option was
deemed to
be
nil at
initial
recognition.
The value
of
the
holder’s conversion
op
tion
was
estimated at
$219
million at
issuance date,
which
determined
the
initial
r
ecognition
of
the
liability
co
mponent
at
$1,358
million
befor
e
allocation
of
issu
ance
costs.
The fair value measurement of the embedded derivativ
e instruments correspon
ded to a
Level 3 fair value hierarchy
measurement,
which
is
furth
er
describe
d
in
note
7.
6.15.5.
The
Group
elect
ed
to
allo
cate
issuan
ce
cos
ts,
totaling
$
10
million,
to
the
debt
component.
The
debt
was
subsequently
measu
red
at
amort
ized
cos
t
usin
g
the
effective
interest method.
Reconciliation of liabilities ari
sing from financing ac
tivit
ies
The reconciliation for th
e year ended December
3
1, 20
21
is
as follows:
In millions of USD
Interest-
bearing
loans and
borrowings
Other
non-
current
financial
liabilities*
Interest-
bearing
loans and
borrowings
–
current
portion
Other
current
financial
liabilities**
Total
December 31, 2020
1,821
482
796
730
3,829
Cash flows
775
(10
)
(1,384
)
(54
)
(673
)
Non
-cash changes:
New leases
—
80
—
—
80
Settlement
—
—
573
(744
)
(171
)
Accreted finance costs
23
—
13
—
36
Fair value chan
ges
—
197
—
68
265
Reclassification
(153
)
(55
)
153
55
—
Foreign currency trans
lation
(75
)
(9
)
(8
)
—
(92
)
December 31, 2021
2,391
685
143
55
3,274
*”Other
n
on
-
current
financial
liabilities”
and
“Other
current
financial
liabilities”
reported
above
do
not
include
deferred
and
contingent
con
sidera
tion,
as
they
relate
to
business
acquisitions.
They
are
further
described
in
Note
7.6.10.
145
**
”Oth
er cu
rrent
financial
liabilities”
reported
ab
ove
correspond
to
the
current
portion
of
the
lease
liability
for
an
amount
o
f
$
55
million.
Deriva
tives
are
not
rep
orted
in
the
abov
e
table
as
they
relate
to
operating
activities
.
Lease
financial liabilities
ar
e
further described in
N
ote 7.6.12
and convertible bonds are
further
described in Note
7.6.1
5.3.
The reconciliation for th
e year ended December
3
1, 20
20
is
as follows:
In millions of USD
Interest-
bearing
loans and
borrowings
Other
non-
current
financial
liabilities*
Interest-
bearing
loans and
borrowings
–
current
portion
Other
current
financial
liabilities**
December 31, 2019
1,200
532
869
385
Cash flows
1,352
219
(934
)
(59
)
Non
-cash changes:
New leases
—
39
—
—
Settlement
—
—
38
(341
)
Accreted finance costs
10
—
35
—
Fair value chan
ges
—
121
—
307
Reclassification
(776
)
(434
)
776
434
Foreign currency trans
lation
35
5
12
4
December 31, 2020
1,821
482
796
730
*”Other
non
-
current
financial
liabilities”
reported
abo
ve
do
not
include
deferred
and
contingent
consideration
,
as
they relate to bus
iness acquisitions. They are furth
er described in Note 7.6.10.
**
”Other
current
financial
liab
ilities”
reported
above
corresp
ond to
the
current p
ortion of
the
lease
liability
for
an
amount
of
$54
mil
lion
and
to
the
$676
million
bondhold
ers’
embedded
conversion
option
on
Tranche
B
of
the
Company’s con
vertible debt issued
on July 3, 2017. Derivatives
are not reported in the above table as they relate to
operating
activities.
Lease
fin
ancial
liabilities
are
further
describ
ed
in
Note
7.6.12
and
conv
ertible
bonds
issued
in
2017 are further described in
Note 7.6.15.3.
Credit facilities
The
Group
’s long
-term
debt contained
standard
condition
s
but
does
n
ot
impose
minimum
financial
ratio
s. The
Group
had
u
nutilized
committed
credit
facilities w
ith
core
relationship
banks tot
alin
g
$
910
million
as of
December 31, 2
02
1.
As at December 31, 2021 the Group also had three long-term amortizing credit fa
cilities with the European
Investment
Bank
as
part
of
R&D
funding
programs.
The
first
one
,
signed
in
August
2017,
is
a
€500
million
loa
n,
in
relation
to
R&D
and
capital
expenditures
i
n
the
European
Union,
fully
d
rawn
in
Euros,
of
which
$
424
million
was
outstand
ing as
at December 3
1, 2021.
The
secon
d on
e
, s
igned in 2020,
is
a €500
million facility
agreement
with E
IB
to suppo
rt R&D and capital expend
iture programs in I
taly and France. It
was fully drawn in 2021,
representing $5
66
million outstand
ing as at December 31, 2021.
As at December 31, 2020 the Group also had three long-term amortizing credit fa
cilities with the European
Investment
Ban
k
as
part
of
R&D
funding
p
rograms.
The
fir
st
on
e,
signed
on
September
27,
2010,
a
€350
million
multi-currency loan
for R&D
p
rograms in
Europe, was
dra
wn
main
ly
in U.S.
dollars for
an amount of
$321 million
and
only
partially
in
Euro
s
for
an
amount
of
€100
million.
The
sec
ond
on
e,
signed
on
March
12,
2013,
a
€350
million
multi-currency
loan
which
also
supported
R&D
programs,
was
drawn
in
U.S.
dollars
for
$471
million,
of
which
$59
million was
outstan
ding
as
at December
3
1,
2020.
The
third
one,
s
igned
in
August
2017
amounted
to
€500
million,
in relation
to
R&D and
capital expenditures
in th
e European Union
for
the years
2017 and
2018. The entire
amount
was fully drawn in E
uros correspond
ing to $520 million outstan
ding as at December 31, 2
020.
146
In
June
2021,
we
signed
a
new
Fac
ility
Agreement
with
C
DP
for
an
amoun
t
of
€150 milli
on,
fully
drawn
in
Euros
,
of
which $1
56
million was
outstand
ing as at
December 31, 2021.
7.6.1
5
.4.
Hedging activiti
es and derivatives
Derivative instruments n
ot designated a
s hedge
The Group conducts
its business on a global basis in various major
international currencies. As a result,
the Group is
exposed
to
adverse
movements
in
foreign
currency
exchange
rates,
primarily
with
respect
to
the
Euro.
Foreign
exchange risk mainly arises
from future commercial transactions
and recognized assets and liabilities at the
Group’s
subsidiaries
. The Group enter
s into cu
rrency forward con
tracts
to reduce its
exposure to
changes in exch
ange rates
and
th
e
associated
risk
arising
from
the
deno
minatio
n
of
certain
ass
ets
and
liabilities
in
foreign
cu
rrencies
at
th
e
Group’s
subsid
iaries.
These
instruments
do
no
t
qualify
as
hedging
ins
truments
and
ar
e
marked
-
to
-market
at
each
period-
end
with
the
as
sociated
changes
in
fair
value
recogn
ized
in
“Other
income
”
or
“Other
expens
es”
of
the
consolidated in
come statement.
To
reduce
its
exposu
re
to
U.S
.
dollar
exchange
rate
fluctuations,
the
Group
also
hedges
certain
E
uro
-denominated
forecasted
transaction
s
that
cover
at
reporting
dat
e a
large
part
of
its
R&D
an
d
S
G&A exp
enses
through
the
use
of
currency
forward
contracts
and
currency
options,
including
collars.
These
instru
ments
do
not
qualify
as
hedging
instruments
and
are
marked
-
to
-market
at
each
period-end
with
the
ass
ociated
changes
in
fair
value
recognized
in
“Other income” or “Other exp
enses”
of
the cons
olidated income statement.
The notional amount
of these
financial instru
ments amount
ed to $
1,244 million in 2021
(20
20
:
$1,452 mi
llion). The
principal
curren
cies
covered at
the
end of
the
year
2
0
21
are the
Euro,
the
Singapo
re
dollar,
the
Chin
a
Yuan Renminbi,
the
Swedish
kr
ona,
th
e
Japan
ese
yen, t
he
In
dian
ru
pee,
the Swiss
franc, the
Malaysian
rin
ggit,
the South
Korean w
on,
the Philippines p
eso, the Taiwan do
llar an
d the Moroccan dirham
.
Foreign
cu
rrency
forward
co
ntracts
and
currency
options,
including
collars,
n
ot
desig
nated
as
cash
flow
hedge
outstand
ing
as
of
December 3
1,
2021
had
remainin
g
terms
of
4
days
to
13
months,
maturin
g
on
average after
106
days.
Foreign
cu
rrency
forward
co
ntracts
and
currency
options,
including
collars,
n
ot
desig
nated
as
cash
flow
hedge
outstand
ing
as
of
December 31,
20
20
ha
d
remaining
term
s
of
4
days
to
11
months,
maturing
on
average
after
74
days.
Derivative instruments d
esignated
as cash flow hedge
To
reduce
its
expo
sure
to
U.S.
dollar
exchan
ge
rate
fluctuations,
the
Group
hedges
certain
Euro
-denominated
forecasted tran
sactions
that
cover at
reporting d
a
te a
portion
of its
front
-end
manufacturin
g costs
of
semi-
finished
goods through the use of
cu
rrency forward contracts and cu
rrency
options, including collars. The
Group also hedges
certain manufacturing tran
sactions d
enominated in Singap
ore dollars.
147
The
principles
regulating
the
hedging
strategy
for
derivatives
designated
as
cash
flow
hedge
is
to
hedge
u
p
to
70%
of
the
total
for
ecasted
transactions
of
the
following
quar
ter
for
these
manufacturing
costs.
In
order
to
follow
a
dynamic
hedge
stra
tegy,
the
Grou
p
may
chan
ge
th
e
perce
ntage
of
the
designated
hedged
item
within
the
limit
of
100% of the f
orecasted trans
action. The maximum length of time over which
the Group could hedge its exposure to
the variability o
f cash flows for forecasted tra
nsactions
is 24 mon
ths.
These
derivative
instruments
are
d
esignated
an
d
qualified
as
cash
flow
hedges.
Hedge
effectiveness
is
determined
at
the
inception
of
the
hedg
e
relationsh
ip,
and
through
periodic
prospective
eff
ectiveness
as
sessments
to
ensure
that
an
economic
relation
ship
exists
between th
e h
edged
item
and
th
e
hedging
instrume
nt.
The
Group
enters
into
hedge
relation
ships
where
th
e
critical
terms
of
the
hedgin
g
instrument
match
with
the
terms
of
the
hedged
ite
m,
which
ensures
a
1:1
hedge
ra
tio
on
a
monthly
basis.
The
Group
therefore
performs
a
qualitat
ive
as
sessment
of
effectiveness. If changes in
circumstances affect the terms of th
e hedged item such that the critical terms no lo
nger
match with
the critical term
of
th
e hedging
ins
trument, the
Group uses t
h
e hypothetical derivative m
ethod to
assess
effectiveness.
Ineffectiveness
may
arise
if
the
timing
of
th
e
forecast
tra
nsaction
changes
from
what
was
originall
y
estimated,
which
cann
ot
occur
as
the
Group
designates
as
hedged
items
forecasted
intercompan
y
transaction
s
denominated in foreign currency over which the
Group has
full oversight
, control, and visi
bility. Ineffectiveness may
arise only if there are chan
ges in th
e credit risk of the coun
terparty.
The derivative instruments
designa
ted as cash
flow hedges are refl
ected at fair v
alue in t
he consolidated s
tatement
of
financial
position. T
he
unrealized
gain
or
loss from
th
e
effective
portion
of
the
hedge
is
reported
in
other
comprehensive
income
and
is reclass
ified into
earnings
in
the s
ame period
in
which
the h
edged
tran
saction
affects
earnings, and with
in the same cons
olidated income statemen
t line item as the impact o
f the hedged tran
saction.
For
th
e
y
ear
end
ed De
cember
31, 2021,
the Group
record
ed a
decrease in
cost of
sales
of $
15
million (20
20
:
in
cr
ease
of
$3
mil
lion)
related
to
the
r
ealized
gains
in
curred
on
such
h
edged
trans
actions.
No
significant
ineffective
portio
n
of
th
e
hedg
e
was
recorded on
th
e
lines “Other
inco
me”
o
r
“
Other expenses”
for the
years
ended
December
31,
20
21
and 20
20
.
The
notional
amount
of
foreign
currency
forward
contracts
and
currency
options,
including
collars,
designa
ted
as
cash
flow
hedge
amounted
to
$
1,425
million
(20
20
:
$
947
million).
The
forecaste
d
transactions
hedged
at
December 31, 2021
were determined to b
e highly probab
le of oc
curring.
As
at
December 31,
2021
,
the
amount
of
net
deferred
loss
es
on
derivative
instruments
included
in
the
cas
h
flo
w
hedge
reserv
e
in
equ
ity
was
$
22
million
(20
20
:
n
et
deferr
ed
gain
of
$
31
m
illion),
all
of
which
were
expected
to
be
reclassified
as
earnings
durin
g
the
next
12
months
bas
ed
on
the
monthly
forecasted
se
mi
-finished
manufacturing
costs.
Foreign
curr
ency
for
ward
c
ontracts
and
currency
optio
ns,
including
collars
,
des
ignated
as
cash
flow
he
dge
outstand
ing as
of Decemb
er 31,
2021,
ha
d re
maining t
erms
of
5 day
s
to
13
mon
ths,
maturing on
average
after
1
40
days.
Foreign
curr
ency
for
ward
c
ontracts
and
currency
optio
ns,
including
collars
,
des
ignated
as
cash
flow
hedge
outstand
ing as
of Decemb
er 31,
20
20
,
had
remaining
terms
of
6
days
to
11
months,
maturing
on
average a
fter
113
days.
As
at
December
31,
20
21,
the
Grou
p
had
the
following
outstanding
derivative
instruments
that
were
enter
ed
into
to hedge Euro
-denominated an
d Singapore
-dollar-denominated forecas
ted transaction
s:
Notional amoun
t for hedge on
forecasted manufacturing cos
ts
transactions
In millions of
Euros
In millions of
Singapore Dollars
Forward contracts
343
214
Currency collars
310
—
148
As
at
December
31,
20
20
,
th
e
Group
had
the
following
outstanding
derivative
instruments
that
were
enter
ed
into
to hedge Euro
-denominated an
d Singapore
-dollar-denominated forecas
ted transaction
s:
Notional amoun
t for hedge
on forecasted manufactu
ring costs
transactions
In millions
of Euros
In millions of
Singapore Dollars
Forward contracts
341
157
Currency collars
334
—
Cash flow and fair value inte
rest rate risk
The
Group’s
interest
rate
risk
arises
from
long
-term
borrowings.
Borrowings
issued
at
variab
le
rates
expose
the
Group
to
cas
h
flow
interest
rate
risk.
Borrowings
issued
at
fixed
rates
expose
th
e
Group
to
fair
value
interest
rate
risk.
The
Group
analyzes
its
inter
est
rate
exposure
on
a
dynamic
bas
is.
Various
scenarios
are
simulated
taking
into
consideration refinancing, renewal of e
xisting positions, alternative financing
and
hedging. The
Group invests
primarily
on
a
short
-term
basis
and
as
such it
s
liquidi
ty
is
invested
in
floating
interest rate
in
struments.
As a
consequence, th
e Group is exp
osed to interest
rate risk due to p
otential mismatch b
etween the return o
n its s
hort
-
term floating interest rate in
vestments an
d the portion o
f its long
-term debt issu
ed at fixed rate.
Other market risk
As part
of
its ongoing
investing
activities, th
e Group
may
be exposed
to
equity
security price
risk for
investments
in
public
entities.
In
o
rder
to
h
edge
the
exposure
to
this
market
risk,
the
Grou
p
may
enter
into
certai
n
derivative
hedging transact
ions.
Credit ris
k
and
the
Group
’s
impairment
policies
on
financial
assets
are
further
describ
ed
in
Note
7.6.
7.13 an
d
Note
7.6.36
.
Offsetting financial asset
s and financial liabilities
The G
roup entered into
currency collars as
combinations of two
options, which
are
reported, for accounting
purposes,
o
n
a
net
basis.
As
at
Dece
mber
31,
2021,
the
fair
v
alue
of
th
ese
collars
represented
ass
ets
for
a
net
amoun
t
of $1
million
(co
mposed
of
$2
million
assets
offset
with
a
$1 million
liab
ility)
and
liabilities
for
a
net
amou
nt of
$13
million (composed o
f $14 million liab
ilities offset with a $1 million a
sset). In ad
dition, the
Grou
p entered in
to other
derivative instruments, primarily
forward contracts, whic
h are
governed by sta
ndard
International Swaps and
Derivatives
Association
(“ISDA”)
agr
eements
and
are
compliant
with
Protocols
of
the
European
Market
Infrastructure Regulation (“EMIR”),
which are
not offset in
the statement
of f
inancial position and
representin
g total
assets of $5
million and liabilities of $30 m
illion as at
December 31, 2021.
Risk
management
policies
relating
to
credit
risk expos
ure
to d
erivatives
counterparties
is
furth
er
described
in N
ote
7.6.36
.
149
7.6.1
5
.5.
Fair values
Set
out
below
is
a
comparison
by
c
lass
of
the
carry
ing
amoun
ts
an
d
fair
value
of
the
Group’s
finan
cial
instru
ments
that are carried in th
e consolida
ted financial s
tatements.
Carrying amount
Fair value
In millions of USD
December 31,
2021
December 31,
2020
December 31,
2021
December 31,
2020
Financial assets
Short-term depos
its
291
581
291
581
Trade accounts receivable
1,759
1,465
1,759
1,465
Other receivables an
d assets
575
520
575
520
Quoted financial ins
truments
29
158
29
158
Unquoted equity s
ecurities
10
10
10
10
Embedded call option
- Senior u
nsecured
convertible bonds
issued on July 3, 2017
(Tranche B)
—
61
—
61
Embedded call option
- Senior u
nsecured
convertible bonds
issued on August
4, 2020
(Tranche A)
11
13
11
13
Embedded call option
- Senior u
nsecured
convertible bonds
issued on August
4, 2020
(Tranche B)
15
20
15
20
Other financial ass
ets
6
65
6
65
Cash equivalents
(1)
2,883
2,637
2,883
2,637
Financial liabilities
Interest-bearing loans
and borrowings
(excluding senior uns
ecured convertible
bonds)
1,152
583
1,152
583
Senior unsecured conv
ertible bond
s issued
on July 3, 2017
(2)
—
675
—
1,359
Embedded conversion
option
- Senior
unsecured conv
ertible bonds issu
ed on July
3, 2017 (Tranche B)
—
676
—
—
Senior unsecured conv
ertible bond
s issued
on August 4,
2020
(3)
1,382
1,359
1,975
1,835
Embedded conversion
option
- Senior
unsecured conv
ertible bonds issu
ed on
August 4, 2020 (Tranche A
)
255
158
—
—
Embedded conversion
option
- Senior
unsecured conv
ertible bonds issu
ed on
August 4, 2020 (Tranche B
)
282
182
—
—
Lease financial liabilities
203
196
203
196
Deferred consideration o
n busines
s
acquisitions
19
20
19
20
Contingent consid
eration on business
acquisitions
77
123
77
123
Trade accounts p
ayable
1,582
1,166
1,582
1,166
Other payables a
nd accrued liabilities
266
274
266
274
Other financial liabilities
43
2
43
2
(1)
Cash equ
ivalents
primarily corre
spond to depo
sits at call wit
h banks.
150
(2)
T
he carry
ing amount of t
he senior unsecured conver
tible bonds issue
d on July 3, 2017 and outst
anding at December 31, 20
20
corr
esponds
to the liability component only,
since, at
initial recognition, an
amount of $
24
8
milli
on was
separately
recognized as
embedded derivative
financial
instruments. Tran
che B liability compo
nent, which amoun
ted to $6
75
million as at
December 31, 20
20
,
was fully settled in 202
1.
(3
)
The
carrying
amount
of
the
senior
unsecured
convertible
bonds
issued
on
August
4,
2020
and
outstanding
at
December 31,
2021
and
December 31,
20
20
correspond
s
to
t
he
liability
component
only,
since,
at
initial
recognition,
an
amount
of
$
219
million
was
separately
recognized as e
m
bedded der
ivative financial i
ns
truments.
The fair
value
of finan
cial as
sets an
d liab
ilities are
included
at
the price
at
which
the ins
trument
could
be sold
in
an
orderly
transaction
b
etween
market participants
at
the
measu
rement
da
te.
The
following methods
an
d
assumptions
were used to estimate fair v
alue:
•
For
trade
accounts
receivable,
cas
h
equivalents,
tra
de
accounts
pay
able,
other
payab
les
and
accrued
liabilities,
th
e
carrying
amounts
reflected
in
th
e
consolidated
financial
s
ta
tements
are
reasonable
estimates
of
fair
value
du
e
to
the
relatively
sh
ort
period
of
time
between
the
orig
ination
of
the
instruments an
d their expected realization.
•
Other
receivab
les
and
assets
approximate
their
carry
ing
amounts
due
either
to
their
shor
t-term
maturities
or to the fact that
they are recorded at th
eir net present value.
•
Financial in
vestments (debt an
d equity s
ecurities):
-
The fair value qu
oted debt
and equity s
ecurities is det
ermined bas
ed upon q
uoted market
prices for
identical instruments
.
-
The fair
valu
e
of u
nquoted
equity
securities
is
based
on
the
valuation
of
the
underlying
instru
ments
on a new round
of third
-party financing or up
on liquidation
.
•
The
fair
valu
e
of
interest
-b
earing
loans
an
d
borrowings,
including
leas
e
liabiliti
es
but
excluding
s
enior
unsecured
con
vertible
bon
ds,
is
determined
by
esti
mating
futu
re
cash f
lows
on a
borro
wing
-
by
-borrowing
basis
and
disco
unting
th
ese
futu
re
cash
flows
using
the
Gro
up’s
incremental
borrowing
rates
for
similar
types
of
arrangements.
•
The senior u
nsecured convert
ible bonds
issued on
July
3, 2017 and outs
tanding as at
December 31,
20
20
ha
d
been
trading
on
the
open
market s
eg
ment
on
the
Frankfurt
Sto
ck
Exchan
ge
since
issuance.
The
fair
value of these ins
truments
was the obs
ervable price of the bond
s on that market.
•
The
s
enior
uns
ecured
convertible
bonds
issued
on
August
4,
2020
an
d
ou
tstanding
as
at
December
31,
20
21
and
December
31,
2020
hav
e
been
trading
on
the
open
market
s
egment
on
the
Frankfurt
Stock
Exchange s
ince issuan
ce. The fair
value
of these
instruments
is the
observable price
of the bo
nds on t
hat
market.
•
The
fair
value
of
derivatives
instruments
is
d
etermined
b
ased
u
pon
qu
oted
market
prices
for
similar
instruments.
•
The
b
ondholders’
convers
ion
option
and
th
e
iss
uer’s
soft
call
e
mbedded
in
the
senior
unsecured
convertible
bon
ds
are
measured
at
fair
value
based
on
the
income
appro
ach
us
ing
Bloomberg’s
option
pricing model,
which
can
be
assimilated
to a
Black
& S
choles
model for
pricing
stock
options
. This
model
was
elected
as
th
e
best
indication
of
fair
valu
e
since
it
ma
ximized
the
use
o
f
obs
ervable
market
-based
inputs.
Fair value hierarchy
The
Group
uses
the
following
h
ierarchy
for
d
etermining
a
nd
disclosing
the
fair
value
of
financial
instruments
by
valuation techn
ique:
•
Level 1: quoted
(unadjus
ted) prices in activ
e markets for identical ass
ets or liabilities.
•
Level 2: other
techniqu
es
for which
all inputs
which have
a significant effect
on the
recor
ded
fair
v
alue
are
observable, either directly o
r indirectly.
151
•
Level 3:
techn
iques
which
use
inputs
which
have
a
significant
effect
on
the
recorded
fair
valu
e
that
are
not based o
n observable market data.
As at December 31, 202
1, the Group h
eld the following as
sets
and liabilities
measured at fair v
alue:
In millions of U
SD
December 31,
202
1
Level 1
Level 2
Level 3
Assets measured at
fair value
Financial assets at FVP
L
Trading derivatives
Foreign exchange forward co
ntracts
3
—
3
—
Currency collars
—
—
—
—
Quoted equity s
ecurities at FVPL
13
13
—
—
Other trading finan
cial assets at FVPL
16
16
—
—
Embedded call optio
ns
26
—
—
26
Cash flow hedges
Foreign exchange forward co
ntracts
2
—
2
—
Currency collars
1
—
1
—
Unquoted equ
ity securities measured
at FVOCI
10
—
—
10
Short-term
deposits
291
291
—
—
Total assets
362
320
6
36
Liabilities measured at fair v
alue
Derivative instrumen
ts
Foreign exchange forward co
ntracts
12
—
12
—
Currency collars
6
—
6
—
Cash Flow Hedges
Foreign exchange forward co
ntracts
18
—
18
—
Currency collars
7
—
7
—
Embedded c
onversion options
537
—
—
537
Contingent co
nsideration on business acquisitions
77
—
—
77
Total liabilities
657
—
43
614
During
the
reporting period
end
ing
December 3
1,
2021, there
was no
transfer
b
etween
Level
1 and
Level 2 fair
valu
e
measurements, an
d no transfer into and o
ut of Level
3 fair valu
e measurements.
152
As at December 31, 20
20
, the Group
held the following
assets
and liab
ilities measured at
fair value:
In millions of USD
December 31,
2020
Level 1
Level 2
Level 3
Assets measured at
fair value
Financial assets at FVP
L
Trading derivatives
Foreign exchange forward co
ntracts
24
—
24
—
Currency collars
9
—
9
—
Quoted equity s
ecurities at FVPL
13
13
—
—
Other trading finan
cial assets at FVPL
12
12
—
—
Embedded call optio
ns
94
—
—
94
Cash flow hedges
Foreign exchange forward co
ntracts
24
—
24
—
Currency collars
8
—
8
—
Quoted d
ebt securities measure
d at FVOCI
Government bonds
issued by the U.S. Treasu
ry
133
133
—
—
Unquoted equ
ity securities measured
at FVOCI
10
—
—
10
Short-term
deposits
581
581
—
—
Total assets
908
739
65
104
Liabilities measured at fair v
alue
Derivative instrumen
ts
Foreign exchange forward co
ntracts
2
—
2
—
Embedded c
onversion options
1,016
—
—
1,016
Contingent co
nsideration on business acquisitions
123
—
—
123
Total liabilities
1,141
—
2
1,139
During
the
reporting period
end
ing
December 3
1,
20
20
,
there was
no transfer
between
Lev
el 1 and
Level 2 fair
v
alue
measurements, an
d no transfer into and o
ut of Level
3 fair valu
e measurements.
Financial instru
ments in Level
1
The
fair
v
alue
of financial
instruments
traded in
active markets
is
based
on
quo
ted
market
p
rices
at
th
e
balance
sheet
date.
A
mark
et
is
regarded
as
active
if
q
uoted
prices
ar
e
readily
and
regularly
av
ailable
from
an
exchange,
dealer,
broker, indus
try group, pricing s
ervice or regulatory agency
, and thos
e prices represent actual and
regularly
occurring
market
transactions
on
an
arm’s
length
basis
.
The
quoted
market
price
used
for
financial
as
sets
held
by
the Group is th
e current bid price. Th
ese instruments a
re included in Level
1.
Financial instru
ments in Level
2
The fair value of financial
instru
ments that are not
traded in active markets
(for example ov
er the counter
derivatives)
is
determined
by
using
v
aluation
techniqu
es.
These
valuation
techniqu
es
maximize
the
use of
observ
able
market
data w
hen
availa
ble
an
d
rely
as
little
as
pos
sible
on entity’s
specific
estimat
es.
If
al
l
s
ignificant
inpu
ts
required
to
fair
value
an
instrument
ar
e
observable,
th
e
instrument
is
in
cluded
i
n
Level 2.
If
one
or
more
of
the
significant
inputs
is n
ot
based
on
observable
market
data,
the
instrument
is
includ
ed
in
Level
3.
Specific v
aluation
techniques
used to valu
e financial instruments in
clude:
•
Quoted mark
et prices or deal
er’s quotes for
sim
ilar
instruments;
•
The
fair
value
o
f
foreign
exchange
forward
contracts
when
determin
ed
usin
g
forward
ex
change
ra
tes
at
the balance sheet dat
e, with the resulting v
alue discoun
ted back to present valu
e.
153
Financial instru
ments in Level
3
For
finan
cial
as
sets
(liabilities)
measured
at
fair
v
alue
using
s
ignificant
unobservable
inp
uts
(Level
3),
the
reconciliation between Jan
uary
1, 2021 and Dece
mber 31, 2021 is
presented as follows
:
In millions of USD
Fair value measurements
using
significant unob
servable inputs (Level 3)
As at January 1, 2021
(1,035
)
Change in fair valu
e of the embedded conv
ersion option
of the
senior unsecured co
nvertible bonds
issued on July 3, 2017 prior
to settlement (Tranche B)
(68
)
Change in fair valu
e of the embedded call op
tion of the senior
unsecured conv
ertible bonds issu
ed on July 3, 2017 prior
to
settlement (Tranche B)
(121
)
Extinguishment o
f the embedded conv
ersion option
of the senior
unsecured conv
ertible bonds issu
ed on July 3, 2017 (Tranche B)
744
Extinguishment o
f the embedded call op
tion of the senior
unsecured conv
ertible bonds issu
ed on July 3, 2017 (Tranche B)
60
Change in fair valu
e of the embedded conv
ersion option
of the
senior unsecured co
nvertible bonds
issued on August
4, 2020
(Tranche A and Tranche B
)
(197
)
Change in fair valu
e of the embedded call op
tion of the senior
unsecured conv
ertible bonds issu
ed on August 4, 2020 (Tranche A
and Tranche B)
(6
)
Change in fair valu
e of the contin
gent consideration o
n business
acquisitions
38
Currency translat
ion adjustment
8
Change in fair valu
e of equity securities at
FVOCI
-
As at December 31, 2021
(577
)
Amount of net loss
es included in
the 2021 income stateme
nt
attributable to a
ssets (liabilities) still h
eld at the reporting d
ate
(165
)
The
following
table
sho
ws
the
impact
on
the
incom
e
statement
of the
v
aluation of
the
embedded derivative
instruments ou
tstanding as at December
31, 2021
:
In millions of USD
Asset (liability) value as at De
cember
31, 2020
(922
)
Settlement of Tranch
e B of the senior
unsecured conv
ertible
bonds issu
ed on July 3, 2017
804
Gains (losses) recognized
in the conso
lidated income statem
ent
(392
)
Asset (liability) value as at De
cember
31, 2021
(510
)
Contingent con
sideration
reported
as
liabilities
on th
e cons
olidated
statement
of finan
cial
position
as
at December
31,
2021 an
d
December
31,
2020
is
based
on
the
probability
that
the
milestones
d
efining th
e v
ariable
components
of
the
con
sideration
will
be
achieved.
In
20
21,
the
probabi
lity
of
ach
ievement
o
f
these
variab
le
components
was
reassessed,
resulting
in
a
reduction
of
$40
million
of
the
fair
value
of
the
contingent
consideration
related
to
the
2020 acquisitio
ns.
The
Group
reported
this
change
in
fa
ir
valu
e in
the lin
es “Research
and
d
evelopment”
and
“Cost
of sales” of the con
solidated statement of inco
me, for $34
million and $6 million, respect
ively.
The
chan
ge
in fair
valu
e
amou
nting to
$
265
million
on
the
embedded
bondholders’
conversion
op
tions was
reported
as
“Finance
costs
”
in
the
consolidated
income
statement e
nded
December
31, 2021
.
The
change
in
fair
value
154
amounting
to
$
127
million
on
the e
mbedded
iss
uer’s
call
option
s
was
reported
as
“Finance
costs
”
in
the
consolidated
income statement ended Dec
ember 3
1, 2021.
The model used to
price the derivative instruments
embedded in the senior
unsecured convertible bon
ds issued on
August 4, 2020 (Tranch
e A and Tran
che B) included t
he following inpu
ts:
•
The risk-free inter
est rate for
comparable maturiti
es;
•
The reference pric
e for the Compan
y’s ord
inary shares as traded on t
he New York Stock Exchan
ge;
•
The exercise pric
e;
•
The dividend
expected to be
paid on th
e Company’s ordinary sh
ares over the l
ife of the o
ption;
•
The volatility o
f the Company’s o
rdinary shares; an
d
•
The duration
of the option.
Sensitivity
to
the
share
price
v
ariations
is
furth
er
d
escribed
in
No
te
7.6.3
6.
Implied
volatility
shou
ld
be
considered
an un
observable input d
ue to t
he lack
of market
data (s
tock exchange
listing of
the bond optio
n) for
a time horizon
equal
to
the
duration
of
the
option.
The
figure
is,
therefore,
an
assumption
based
on
the
volatility
implied
by
the
price of
th
e financial
instrument,
as
n
egotiated at
th
e issue stage,
and market
volatility for the
nearest time
horizon.
The
pric
es
of
the
bondholders’
conversion
o
ption
s
are
sensitive
to
implied
volatility.
The
table
below
shows
a
sensitivity analysis of
the net
carryin
g amount
o
f
the embedded conversion optio
ns in
relation
to a
s
eries of
changes
expressed in percentage poin
t terms of v
olatility.
Change in volatility o
f the Company
’
s ord
inary
shares
-
10
p.p.
- 8 p.p.
-5 p.p.
+5 p.p.
+8 p.p.
+10
p.p.
Change in the net carry
ing amount of th
e
bondholders
’
conversion options
(120
)
(96
)
(60
)
58
93
116
Net carrying amo
unt of the embedd
ed conversion
options
417
441
477
595
630
653
155
For
finan
cial
as
sets
(liabilities)
measured
at
fair
v
alue
using
s
ignificant
u
nobservable
inputs
(Level
3),
the
reconciliation between Jan
uary
1, 20
20
and Dece
mber 31, 20
20
is
presented as
follows:
In millions of USD
Fair value measurements
using
significant unob
servable inputs (Level 3)
As at January 1, 2020
(661
)
Change in fair valu
e of the embedded conv
ersion option
of the
senior unsecured co
nvertible bonds
issued on July 3, 2017 prior
to settlement (Tranche A)
(11
)
Change in fair valu
e of the embedded call op
tion of the senior
unsecured conv
ertible bonds issu
ed on July 3, 2017 prior
to
settlement (Tranche A)
(53
)
Extinguishment o
f the embedded conv
ersion option
of the senior
unsecured conv
ertible bonds issu
ed on July 3, 2017 (Tranche A)
341
Extinguishment o
f the embedded call op
tion of the senior
unsecured conv
ertible bonds issu
ed on July 3, 2017 (Tranche A)
38
Change in fair valu
e of the embedded conv
ersion option
of the
senior unsecured co
nvertible bonds
issued on July 3, 2017
(Tranche B)
(296
)
Change in fair valu
e of the embedded call op
tion of the senior
unsecured conv
ertible bonds issu
ed on July 3, 2017 (Tranche B)
39
Embedded non
-equity derivativ
e instruments recognized
at
inception on th
e senior unsecured convertible b
onds issued on
August 4, 2020
(219
)
Change in fair valu
e of the embedded conv
ersion option
of the
senior unsecured co
nvertible bonds
issued on August
4, 2020
(Tranche A and Tranche B
)
(121
)
Change in fair valu
e of the embedded call op
tion of the senior
unsecured conv
ertible bonds issu
ed on August 4, 2020 (Tranche A
and Tranche B)
33
Contingent cons
ideration on busin
ess acquisitions
(117
)
Change in fair valu
e of the contin
gent consideration o
n business
acquisitions
(1
)
Currency translat
ion adjustment
(5
)
Change in fair valu
e of equity securities at
FVOCI
(2
)
As at December 31, 2020
(1,035
)
The
following
table
sh
ows
the
impact
on
the
in
come
statement
of the
valuation
of
the
embedded derivative
instruments ou
tstanding as at December
31, 20
20
:
In millions of USD
Asset (liability) value as at De
cember
31, 2019
(358
)
Embedded non
-equity derivative in
struments recognized at
inception on th
e senior unsecured convertible b
onds issued on
August 4, 2020
(219
)
Gains (losses) recognized
in the conso
lidated income statem
ent
(345
)
Asset (liability) value as at
Decem
ber 31, 2020
(922
)
The change in fair value
amou
nting to $
417
million on the embedded bondh
olders’ conversion option
was reported
as
“Finance
costs”
in
the
consolida
ted
income
s
tatement
ended
December
31,
20
20
.
The
change
in
fair
value
156
amounting
to
$
71
million
on
the
embedded
issuer’s call
option
was
reported
as “Finance
income”
in
the
conso
lidated
income statement ended Dec
ember 31, 20
20
.
7.6.1
6. Other n
on-curr
ent assets
Other non-current as
sets consisted
of the following:
In millions of USD
December 31,
2021
December 31,
2020
Long-term state
receivables
506
623
Deposits and
other non-curre
nt ass
ets
90
75
Total
596
698
Long-term
state
receivables
includ
e
receivables
related
to
fun
ding
and
receivables
related
to
tax
refund
s.
Funding
are
mainly
public
grants
to be
received
from governmental
agencies
in Italy
an
d
France as
part
o
f
long
-term re
search
,
development,
innovation,
industrialization
and
capital
investment
p
rojects.
Lo
ng-term
receivables
related
to
tax
refund correspond to tax benefits claimed by the Group in certain of its local
ta
x jurisdictions
, for which collection is
expected beyond one y
ear.
The
Group holds
long
-term
receivab
les
related
to funding
and
tax ref
und with
the
o
bjective
to
collect
the contractual
cash
flows and
therefore,
thes
e
receivables are
meas
ured
su
bsequently at
amorti
zed cost
using
the e
ffective
interes
t
method.
In 2021 and 2020,
the Group entered into f
actoring transaction
s to accelerate
th
e realization in cash of
certain long-
term
receivables.
The
Group
sold
witho
ut
recourse
$118
million
an
d
$96
million
of
these
receivab
les
in
the
years
ended December 31, 2021 an
d 2020 respectively,
with a finan
cial cost of less t
han $1 mil
lion for
both years
.
The
major
portion
of
other
lo
ng
-term
re
ceivables
to
which
the
forward
looking
expected
credit
loss
model
applies
corresponds
to
receivables
from
governmenta
l
agencies
.
Du
e
to
the
existing
his
tory
of
zero
-de
fault
on
receivables
originated by
governments, the
expected credit
los
s is
assumed
to be negligible
.
Oth
er
no
n-current assets presented
in the table above within
th
e l
ine "Deposits and other non-current assets
" are composed
of individ
ually insignificant
amounts
not deemed to
hav
e exp
osure
of default.
Consequ
ently, n
o significant
expected
credit loss
allowance
was
reported on other n
on-current as
sets at reporting d
ate.
The carrying amounts o
f the Group’s n
on
-current assets are denominated in t
he followin
g currencies:
In millions of U
SD
December 31,
2021
December 31,
2020
US dollar
41
20
Euro
545
668
Japanese Yen
2
3
Other currencies
8
7
Total
596
698
157
7.6.1
7. Inventor
ies
Inventories cons
isted of the following:
In millions of USD
December 31,
2021
December 31,
2020
Raw materials
223
175
Work-
in
-process
1,241
1,117
Finished produ
cts
514
546
Total
1,978
1,838
Write-offs of inventories were recognized
in cost of
sales as an e
xpense and amounted to $
65
million in 2021
(2020:
$57 m
illion). Further
impact related to inventories
on the consolidated income
s
tatement is
provid
ed in
Note
7.6.2
8.
The
carrying
amount
of
inventories is
presented
net
of
a reserve
for
obsolescence items
of
$
88
million
as
at
December 31, 2021 (
20
20
: $
74
million).
7.6.1
8. Trade ac
counts rec
eivable
Trade accounts receivable co
nsisted o
f the following:
In millions of USD
December 31,
2021
December 31,
2020
Trade accounts receivable
1,778
1,481
Loss allowance
(19
)
(16
)
Total
1,759
1,465
Trade r
eceivables
are
a
mounts
d
ue
from
customers
for
goods
sold
or
services
perfor
med
in
the
ordin
ary
course
o
f
business.
Trade
receivables
are
non
-interest
bearing
with
credit
terms
from
30
up
to
90
d
ay
terms.
They
ar
e
all
classified
as
current.
The
Group h
olds
the
trade receivable
s
with
the
objective
to
collect
th
e con
tractual
cash
flows
and, therefore, trade receivables are measured subsequently
at amortized cost us
ing the effective
interest method.
The Group
does
not expect
to
have an
y contracts
wh
ere th
e period
between
the tran
sfer of
the promised
goods
or
services
to
th
e
cus
tomer
and
payment
by
the
cu
stomer
exceeds
one
year.
As
a
consequ
ence,
the
Group
does
n
ot
adjust
any
of
the
transaction
prices
for
the
time
value
of
money
and
no
significant
tra
nsaction
with
customers
includes
significant
finan
cing compon
ent.
Due
to
the s
hort
-term
nature
of
trade
receivables,
th
eir carry
ing
amount
is considered to b
e the same as th
eir fair value.
As
described in
Note
7.6.36,
the
Group monitors
th
e
creditworth
iness of
its
cus
tomers
to
which
it
gran
ts cre
dit term
s
in the normal course of
busin
ess. If certain customers are independently rated, these ratings are used. Otherwise, if
there
is
n
o
in
dependent
rating,
risk
control
as
sesses
the
credit
quality
of
the
customer,
considering
its
finan
cial
position,
pas
t
experience
and
other
factors.
In
dividual
risk
limits
are
set
bas
ed
on
in
ternal
and
external
ratings
in
accordance with limits set by
managem
ent. The utilization of cre
dit limits is regularly monitored. Sales to customers
are primarily settled in cas
h.
The Group
us
es a
lifetime
expected loss
allowance
for
all tr
ade rec
eivables
based
on
failure rates,
as
applied
to th
e
gross amounts of
trade accounts rece
ivable. The m
odel includes reasonable a
ssumptions about future
credit trends.
The historical
loss
rates
are adju
sted
to reflect curr
ent
and forward
-looking in
formation
on
macroeconomic
factors
affecting the ability o
f the Grou
p
’s customers t
o settle the receivables. In a
dditio
n to th
e factors already embedded
in
the
failure
rates,
as
applied
on
tra
de
accounts
receivable,
the
Group
has
identified
cyclicality
and
uncertainties
around
continued growth
fo
r the
semiconductor
industry
and
its
serviceable
available
market
to
be
the
mo
st
relevant
factors.
These
mac
roeconomic
factors
ar
e
weigh
ted
into
different
economic
s
cenarios,
in
lin
e
with
estimates
and
methodologies
applied
by
other
business
entit
ies,
including
financial
institutions
.
These
scenarios
158
range
from u
pside
scenario
(abov
e-trend
economic
growth)
to
severe
downsid
e (recess
ion).
On th
at b
asis, the
loss
allowance as at December
31, 2021 an
d December 31, 20
20
was d
etermined as follows:
Past due
In millions of USD
Total
No
past-
due
Less than
a month
Between
1 and 6
months
Over 6
months
December 31, 2021
Expected loss r
ate
1
%
1
%
10
%
100
%
Trade receivables
–
Gross carryin
g amount
1,778
1,736
39
—
3
Loss allowance
(19
)
(16
)
—
—
(3
)
Trade receivables
–
Net carrying amoun
t
1,759
1,720
39
—
—
December 31, 2020
Expected loss r
ate
1
%
1
%
10
%
100
%
Trade receivables
–
Gross carryin
g amount
1,481
1,450
29
—
2
Loss allowance
(16
)
(14
)
—
—
(2
)
Trade receivables
–
Net carrying amoun
t
1,465
1,436
29
—
—
The loss
allowanc
e for
trade
account
s
receivable
as at
December 31,
2021 and
December
31,
20
20
reconcile
to
the
opening loss a
llowance as follows:
In millions of USD
As at December 31, 2019
16
Additions
1
Reversals
(1
)
As at December 31, 2020
16
Additions
4
Reversals
(1
)
As at December 31, 2021
19
Trade accounts receivable
are d
enominated in the following
currencies:
In millions of USD
December 31,
2021
December 31,
2020
US dollar
1,635
1,378
Euro
37
38
Japanese Yen
106
65
Total
1,778
1,481
The
maximum
exposu
re to
credit
risk
was
th
e
fair v
alue
of
trade accou
nts
receivable,
net
o
f expe
cted
credit
los
ses
as at December 31, 2021
and December 3
1, 20
20
.
159
7.6.19
. Other r
eceivables and assets
Other receivables an
d assets consisted o
f the following:
In millions of USD
December 31,
2021
December 31,
2020
Receivables from governm
ent agencies
296
244
Advances
28
39
Prepayments
90
70
Other indirect tax receivab
le
119
114
Other current ass
ets
42
53
Total
575
520
Receivables
from
gov
ernment
agencies
relate
to
res
earch
and
development
con
tracts
,
research
tax
credits,
industrializatio
n contracts and capital in
vestment projects
.
The
Group applies
a
forward
-looking e
xpected
credit
loss
es
model
on
all financial
assets measured
at
amortized
cost,
excluding trade
acco
unts receivable. The m
ajor portion of
other receivables and assets to
which this
expected
credit
loss
model
applies
corresp
onds
to
receivables
from
governmental
agencies.
Due
to
the
short
maturity
of
these
receivables
and
th
e
exis
ting
history
of
zero
-default
on
receivables
originated
by
gov
ernments,
the
expected
credit
loss is assumed to be n
egligible. Other receivables, excludin
g receivables from governm
ent agencies, are compo
sed
of
individu
ally
insignificant
amounts at
e
xposure
of
default. Consequently,
no
significant
loss allowance
was reported
on other receivables an
d assets as a
t December 31, 202
1 and Dece
mber 31, 2020.
The carrying amounts o
f the Group’s o
ther receivables
and a
ssets
are denominated in the following cu
rrencies:
In millions of USD
December 31,
2021
December 31,
2020
US dollar
104
108
Euro
435
365
Other currencies
36
47
Total
575
520
The
maximu
m
expos
ure
to
credit
ris
k
was
the
fair value
of
other re
ceivable
s
and
as
sets,
net
of
exp
ected cre
dit
loss
es,
as at December 31, 20
21
and December 31,
20
20
.
7.6.
20. Cash and c
ash equivalen
ts
Cash and ca
sh equivalents consis
ted of the following:
In millions of USD
December 31,
2021
December 31,
2020
Cash at ban
k and in hand
342
369
Deposits at call with
banks
2,883
2,637
Total
3,225
3,006
160
7.6.2
1. Equity
7.6.2
1
.1.
Outsta
nding shares
The
authorized
share
capital
of
the
Company
is
€
1,810 million
consistin
g
of
1,200,000,000
co
mmon
shares
and
540,000,000
preference
shar
es,
each
with
a
nominal
value
of
€
1.04.
As
at
D
ecember
31,
20
21
,
the
number
of
common shares iss
ued was
911,276,920 sh
ares (December 31, 20
20
:
911,239,4
20 shares).
As of Decem
ber 31, 2021, the number of common shares outstanding was 906,518,057 shares (December 31, 20
20
:
905,415,002 shares
).
7.6.2
1
.2.
Preference shar
es
The 540,000,000 preference s
hares, when iss
ued, will entitle a holder to full votin
g rights and to a preferential right
to dividends
and distributions up
on liquidation.
The Compan
y is
a
party
to an
option
agreement regardin
g
t
he
preference s
hares
with Sti
chting
Continuïteit
ST
(the
“Stichting”),
enter
ed
into
on
Janu
ary
22,
2007,
with
a
duration
of
ten
y
ears,
which
agreement
was
extended
for
another
ten
years
in
October
2016.
The
Managing
Board
a
nd
the
Su
pervisory
Board,
along
with
the
board
of
the
Stichting,
h
ave
declared
that
they
are
jointly
of
the
opinion
that
the
Stichting
is
independent
of
the
Compan
y.
The
option
agreement
provides
for
the
issuance
of
up
to
a
maximum
540,000,0
00
p
reference
shares.
Any
such
s
hares
would be issued t
o the Stich
ting up
on i
ts request
and in its
sole discretion a
nd upon p
ayment of a
t least 25%
of the
par
value of
th
e
p
reference
sh
ares
to
be
is
sued. The
shares
would be
issuab
le
in the
event
of
action
s w
hich
the
board
of the Stichting determine
s would be contrary to the Company
’s
interests, shareholders and other
stakeholders and
which
in
the
event
of
a
creeping
acq
uisition
or
offer
for
the
Company’s
common
shares
are
not
supported
by
the
Company’s
Man
aging
Board
and
Supervisory
Board.
The
preference
shares
may
remain
ou
tstandin
g
for
no
longer
than two years. No
preference shares have been
issued to
dat
e. The e
ffect of the
preference shares may be
to deter
potential
acquirers
from
effecting
an
u
nsolicited
acquis
ition
resulting
in
a
change
of
control
as
well
as
to
create
a
level-playing
field
in
the
event actions
which
are considered
to
b
e
hostile
b
y the
Managing Board
and
the
Supervis
ory
Board, as
described
above, occur
and which
the bo
ard of the
Stichting determines
to
be contra
ry to
the
Company’s
interests, s
hareholders and other stakeho
lders.
There were no preference sh
ares iss
ued as of December 31, 20
21
and December 31, 20
20
respectively.
7.6.2
1
.3.
Treasury shares
As
of
Dec
ember
31,
202
1,
the
Company
owned
4,758,863
s
hares
clas
sified
as
treasury
s
tock
in
th
e
consolida
ted
statement of equity compare
d to
5,824,418 shar
es as of December 31, 20
20
.
The treasury
shares
have b
een originally
designated
for allocation
under
the Compan
y’s share
-based remuneration
programs
of
unvested
shares.
As
o
f
December
31,
2021,
67,933,213
of
thes
e
treasury
shares
were
transferred
to
employees under the
Company
’s share
-based remuneration programs, of
which 7,4
48,615 in
the year ended
December 31, 2021.
In
2021,
th
e
Company
completed
its
buy-back
program
announ
ced
on
November
5,
2
018
by
th
e
repurchase
of
approximately
8.3 m
illion sh
ares of
its
common sto
ck for
a
total o
f $
313
million,
reflected
at
cost,
as a
reduction
of
the parent company
stockholders’ equity
.
On
July
1,
2
021,
the
Co
mpany
an
nounced
the
laun
ch
of
a
share
buy
-back
program
of
up
to
$1,040
million
to
be
executed within a
three-year period. The Company
intends to carry out
the buy
-back program, and ho
ld the shares
bought back
as
treas
ury
s
tock
for
th
e
p
urpose of
meeting
the
Company’s obligations
in rel
at
ion to
its
employee stock
award
plans
and
to
support
the
p
otential
settlement
o
f
its
outstanding
con
vertible
d
ebt.
In
2021,
as
part
of
the
share b
uy-back
program an
nounced on
July
1, 2021,
the Compan
y repurch
ased ap
proximately
3.9 million
shares
of
its common stock for a
total of $
172
million.
161
As
described
in
note
7.6.15
.3
,
bondholders
exercised
in
2021
their
conversion
rights
on
Tranche
B
of
th
e
senior
unsecured
con
vertible
bon
ds
issued
on
July
3,
2017.
Out
of
the
3,750
bonds
composing
Tranche
B,
the
Company
elected to settle 1,238
bonds on a net-share basis
through the delivery
of approximately 5.8 million treasury shares.
In
2020,
b
ondholders
exercised
their
conversion
rights
on
Tranch
e
A
of
the
senior
u
nsecured
convertible
b
onds
issued
on July 3,
2017, which th
e Company
elected to
net
-share
settle.
The full
settlement
of Tranche
A resulted
in
11.4 million shar
es delivered to bond
holders
.
7.6.2
1
.4.
Unvested
share awards for the
Supervisory B
oard
On
an
annual
basis
and
until
the y
ear
2012, th
e
Compensation
Committee
(on
behalf
of
the
Supervisory
Board an
d
with
its
approval)
used
to
grant
s
tock
-based
award
s
(the
option
s
to
acq
uire
common
shares
in
the
share
capital
of
the
Company)
to
the
members
and
p
rofessionals
of
the
Supervisory
Board
(“The
Supervisory
Board
Plan”).
The
awards
were granted
at
the n
ominal v
alue of
the
share
of
€
1.04 (
exercise pric
e of
the
option).
The option
s gran
ted
under
the
Supervisory
Board Plan
vest
and
become exercis
able
imme
diately,
whil
e
the
shar
es
resulting
from
these
awards
v
est
and
therefore
bec
ome
availab
le
for
trade
evenly
over
three
years
(one
third
ev
ery
year),
with
no market,
performance or service cond
itions
.
The
table
below
summariz
es
grants
un
der
the
outstandin
g
s
tock
award
plans
as
authorized
by
the
Comp
ensation
Committee:
Year of Grant
Options
gran
ted
and vested
Options waived
at grant
2011
172,500
(30,000
)
2012
180,000
(22,500
)
2013 to 2021
No options
granted
A
summary
of
the
option
s’
activ
ity
by
plan
for
the
years
ended
De
cember
31,
2021
and
December 3
1,
20
20
is
presented below:
Year of grant
Outstandin
g
as of
31.12.2019
Exercised
Outstandin
g
as of
31.12.2020
Exercised
Outstandin
g
as of
31.12.2021
2011
45,000
(37,500
)
7,500
(7,500
)
—
2012
65,000
(15,000
)
50,000
(30,000
)
20,000
The tota
l
intrinsic
valu
e o
f
optio
ns
exercised
during
the
year
20
21
a
mounted
to
$
2 million
,
compared
to
$2
mil
lion
in 2020.
The
total intrinsic value of
options outstanding as of
December
31, 20
21
and
December 31, 2020 amounted
to $
1 million and $2 million, r
espectively.
At
the
Company’
s
Annual
General
Meeting
of
Shareho
lders
held
on
Ju
ne
21,
2013,
it
was
reso
lved
to
abolish
an
d
terminate the stock-bas
ed compens
ation for the Sup
ervisory Board members an
d profession
als.
162
7.6.2
1
.5.
Unvested
share awards for the
Employees
On an annual bas
is, the Compensation Committee (on behalf of the Supervis
ory Board and with its approval) grants
stock-
based
awards
to
senior
executives
along
with
s
elected
employees
(the
“Employee
Plan”).
The
awards
are
granted
for
services
under t
he Employee
Plan.
There
ar
e
two
types of
unvested
shares:
(1)
shares
granted
to
employees,
which
are
subject
on
ly
to
service
conditions
and
vest
ov
er
the
requisite
service
p
eriod,
and
(2)
shares
granted
to senior
executiv
es,
whose
vesting
is
subject
to
performance
conditions
.
For
the
plans
201
8
,
201
9
and 2020
,
the performance cond
itions con
sisted of two external ta
rgets (sales
evolution and op
erating income compared to a
basket
of
competitors)
weighting
for
two
third
s
of
the
total
n
umber
of
awards
granted
and
of
one
internal
target
(return
on
net
assets
compared
to
the
previous
period),
weighting
for
one
third
of
the
total
number
of
award
s
granted.
For
the
plan
2021,
the
performance
conditions
cons
isted
of
two
external
tar
gets
(sales
evolution
and
operating
income
compar
ed
to
a
basket
of
competitors
)
weighting
for
two
thirds
of
the
tota
l
n
umber
of
awards
granted an
d of
one in
ternal target (Co
mpany’s
sustainability
and d
iversity performance).
All
the award
s v
est ov
er a
three-year service period (32% as of
the first anniversary of
th
e grant, 32% as of
the second anniversary of
th
e grant
an
d
36%
as
of
the
third
an
niversary
of
the
grant).
In
add
ition,
in
2019
and
2020
there w
as
a
Special
Bonus
granted
to the Group’s
CEO.
The
table
below
summariz
es
grants
un
der
the
outstandin
g
s
tock
award
plans
as
authorized
by
the
Comp
ensation
Committee:
Date of Grant
Allocations un
der
Number
of shares
granted
Number of
shares
waived
Number of
shares lost
on performance
conditions
July 24, 2018
2018 Employee Plan
7,552,410
—
—
December 20, 2018
2018 Employee Plan
443,200
—
—
May 23, 2019
2019 CEO Special Bonus
34,960
—
—
July 24, 2019
2019 Employee Plan
7,752,940
—
(1,161,966
)
December 26, 2019
2019 Employee Plan
246,750
—
(17,013
)
June 17, 2020
2020 CEO Special Bonus
16,000
—
—
July 23, 2020
2020 Employee Plan
7,437,580
—
—
December 24, 2020
2020 Employee Plan
562,350
—
—
July 28, 2021
2021 Employee Plan
6,327,205
—
(954,428
)
December 21, 2021
2021 Employee Plan
213,270
—
(60,500
)
A summary of the un
vested share activity for
the year December
31, 20
21 is presented b
elow:
Allocation under
Unvested as
at
December
31,
2020
Granted
Forfeited
/
waived
Cancelled on
failed vesting
conditions
Vested
Unvested as
at
December
31,
2021
2018 Employee Plan
2,718,685
—
(8,235
)
—
(2,710,450
)
—
2019 CEO Special
Bonus
23,306
—
—
—
(11,654
)
11,652
2019 Employee Plan
4,575,120
—
(46,062
)
—
(2,172,659
)
2,356,399
2020 CEO Special
Bonus
—
16,000
—
—
(5,333
)
10,667
2020 Employee Plan
7,970,945
—
(97,860
)
—
(2,547,419
)
5,325,666
2021 Employee Plan
—
6,540,475
(41,870
)
(1,014,928
)
(1,100
)
5,482,577
Total
15,288,056
6,556,475
(194,027
)
(1,014,928
)
(7,448,615
)
13,186,961
The
grant date weighted average
fair value
of unvested shares
granted to
employ
ees under the
201
8
E
mployee Plan
was
$22.78.
On
March
27,
2019,
the
Compensat
ion
Committee
approv
ed
th
e
s
tatement
that
with
respect
to
the
163
shares
subject
to
performance
conditio
ns, all
three
performance
conditions
were
ful
ly
met.
Cons
equently,
the
compensation
expense
reco
rded
on
the
2018
Employee
Plan
reflects
the
statement
that
—
for
the
portio
n
of
the
shares
s
ubject
to
performance
conditions
—
100%
of
the
awar
ds
gran
ted
will
fully
vest,
as
far
as
the service
cond
ition
is met.
The
grant date weighted average
fair value
of unvested shares
granted to
employ
ees under the
2019 Employee Plan
was
$19.28.
On
Ma
rch 25,
2020,
the
Compensat
ion
Committee
approv
ed
th
e
s
tatement
that
with
respect
to
the
shares subject to performance conditions
, two performanc
e conditions were met. Consequently, the compensation
expense recorded on the 201
9 Employee Plan reflects th
e statement that
—
for the portion of the shares subject to
performance condition
s
—
two th
irds of th
e awards granted will vest, as
far as the se
rvice condition
is met.
The grant date fair
v
alue of unvested shares granted to
the CEO
under the 2019 CEO Special Bonus Plan was
$14.97
.
On the 2019 CEO Special Bonus Plan, the fair value of the unvested shares granted reflected the market
price of the
shares at th
e date of the grant.
The
grant date weighted
average fair
value of unvested shares
gran
ted to
employe
es under
the 20
20
Employee Plan
was
$30.17
.
On
March
24
,
2021,
the
Compensation
Committee
approv
ed
th
e
s
tatement
th
at
with
respect
to
the
shares
subject
to
performance
cond
itions, all
three
performance
conditions
were
ful
ly
met.
Con
sequently,
the
compensation
expense
recor
ded
on
the
2020
Employee
Plan
reflects
th
e
statement
that
—
for
the
portio
n
of
the
shares
s
ubject
to
performance
conditions
—
100%
of
th
e
aw
ards
gran
ted
will
fully vest,
as f
ar
as the
s
ervice
condition
is met.
The grant date fair
v
alue of unvested shares granted to
the CEO
under the 20
20
CEO Special Bonus Plan was $26.64.
On the 20
20
CEO
Special Bonus
Plan, the fair value
of the unvested sh
ares granted reflected the market
price of the
shares at th
e date of the grant.
The
grant date weighted
average fair
value of unvested shares
gran
ted to
employe
es under
the 20
21
Employee Plan
was
$39.20.
On
Ma
rch
23
,
2022,
th
e
Compens
ation
Committee
appro
ved
the
statement
that
with
respect
to
the
shares
subject
to
performance
condition
s,
two
out
of
three
p
erformance
conditions
were
met.
Cons
equently,
the
compensation
expense
recor
ded
on
the
202
1
Employee
Plan
reflects
the
s
tatement
that
—
for
the
portio
n
of
the
shares
sub
ject
to
performanc
e
conditions
—
two
th
irds
of
the
award
s
granted
will
fully
vest,
as
far
as
the
s
ervice
condition is met.
The following table illustra
tes the classification of pre-payroll t
ax and social contrib
ution stock-based compensation
expense included in t
he consolidated in
come statement for
the year ended Dec
ember
31,
2021 and 20
20
:
In millions of USD
December 31,
2021
December 31,
2020
Cost of sales
33
26
Research and d
evelopment
68
53
Selling, general and a
dministrative
109
87
Total pre-payroll tax and so
cial contr
ibution compensation
210
166
The fair value of the shares
vested in
2021
totaled
$
181
million
compared to $
141
million
in
2020
.
Compensation
cost,
excluding
pay
roll
tax
and
so
cial con
tribu
tion,
capitalized
as
part
of
inv
entory
was
$
9
million as
of
December 31,
2021,
compared
to
$
6
million
as
of
December
31,
20
20
.
As
of
December 31,
2021,
th
ere
was
$
214
million of t
otal unrecogn
ized compensation
cost related t
o the grant o
f unvested s
hares, which
is expected to
be recognized over a weighte
d average period o
f approximately
9 months.
The total
deferred
income
tax
benefit r
ecognized
in th
e con
solidated
income s
tatement
related
to u
nvested
share
-
based compensation expense amounted
to $
14
million f
or the
year
ended
December
31, 2021,
compared to
$9 million
for
the
year
ended
December
31,
20
20
.
The
excess
tax
benefit
on
unvested
s
hare
-based
compensat
ion
totaled
$9
million
as
at
December 31,
20
21,
compared
to
$7
million
as
at
December 31,
20
20
,
and
was
recorded
in
“
O
ther reserves”
in
the consolida
ted statement of equity
.
164
7.6.2
1
.6.
Other res
erves
Other reserves include th
e following compon
ents as at
December 3
1, 2021
:
In millions of USD
Share-based
compensation
reserve
Fair
value
reserve
of
financial
assets
at
FVOCI
Cash
Flow
Hedge
(CFH)
reserve
Foreign
currency
translation
reserve
Employee
benefit
plan
reserve
Total
other
reserves
As at December 31, 2019
987
(1
)
(2
)
564
(231
)
1,317
Employee share award s
cheme
173
—
—
—
173
Net movement recognized in
the
statement of comprehensiv
e
income
—
(2
)
35
202
—
235
Transfer of cash flow h
edge
reserve to inventories
—
—
(2
)
—
—
(2
)
As at December 31, 2020
1,160
(3
)
31
766
(231
)
1,723
Employee share award s
cheme
220
—
—
—
220
Net movement recognized in
the
statement of comprehensiv
e
income
—
(1
)
(59
)
(188
)
37
(211
)
Transfer of cash flow h
edge
reserve to inventories
—
—
6
—
—
6
As at December 31, 2021
1,380
(4
)
(22
)
578
(194
)
1,738
Share-based compensation
reserve
:
The
share-based compensation
reserve
is
used to
recognize
th
e
v
alue
o
f
equity
-
settled
sh
are-based
p
ayment
to
employees,
includ
ing
key
management
p
ersonnel,
as
part
o
f
their
remuneration.
Refer to Notes 7.6.2
1.4 and 7.
6.21.5 for furth
er details on thes
e share
-based compensation
programs.
Fair value reserve of
f
inancial assets at FVOCI:
This reserve records fair value changes on
debt and equity securities
measured at FVOCI.
Cash
Flow
hedge
res
erve:
The
cash
flow
hedge
reserve
contains
the
effe
ctive
portion
of
th
e
cash
flow
hedge
relationship ou
tstanding as at
year-end
.
Foreign
currency
translatio
n
reserve:
Th
e
foreign
currency
tra
nslation
reserve
is
used
to
record
ex
change
differences
arising
from
the
trans
lation
of
the
financial
statements
for
subsidiaries
which
fun
ctional
currency
is
different from the U.S. dollars
.
Employee benefit
plan
reserve:
The
employee
ben
efit
plan r
eserve is
us
ed
to recognize
the
actuarial gains
and losses
and pas
t service cost of post
-employment pension p
lans.
7.6.2
1
.7.
Dividends
The 2021
AGM
held
on
May
27,
2021 au
thorized
the distrib
ution
of
a cas
h div
idend of
$0.24 per
outstan
ding s
hare
of
th
e Com
pany’s common
st
ock, to
be
distributed in
quarterly installments of
$0.06 in
e
ach
of
th
e
s
econd, third
and
fourth q
uarters o
f 2021 an
d first
quarter
of 2022.
The amou
n
t
of $54
million corresp
onding
to the
first in
stallment,
$
55
million
correspondin
g
to
the
s
econd
ins
tallment
and
$
54
million
corr
espond
ing
to
the
third
in
stallment
were
paid
as
at
December
31,
202
1.
The
remaining
po
rtion
of
$
55
million
related
to
the
las
t
ins
tallment
is
pres
ented
in
the line
“
Other
payables
and accrued
liabilities
”
of
the
consolida
ted
statement of
financial
position
as at December
31, 2021.
The 20
20
AGM
held on June 17, 2020
authorized the distribution of a
cash dividend of
$0.
168
per outstan
ding share
of
the
Compan
y’s
common
stock,
to
be
dis
tributed
in
quarterly
installments
of
$0.0
42
in
each
of
the
second
,
third
and fourth quarters of
20
20
and first
quarter of 2021. The
amount of
$
37
million correspo
nding to the
first
165
installment,
$38 million
corr
espondin
g
to
th
e
second
installment
and
$
34
million
correspond
ing
to
th
e
third
installment were paid a
s
at
December 31, 20
20
. The remain
ing portion of
$4 million related t
o the third
installment
and the last
installment of $
38
million were paid in
the first half of 2021
.
The 2019
AGM
held
on
May
31,
2019 au
thorized
the distrib
ution
of
a cas
h div
idend of
$0.24 per
outstan
ding s
hare
of
th
e Com
pany’s common
st
ock, to
be
distributed in
quarterly installments of
$0.06 in
e
ach
of
th
e
second, third
and
fourth q
uarters o
f 2019
and
first q
uarter of
20
20
.
The amou
nt
of $5
3 million corr
esponding
to
the first
installment,
$5
3 million
correspond
ing
to
the
second
ins
tallment
and
$48
million
corr
esponding
to
the
third
installment
were
paid
as
at
Dece
mber 31,
2019.
The
remaining
portion
of
$6 million
related
to
th
e
third
installment
and
the
last
installment of $53
million were paid
in the first h
alf of 20
20
.
7.6.2
1
.8.
Legal reserves
Refer to Note 8.3.11 fo
r the c
omposition of
the
Company’s
legal reserves.
7.6.22
.
Provisions
Movements in prov
isions during the year ended Dece
mber
31, 2021 are detai
led as follo
ws:
In millions of USD
Restructuring
Warranty
an
d
product
Guarantee
Total
As at December 31, 2020
4
2
6
Unused prov
isions
(2
)
—
(2
)
Charges incurred in 2021
3
2
5
Amounts paid
(3
)
—
(3
)
As at December 31, 2021
2
4
6
Current 2021
2
4
6
Non-current 2021
—
—
—
As at December 31, 2020
4
2
6
Current 2020
4
2
6
Non-current 2020
—
—
—
166
Restructuring pro
visions
•
Set-top Box restru
cturing plan
In
2016,
the
Group
announced
its
decision
to
cease
th
e
development
of
new
platforms
and
standard
products
for
set-
top
-box
and h
ome
gatewa
y
products. T
his
d
ecision
resulted
in a
global w
orkforce review
affecting approximately
1,400
employees
worldwide,
which
included
about
430
employees
in
France
throu
gh
a
volu
ntary
departure
plan
,
about 670
employees in
Asia and about 120
employees in the
United States of America. The
Group reported in 2021
and 2020 a $2 million an
d $1 million, res
pectively, as a rev
ersal of unused p
rovisions.
•
Bouskoura res
tructuring plan
In 2019,
manage
ment committed to
a restructuring plan impacting
its
back-end activities. A
volun
tary plan i
nv
olving
a
reduction
in
force
repres
enting
ap
proximately
1
50
employees
was
annou
nced
in
Bousko
ura,
Mo
rocco,
in
December 20
19,
in
complianc
e with
loca
l
legislation.
In association
with
the
volun
tary termination
benefits
p
aid
to
employees who
signed the
o
ffer f
or voluntary leaves, the G
roup recorded a
restructu
ring
charge totaling
$
11
million
since inception, of which
$3 million reported
in 202
1.
Warranty and p
roduct guarantee
The Group’s
customers
occasionally
return the
Group’s p
roducts for techn
ical reasons
. The Group’s
standard
terms
and
conditions
of
sale
provide
that
if
the
Group
determines
that
prod
ucts d
o no
t conform,
the
Group
will repair
or
replace the
non
-conforming products, or
issue a
credit or re
bate of the
purchas
e price.
Quality
returns
are identifie
d
shortly after
sale in
customer
quality control
testing. Quality
return
s are
usu
ally
associated
with end-user
customers,
not with distrib
ution channels.
7.6.2
3. Employee b
enefits
Comparative
figures have
been adjusted
to ref
lect
a change
in
accounting policy,
following
th
e
IFRIC agenda
decision
issued
in
2021.
The
change
in
accountin
g
policy
affects
pension
accountin
g
for
defined
benefit
plans
with
certain
characteristics found in retirement
indemnities plans in one of
the countries where
th
e Group operates. The
change
in
accounting
policy
was
ap
plied
retrospectively
and
resulted
in
a
decrease
in
non
-curre
nt
liabilities
for
employee
benefits
o
f
$1
8
mi
llion,
a
reduction
in
n
on
-current
deferred
ta
x
as
sets
of
$5
mill
ion
and
an
increase
in
retained
earnings
of
$13
million,
net
of
def
erred
income
tax
as
of
December
31,
20
20.
The
amoun
ts
affected
in
the
below
footnote are marked with
an asterisk
(*).
Employee benefits liab
ilities are detailed as follows:
In millions of USD
December 31,
2021
December 31,
2020*
Retirement benefit obligation
liability
448
500
Other long-term employ
ee benefits
99
107
Other employee benefits
liabilities
39
55
Salaries and wages
531
446
Social charges on s
alaries and wages
222
200
Total employee bene
fits liabilities
1,339
1,308
Non-current ass
ets
—
(4
)
Current liabilities
775
696
Non-current liabilities
564
616
167
Pensions
The
Group
has
a
number
of
defined
benefit
pension
plans
cov
ering
employees
in
various
countries
.
The
defined
benefit
plan
s provide
pension
benefits based
on years
of
service
an
d e
mployee
co
mpensation levels.
The G
roup uses
December
31
as
m
easuremen
t
date
for
all
its
plans
.
Eligibility
is
generally
determined
in
accordance
with
lo
cal
statutory requirements. In
2021 and 20
20
,
the major def
ined
benefit
pension
plans an
d lo
ng
-term em
ployee benefit
plans were in the
USA (retirement plan closed to
new entrants and f
uture accrual), France (re
tirement indemnities),
Switzerland (retirement pension system), U
K (retirement
benefit scheme
closed to
new entrants and future
accrual)
and Italy (termination
indemnity plan
(“TFR”) generated befo
re July
1, 2007).
The amounts recognized in t
he statement of financial p
osition
are determined as
follows:
In millions of USD
December 31,
2021
December 31,
2020*
Benefit obligations wh
olly or partially fun
ded
(849
)
(880
)
Fair value of plan a
ssets
743
718
Benefit obligations wh
olly unfunded
(312
)
(338
)
Asset ceiling
(30
)
—
Total pension liabilities
(448
)
(500
)
The movements in th
e pension liability
are as follows:
In millions of USD
2021
2020*
Beginning of the year
500
471
Exchange difference
(23
)
38
Pension expense
41
38
Contributions
paid
(30
)
(29
)
Remeasurement (gain) / los
s recognized in O
CI
(41
)
—
Change in accountin
g policy
—
(18
)
End of th
e year
447
500
Changes in defined benef
it obligations a
re as follows:
In millions of USD
2021
2020*
Beginning of the year
1,218
1,052
Service cost
36
31
Interest cost
18
20
Employee contribution
s
4
4
Plan amendment
—
1
Actuarial (gain) loss
–
Exp
erience
20
(5
)
Actuarial (gain) loss
–
Demograp
hic assumptio
ns
(13
)
(1
)
Actuarial (gain) loss
–
Finan
cial assumptions
(58
)
92
Benefits paid
(33
)
(15
)
Effect of foreign exchange tra
nslation
(31
)
57
Change in accountin
g policy
—
(18
)
End of th
e year
1,161
1,218
168
Defined benefit obligations
by main geograph
ical locations are as
follows:
In millions of USD
2021
2020*
France
223
242
Italy
105
120
Switzerland
161
169
United Kingdom
192
224
United States
406
398
Other countries
74
65
End of th
e year
1,161
1,218
Changes in plan
assets are as follows:
In millions of USD
2021
2020
Beginning of the year
718
597
Interest income
12
14
Employer contributio
n
17
17
Employee contribution
4
4
Benefits paid
(20
)
(3
)
Actuarial gain (loss
)
21
70
Effect of foreign exchange tra
nslation
(9
)
19
End of th
e year
743
718
The
actual return on
plan
assets
in 2021 was a
gain of $
33
million (20
20
: gain
of $
84
million
). In
2021, the
theoretical
interest incom
e on
plan
asset
s
was a
gain
of
$12
m
illion (2
0
20
:
gain o
f $1
4
million)
resulting
in an
actu
arial
gain
on
plan ass
ets of $
21
million (20
20
:
gain of $
70
million).
Plan assets
by main geographical location
s are as follows:
In millions of USD
2021
2020
France
3
3
Switzerland
125
121
United Kingdom
206
199
United States
365
348
Other countries
44
47
End of th
e year
743
718
The effects of the as
set ceiling are as
follows:
In millions of USD
2021
2020
Beginning of the
year
—
(16
)
Effect of asset ceiling recogniz
ed during th
e year
(30
)
16
Effect of foreign exchange tra
nslation
—
—
End of th
e year
(30
)
—
169
The amounts recognized in t
he income statement relat
ed to pens
ions are as follows:
In millions of USD
2021
2020
Service cost
36
32
Current service cost
36
31
Prior service cost
—
1
Net interest co
st
5
6
Interest cost
18
20
Interest income
(13
)
(14
)
Total pension costs
41
38
The Group’s
detailed
pension plan
asset
allocation
including th
e fair
value
measurements of
those
plan
assets as
at
December 31, 2021 is a
s follows:
In millions of USD
Total
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Cash and ca
sh equivalents
5
5
—
—
Equity securities
130
2
128
—
Government debt s
ecurities
87
—
87
—
Corporate debt securities
164
—
139
25
Investment funds
156
1
155
—
Real estate
10
—
10
—
Other (mainly insuran
ce assets)
191
—
49
142
Total
743
8
568
167
The Group’s
detailed
pension plan
asset
allocation
including th
e fair
value
measurements of
those
plan
assets as
at
December 31, 20
20
is a
s follows
:
In millions of USD
Total
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Cash and ca
sh equivalents
4
4
—
—
Equity securities
167
2
165
—
Government debt s
ecurities
86
—
86
—
Corporate debt securities
105
—
81
24
Investment funds
153
3
150
—
Real estate
11
—
11
—
Other (mainly insuran
ce assets)
192
—
54
138
Total
718
9
547
162
170
The
majority of
plans (in
the
United Kingdom,
United States and
Switzerland) are
governe
d
by
an independent
board
of trustees
,
which includ
es employer representativ
es.
The Group’s
inv
estment strategy for its p
ension plans is to optimize the long
-term inv
estment return on p
lan assets
in
relation
to
the
liability
structure
to
maintain
an
accepta
ble
level
o
f
risk
while
minimizin
g
the
cos
t
of
providing
pension
benefits
and
maintaining
a
d
equate
funding
levels
in
accordance
with
ap
plicable
rules
in
each
jurisdiction
.
The
Group’s
p
ractice is
to
periodically
con
duct
a
review
in
each
subsidiary
of
its
asset
allocat
ion
strategy,
in
s
uch
a
way that the as
set allocation is in lin
e with the tar
geted asset allo
cation with
in
reasonab
le boundaries. The Group
’s
asset portfolios
are managed
in su
ch a way as
to achiev
e adapted
diversity. The
Group does n
ot manage a
ny assets
internally.
After con
sidering
the
funded
sta
tus
of
the
Group’s
defined
benefi
t
plans
,
movemen
ts
in
the
dis
count
rate,
investment performance and related tax consequences, the
Group may choose to
make contributions to
its pension
plans
in
any
given
year
in
excess
of
required
amounts
.
In
20
21
,
the
Group’s
contributions
to
p
lan
assets
were
$
17
million (20
20
: $
17
mil
lion) and it exp
ects to contribu
te cash of $
26
million in 20
22
.
Other long-term
employee benefits
Other
lon
g-term employee
ben
efits
in
clude
seniority and
loyalty
award
p
rograms. T
he movements
in the
other long
-
term employee benefits lia
bility are as
follows:
In millions of USD
2021
2020
Beginning of the year
108
96
Service cost
14
12
Interest cost
1
1
Plan amendment
–
past serv
ice cost
–
non vested benefits
—
—
Actuarial (gain) loss
–
Exp
erience
(1
)
(2
)
Actuarial (gain) loss
–
Demograp
hic assumptio
ns
1
1
Actuarial (gain) loss
–
Finan
cial assumptions
(3
)
3
Benefits paid
(5
)
(11
)
Effect of curtailment
—
—
Effect of foreign exchange tra
nslation
(16
)
8
End of th
e year
99
108
The amounts recognized in t
he income statement relat
ed to oth
er long
-term benefits ar
e as follows:
In millions of USD
2021
2020
Service cost
14
12
Current service cost
14
12
Past service cost
—
—
Curtailment
—
—
Net interest co
st
(1
)
3
Interest cost
1
1
Immediate recognition o
f (gains) los
ses
(2
)
2
Total other long
-term bene
fits costs
13
15
171
Assumptions
The
weighted
average
as
sumptions
us
ed
in
the
determination
of
pension
an
d
other
long
-term
obligation
s
are
as
follows:
2021
2020
Discount rate
1.50
%
1.43
%
Inflation rate
1.73
%
1.74
%
Future salary in
crease
1.69
%
2.65
%
The
discount
rate
was
determined
by
reference
to
high
q
uality
corp
orate
bond
rates
applicable
to
the
respective
country
of
each
plan
and
estimated
terms
of
the
defined
benefit
obligation.
As
requ
ired b
y
IAS
19,
and
for
pension
plans with p
lan assets, the in
terest income on plan ass
ets is set equal to t
he corresponding dis
count rate.
The average duration of De
fined Benefit Ob
ligations is
14
y
ears in 2021
(20
20
:
13 years).
At December
31, 202
1, an
increase of
the d
iscount
rate of 0.50%
would
have
resulted in a
reduction
of
the Defined
Benefit
Obligations
of
$
81
million
and
a
decrease
o
f th
e
discou
nt
rate
of
0.50%
would
have
resulted
in an
in
crease
of th
e
Defined
Benefit
Obligat
ions
by
$
87
million.
An
increas
e of
th
e inflation
rate
of
0.50%
would
ha
ve resulted
in
an
increase
of
the
Defined
Benefit
Obligation
s
of
$
12
milli
on
an
d
a
decrease
of
the
in
flation
rate
of
0.50%
would
have
resu
lted
in
a decrease
of
the
Defined
B
enefit
Obligati
ons
of $
12
million.
An
increase
of
the
life
exp
ectancy
of
one year would h
ave resulted in
an increase of th
e Defined
Benefit Obligations
of $
2
2 million a
nd a decrease of th
e
life
exp
ectancy
of
one
y
ear
would
h
ave
resulted
in
a
decrease
of
the
De
fined
Bene
fit
Obligations
of
$
22
million.
These
s
ensitivity
analyses
are
based
on
a
change
in
an
as
sumption
while
ho
lding
all
other
assumptio
ns
con
stant.
When
calculating
the
s
ensitivity
of
the
d
efined
benefit
o
bligation
to
significant
actuarial
assumptions
,
the
same
method has
been
applied
as when calculatin
g the
pension liab
ility r
ecognized within
the con
solidated
sta
tement of
financial position
.
Assumptions
regarding
futu
re
mortality experience are
set based on ad
vice from
published statistics
and e
xperience
in each territory.
Defined contribution
plans
The
Group
h
as
certain
d
efined
contribution
plans,
which
accrue
b
enefits
for
e
mployees
on
a
p
ro
-rata
basis
during
their
employ
ment
period
based
on
their
individual
salaries.
In
20
21,
the
annual
cost
of
these
plans
amounted
to
approximately $
101
million (20
20
: $
91
million).
7.6.2
4. Trade ac
counts payable, other p
ayables and accru
ed liabilities
In millions of USD
December 31,
2021
December 31,
2020
Trade accou
nts payable
1,582
1,166
Dividends du
e to shareholders
55
42
Taxes other than in
come taxes
58
58
Advances
59
75
Royalties
29
24
Deferred consideration for
business a
cquisitions
27
—
Other accrued liabilities
38
75
Total other p
ayables and acc
rued liabilities
266
274
172
7.6.2
5. Significant c
ategories of inco
me
In millions of USD
December 31,
2021
December 31,
2020
Sales of goods
12,729
10,181
License revenue and pat
ent royalty in
come
32
38
Research tax credits recogniz
ed as a r
eduction of Research & Dev
elopment
expenses
102
102
Public funding recognized
in Other income
162
231
Finance income
13
105
Total
13,038
10,657
7.6.2
6
.
Revenue
s
7.6.2
6
.1.
Nature o
f goods and services
The Group designs, develops, m
anufactures and markets a broad range of
products, including discrete and standard
commodity
components,
application-
sp
ecific
integrated
circuits
(“ASICs”),
full
custom
devices
and
semi-custom
devices
and
application
specif
ic
standard
products
(“ASSPs
”)
for
an
alog,
digital
an
d
mixe
d
-signal
applications.
In
addition, the Group participates in
the manufacturing value chain
of smartcard products,
which
includes the
production a
nd sale of both s
ilicon chips and smartcards
.
The
principal
activities
—
separated
by
reporta
ble
segments
—
from
which
the
Group
generates
its
revenu
es
are
described in Note 7.6.2
7
.
Other
revenues
consist
of lice
nse
revenu
e,
service
revenu
e
re
lat
ed
to
transferring
licens
es,
patent
royalty
income,
sale of scrap materials
and manufactu
ring by
-products.
While
the
majority
of
the
Group’s
sales
agreements
contain
sta
ndard
terms
and
conditions,
the
Group
may,
from
time to
tim
e,
enter
into
agreements
th
at
contain
multiple
perfor
mance
obligations
or
ter
ms
and
con
ditions.
Those
agreements concern
principall
y
the
revenu
es
from
s
ervices, where
the performance
obli
gation
is
s
atisfied over
time.
The objective when allocating the transaction price is to allo
cate the transaction price to each performance
obligation
(or
distinct
good
or
s
ervice)
in
an
a
mount
that
depicts
the
amount
of
cons
ideration
to
which
the
Group
expects to be entitled in exch
ange for tran
sferring the pro
mised goods or
services to the custo
mer.
7.6.2
6
.2.
Revenue
recognition and disaggregat
ion
The Grou
p
recognizes
revenue
from
produ
cts
sold
to
a
customer,
including
distributors
,
when
it
satis
fies
a
performance obligation at a p
oint in time
b
y transferring control over a
product to
th
e customer. This usually occur
s
at
the
time
of
shipment. T
he
performance obligations
linked
to the
s
ale
of
goods
contracts
hav
e
the
o
riginal
expected
length
of
less
than
one
year.
The
tran
saction
price
is
d
etermined
based
on
th
e
contract
terms,
adjusted
fo
r
price
protection
if
applicable.
The
rev
enues
from
services
are
usually
link
ed
to
performance
obligations
tra
nsferred
over
time and are recognized in
line with the contract
terms.
The payment terms ty
pically ra
nge between 30 and 90
days.
173
The
Group’s
consolidated
to
tal
revenues
disaggregated
by
operating
s
egments
are
presented
in
Note
7.6.2
7.
Th
e
following table
pr
esents the
Group’s
consolidated
total
revenu
es disaggregated
by geographical
region of
ship
ment,
nature and market ch
annel.
In
millions of USD
December 31,
2021
December 31,
2020
Total revenues by geo
graphical region of shipmen
t
(1)
EMEA
2,557
1,966
Americas
1,525
1,165
Asia Pacific
8,679
7,088
Total revenues
12,761
10,219
Total revenues by n
ature
Revenues from sale of prod
ucts
12,560
10,049
Revenues from sale of servic
es
169
132
Other revenues
32
38
Total revenues
12,761
10,219
Total revenues by m
arket channel
(2)
Original Equipment Man
ufacturers (
“
OEM
”
)
8,486
7,411
Distribution
4,275
2,808
Total revenues
12,761
10,219
(1)
T
otal
revenues
by geographical
region of shi
pment ar
e classifie
d by l
ocation of
customer invoi
ced or
r
eclassified
by shi
pment de
stination in
line with
customer demand. For
example,
products ordered by
U.S.
-based companies to be
invoiced t
o Asia
Pacific affiliates
are
classified
as Asia Pacifi
c revenues.
(2)
Original Equipment
Manufactur
ers (“
OEM
”)
are the end-customers to
which
the Group provides
direct marketing
applicatio
n engineering
support,
while
Distribution
refers
t
o
the di
stributors
and r
epresentative
s that
the
Group
engages
to
distribute
its
products
around
the
world.
The
Group
does
not
disclos
e
th
e
v
alue
o
f
un
satisfied
performance
obligat
ions
for
(i)
c
ontracts
with
an
original
expected
length
of one
year or
less
and (ii) contracts f
or
which
th
e
Group
recognizes
revenu
e
at the
amount to
which
the Group has
the right to invoice for services per
formed.
In
2021,
the
Group’s
largest
cus
tomer,
App
le,
repres
ented
20.5%
(2020:
23
.9%)
of
total
revenues
,
reported
in
the
ADG, AMS and MDG s
egments.
7.6.2
7. Segment infor
mation
The Group designs, develops,
manufactures and markets a
broad range of products, including discrete and standard
commodity
components,
application-
sp
ecific
integrated
circuits
(“ASICs”),
full
custom
devices
and
s
emi
-cus
tom
devices
and
application-
specific
standard
products
(“ASSPs”)
for
analog,
digital
and
mi
xed
-signal
applications
.
In
ad
dition, the G
roup participates in the
manufacturing value chain of
smartcard products
, which
includes
the
production a
nd sale of both s
ilicon chips and smartcards
.
The Group’s operating s
egments are as
follows:
•
Automo
tive
and
Discrete
Group
(ADG),
comprised
of
dedicated
automotive
ICs,
an
d
discrete
and
power
transistor
products.
•
Analog,
MEMS
and
Sensors
Group
(AMS),
comprised
of
analog
,
smart
power,
low
power
RF,
MEMS
sensors
and actuators, a
nd optical sensing solu
tions.
•
Microcon
trollers and Digital ICs G
roup (MDG),
compris
ed of microcon
trollers
(general pu
rpose and
secure), memories
(RF and EE
PROM)
,
and RF com
munication
s
.
For
th
e
compu
tation
of
the
seg
ments
’
in
ternal
financial
measurements,
th
e
Group
uses
certain
internal
rules
of
allocation
for
the
costs
not
directly
ch
argeable
to
the
segments,
including
cos
t
of
sales,
SG&A expens
es
and
a
part
174
of R&D
expenses.
In
compliance
with
the
Group’s
internal
po
licies,
certain
costs
are
not allocat
ed to
the s
egments,
but reported in “Others”. Those comprise
unused capacity charges, including reduced manufacturing activity due to
COVID-19,
impairment,
restructuring
charges
and
other
related
closure
costs,
manage
me
nt
reorganiza
tion
expenses,
phase-out
and
start-up
costs
of
certain
manufactu
ring
facilities,
an
d
other
unallocat
ed
expens
es
such
as
:
strategic
or sp
ecial R&D p
rograms,
certain corpora
te-level o
perating
expenses,
patent
claims an
d litigations,
and o
ther co
sts
that
are
not
allocated
to
product
group
s,
as
well
as
operatin
g earn
ings
of
other
products
.
In
addition
,
depreciation
and
amort
ization
expens
e
is
part
of
the
man
ufacturing
costs
allocated
to
the
segments
and
is
neither
identified
as
part of the invento
ry var
iation nor as part of the unu
sed capacity charges; therefor
e, it cannot be is
olated in cost of
sales.
Fina
lly,
pu
blic
grants
are
allocated
to
the
Grou
p’s
s
egments
prop
ortionally
to
the
incurred
R&D
expenses
on
the spons
ored projects.
Wafer
costs are
allocated to
the
segments based
on
actual cost.
From
time
to time,
with
respect to
specific
technologies, wafer cos
ts are allocated to s
egments based o
n market price.
The following tables
present the Group
’s consolidated
total revenues an
d consolidated operatin
g income by
reportable segment.
Total revenues by
operating seg
ment:
In millions of USD
December 31,
2021
December 31,
2020
ADG
4,350
3,284
AMS
4,623
3,892
MDG
3,766
3,030
Total revenues of o
perating segments
12,739
10,206
Others
22
13
Total revenues
12,761
10,219
Operating profit by o
perating seg
ment:
In millions of USD
December 31,
2021
December 31,
2020
ADG
5
09
179
AMS
1,014
808
MDG
91
4
501
Sub-total operating p
rofit of operating segm
ents
2,4
37
1,488
Impairment, restructuring ch
arges and
other related closure cos
ts
(2
)
(11
)
Unallocated manufacturin
g results
(1
5
)
(161
)
Strategic and other research a
nd d
evelopment programs an
d other
non-allocated prov
isions
(2)
(
11
)
(5
)
IFRS/U.S. GAAP Adjustm
ents
(1)
:
Net impact of capitalized dev
elopment costs
119
(42
)
Derivative instruments
not designated
as hedge instru
ments under
IFRS
(39
)
23
Employee benefits ad
justments
7
(14
)
Asset acquis
ition tax incentives
(5
1
)
(49
)
IFRS 16 adjustment on
lease expens
es
7
4
Operating profit
2,452
1,233
(1)
The
operating
profit
allocated
by
operating
segments
as
reported
in
the
abo
ve
table
is
based
on
the
Group’s
primary
financial
reporting
framework (U.S.
GAAP)
and
reflects
the
way
the
Chief
Operating
Decision
Maker
(“
CODM
”)
monitors
the
operating performanc
e
of
each segment.
175
(2)
Include
s unallocated income and expenses such as
certain corporate-level operating expenses and other income
(costs) that are not
allocat
ed to the product se
gments.
The
follo
wing
is
a
s
ummary
of
op
erations
by
entities
located
within
th
e
indicated
geogr
aphic
areas
for
2021
an
d
2020
.
Tota
l
revenu
es
represent
sales
to
third
parties
from
the
country
in
which
eac
h
entit
y
is
incorporated.
A
significant
p
ortion
of
property,
plan
t
and
equ
ipment
expenditures is
at
tributable
to
front
-end
and b
ack
-end
facilities,
located in the different countries in w
hich the Group operates. As such, the Group mainly allocates capital spending
resources accordin
g to geograph
ic areas rather than
along product s
egment areas.
Total revenues by g
eographical area
:
In millions of USD
December 31,
2021
December 31,
2020
Netherlands
3,282
2,795
France
126
89
Italy
56
52
USA
1,253
976
Singapore
7,442
5,817
Japan
586
479
Other countries
16
11
Total
12,761
10,219
Non
-current assets other than o
ther non
-current financ
ial assets and
deferred tax assets:
In millions of USD
December 31,
2021
December 31,
2020
Netherlands
2,992
2,326
France
1,689
1,643
Italy
1,737
1,554
USA
44
33
Singapore
673
606
Other countries
941
920
Total
8,076
7,082
176
7.6.2
8. Expenses
by nature
Expenses recorded a
s cost of sales,
R&D an
d SG&A are detailed as
follows:
In millions of USD
December 31,
2021
December 31,
2020
Depreciation and amortizat
ion
1,349
1,262
Employee benefit expenses
3,602
3,073
Purchase of materials
2,828
2,619
Purchase of su
bcontracting s
ervices
2,064
1,640
Changes in inv
entories
(188
)
(85
)
Transportation
30
31
Impairment charge
40
114
Royalties and p
atents
99
81
Advertising costs
14
12
Other expenses
577
467
Total cost of sales, resear
ch and d
evelopment, and
selling,
general and
administrative
10,415
9,214
Employee benefit expenses a
re detailed as
follows:
In millions of USD
December 31,
2021
December 31,
2020
Wages and s
alaries
2,710
2,271
Payroll taxes an
d other s
ocial contribution ch
arges
527
492
Share-based compensation
expens
e
210
166
Pensions an
d other long-term b
enefits costs
155
144
Total employee bene
fit expenses
3,602
3,073
Of which included in:
Cost of sales
1,595
1,358
Selling, general and a
dministrative
955
810
Research and development
1,052
905
7.6.29
. Other in
come / exp
enses
Other income consisted o
f the following:
In millions of USD
December 31,
2021
December 31,
2020
Public funding
162
231
Foreign exchange for
ward contracts
and other currency derivat
ives
9
26
Net foreign exchange gain
—
21
Gain on sale of n
on-current as
sets
5
14
Total other inco
me
176
292
177
Other expenses cons
isted of the following:
In millions of USD
December 31,
2021
December 31,
2020
Start-up / Phas
e out costs
—
8
Foreign exchange for
ward contracts
and other currency derivat
ives
35
13
Net foreign exchange los
s
2
—
Patent costs
10
11
Sanitation and
other costs incurred to p
revent the spread of COVID
-
19
19
32
Other expense
4
—
Total other exp
enses
70
64
The Group receives significant public funding f
rom governmental agencies in several jurisdictions. Public funding
for
research,
development
an
d
other
innov
ation
programs
is
recognized
ratably
as
the
related
cos
ts
are
incurred
once
the
agreement
with
the
respective
governmental
agency
has
been
s
igned
and
all
applicab
le
con
ditions
have
been
met.
Pu
blic
funding
received
in
the
year
ended
Dece
mber
31,
2017,
from
the
Nano2017
p
rogram
with
the
French
government is subject to a financial return in th
e year 2024 and depends on the future cumulative sales of a certain
product group
over a five-year period
.
As at December 31, 2021, an a
mount of $44
million, co
rresponding p
rimarily
to
the
Nan
o2017
p
rogram,
was
reported
in
oth
er
n
on-curr
ent
liabilities
in
the
cons
olidated
statement
of
finan
cial
position as
at
December 31, 2021, compared to $42 million as
at
December 31, 20
20
.
The Group
also participates in
the
European
Commissi
on's
Importan
t
Projects
of
Commo
n
Interests
(IPCEI),
u
ntil
2022
in
France
and
until
2024
in
Italy.
For
the
latter,
th
e Grou
p
reported
$195
million
re
ceivables,
o
f which
$
111
million
reported
i
n
the
line
"Other
receivables and as
sets"
of
the cons
olidated
statement of financial pos
ition
for the year ended December 3
1, 2021.
Foreign
exchan
ge
gain
s
(loss
es),
net
of
foreign exchange
for
ward
contra
cts
an
d
other
currency derivatives,
represent
the
portion
of
exchange
rate
chan
ges
on
transactions
denominated
in
currencies
other
than
the
entity’s
functio
nal
currency and th
e changes in f
air value of derivativ
e instruments
which are not
designated a
s hedge, as d
escribed in
Note 7
.6
.15.4.
Patent costs
in
clude legal
and attorney
fees
and payment
for
claims, patent pre-litigation consultancy and
legal fees.
They are
report
ed net
of settlements, if
any, which primarily
include reimbursements of
prior patent litigation
costs
.
COVID-19
in
cremental costs
are mainly
composed of
purcha
ses of
medical
d
isposab
les,
s
uch
as
masks and
sanitizers,
and other expens
es related to san
itary measures undertaken t
o protect employees du
ring the COVID
-19 pandemic.
7.6.
30. Finance incom
e / cost
s
Total finance income cons
isted o
f the following:
In millions of USD
December 31,
2021
December 31,
2020
Change in fair value of th
e embedded ca
ll option of the s
enior unsecured
convertible bonds
issued on July 3, 2017 (Tranche B
)
—
39
Change in fair value of th
e embedded ca
ll option of the s
enior unsecured
convertible bonds
issued on August
4, 2020 (Tranche A)
—
13
Change in fair value of th
e embedded ca
ll option of the s
enior unsecured
convertible bonds
issued on
August 4, 2020 (Tranche B)
—
20
Interest income on qu
oted debt securities
1
3
Other finance income
12
30
Total finance income
13
105
178
Total finance costs co
nsisted of the following:
In millions of USD
December 31,
2021
December 31,
2020
Interest on Senior Bon
ds
38
47
2017 issued senior
convertible bond n
et-sh
are settlement (Tranche A)
—
64
2017
issued s
enior convertible bon
d net
-share settlement (Tranche B)
189
—
Change in fair valu
e of the embedded conv
ersion option
of the senior
unsecured conv
ertible bonds issu
ed on July 3, 2017 (Tranche B)
—
296
Change in fair valu
e of the embedded conv
ersion option
of the senior
unsecured conv
ertible bonds issu
ed on August 4, 2020 (Tranche A)
98
58
Change in fair valu
e of the embedded conv
ersion option
of the senior
unsecured conv
ertible bonds issu
ed on August 4, 2020 (Tranche B)
99
63
Change in fair value of th
e embedded ca
ll option of the s
enior unsecured
convertible bonds
issued on
August 4, 2020 (Tranche A)
2
—
Change in fair value of th
e embedded ca
ll option of the s
enior unsecured
convertible bonds
issued on August
4, 2020 (Tranche B)
4
—
Interests on leas
e liabilities
5
5
Interests on lo
ng-term loans an
d borrowings
1
4
Bank charges and
commissions
3
4
Other finance expens
e
2
3
Total finance costs
441
544
No borrowing cos
ts were capitalized in
2021 an
d 20
20
.
As
described in
Note
7.6.15.3, the
chan
ge
in fair
v
alue
o
f the
non
-equity derivative
ins
truments corresponding
to
th
e
bondholders’
conversion
option
and
the
issuer’s
call
option
embedded
in
the
unsecured
senior
con
vertible
bonds
issued on August 4, 2020, genera
ted a cost of $197 million and $6 million respectiv
ely, for the year ended
December 31,
2021
compared
to
a
cost
of
$121
million
and
gain
of
$33
million
respectively,
for
the
year
end
ed
December 31,
2020.
Additio
nally,
the
net-share
settlement
o
f
the
Tranch
e
B
o
f
the
uns
ecured
senior
conv
ertible
bonds issu
ed on July
3, 2017 generated a cost of $189 millio
n for the year end
ed December
31, 2021.
Leases are further described i
n Note 7.6.1
2.
7.6.3
1. Compo
nents of oth
er comprehensive income
In millions of USD
December 31,
2021
December 31,
2020
Cash flow hedges:
Gains / (losses
) arising during the year
(56
)
38
Reclassification adjus
tments for (gains
) / losses includ
ed in the
income statement
(12
)
1
Total
(68
)
39
7.6.3
2. Income
tax
Comparative
figures have
been adjusted
to ref
lect
a change
in
accounting policy,
following
th
e
IFRIC agenda
decision
issued
in
2021.
The
change
in
accou
nting
po
licy
affects
pens
ion
accou
nting
for
defined
benefit
plan
s
with
certain
characteristics found in retirement
indemnities plans in one of
the countries where
th
e Group operates. The
change
in
accounting
policy
was
ap
plied
retrospectively
and
resu
lted
in
a
decrease
in
non-curre
nt
liabilities
for
employee
benefits
o
f
$1
8
mi
llion,
a
reduction
in
n
on
-current
deferred
ta
x
as
sets
of
$5
mill
ion
and
an
increase
in
retained
179
earnings
of
$13
million,
net
of
def
erred
income
tax
as
of
December
31,
2020.
The
am
ou
nts
affected
in
the
belo
w
footnote are marked with
an asterisk
(*).
The major components
of income tax benefit (exp
ense) for
the years ended December
31, 2021 and
20
20
are:
Consolidated income s
tatement
In millions of USD
December 31,
2021
December 31,
2020
The Netherlands taxes
–
current
—
—
Foreign taxes
–
cu
rrent
(285
)
(171
)
Current taxes
(285
)
(171
)
The Netherlands taxes
–
deferred
—
—
Foreign deferred taxes
(22
)
71
Deferred taxes
(22
)
71
Income tax be
nefit / (expense)
(307
)
(100
)
Consolidated
statement
of other comprehens
ive income
(deferred
tax related
to
items charged
or credited
directly
to equity du
ring the year)
In millions of USD
December 31,
2021
December 31,
2020*
Re
-measurements of e
mployee benefit
obligations
(3
)
(5
)
Income tax cr
edited (charged) directly to eq
uity
(3
)
(5
)
180
A
reconciliation
between
inco
me
tax
b
enefit
and
the
product
of
income
b
efore
tax
multiplied
by
The
Neth
erlands’
statutory tax rat
e for the years
ended December 31, 20
21 an
d 20
20
is as
follows:
In millions of USD
December 31,
2021
December 31,
2020
Gain (loss) before inco
me tax
2,024
796
Income tax be
nefit (expense) at The Ne
therlands
’
statuto
ry tax
rate of 25% (2020: 25%)
(506
)
(199
)
Non-deductible, no
n-taxable items
4
(97
)
Impairment of deferred tax
assets a
nd tax losses with
no deferred
tax asset recognized
(2
)
11
Effect on deferred tax rates o
f
changes in enact
ed tax rates
6
(5
)
Current year credits
39
40
Other taxes and cred
its
(22
)
(42
)
Benefits from tax holida
ys
49
37
Current year tax risk
(8
)
(1
)
Earnings (los
ses) of subs
idiaries taxed at different rates
133
156
Income tax be
nefit / (expense)
(307
)
(100
)
During the year ended Dec
ember
31, 20
21
, the
Group d
id not recognize deferr
ed tax ass
ets on net op
erating losses
for an appro
ximate amount of $
3 million (20
20
: $9 million).
The chan
ges
in
enacted
tax
ra
tes
resulted
in
a
de
crease
of
tax
expense
of
$
6
million
in
20
21
(increase
o
f
$5 million
in 20
20
).
The
tax
holiday
s
represent
a
tax
exemption
period
aimed
at
attracting
forei
gn
technological
investment
in
certain
tax
juris
dictions.
These
agreements
are
p
resent
in
various
countries
and
include
programs
that
redu
ce
up
to
100%
of
taxes
in
years
affected
by
the
agreements.
The
Group’s
tax
ho
lidays
expire
at
var
ious
d
ates
throu
gh
t
h
e
year
ending December 31,
2029.
181
For
a
particu
lar
tax-paying
component
of
the
Group
and
within
a
particular
tax
jurisdiction,
all
deferred
tax
assets
and
liab
ilities
are
offset
and
presented
as
a
single
amount.
The
Group
d
oes
not
offset deferred
tax
ass
ets
and
liabilities attributab
le to different tax
-paying compo
nents or to d
ifferent tax jurisdictions
.
In millions of USD
December
31,
2020*
Exchange
differences
Income
tax
charged
directly
to
equity
Business
acquisitions
Income
statement
benefit
(expense)
December
31,
2021
Deferred tax assets
Tax losses and
investments credits
260
(4)
—
—
68
324
Impairment charge and
restructuring
3
1
—
—
—
4
Fixed asset depreciation
85
(2)
—
—
(23)
60
Receivables for govern
ment funding
40
—
—
—
24
64
Pension service cos
t
103
(1)
(3)
(73)
26
Other
99
(2)
—
—
(3)
94
Total deferred t
ax assets
590
(8)
(3)
—
(7)
572
Deferred tax liabilities
Accelerated tax depreciation
(21)
—
—
—
(11)
(32)
Acquired intangible as
sets
(40)
1
—
—
17
(22)
Advances of gov
ernment funding
(94)
1
—
—
(22)
(115)
Other
(16)
2
—
—
1
(13)
Total deferred t
ax liabilities
(171)
4
—
—
(15)
(182)
Net deferr
ed tax
419
(4)
(3)
—
(22)
390
In millions of USD
December
31,
2019
Exchange
differences
Income
tax
charged
directly
to
equity*
Business
acquisitions
Income
statement
benefit
(expense)
December
31,
2020*
Deferred tax asset
s
Tax losses
211
17
—
5
27
260
Impairment charge and
restructuring
6
1
—
—
(4)
3
Fixed asset depreciation
44
4
—
—
37
85
Receivables for govern
ment funding
14
—
—
—
26
40
Other*
165
—
(5)
—
42
202
Total deferred t
ax assets
440
22
(5)
5
128
590
Deferred tax liabilities
Accelerated tax depreciation
(20)
—
—
—
(1)
(21)
Acquired intangible as
sets
(34)
—
—
(18)
12
(40)
Advances of gov
ernment funding
(31)
—
—
—
(63)
(94)
Other
(13)
2
—
—
(5)
(16)
Total deferred t
ax liabilities
(98)
2
—
(18)
(57)
(171)
Net deferr
ed tax
342
24
(5)
(13)
71
419
182
As
at
Decemb
er 31, 20
21, the
Group
has
deferred
tax
assets
on
tax
loss
carry
forwards a
nd
investment
credits th
at
expire starting 2022 out
of which a
deferred tax assets o
f $3
24m are recognized, a
s follows:
Year
In millions
of USD
2022
8
2023
8
2024
8
2025
9
2026
6
Thereafter
364
Total
403
As at
December
31, 20
20
, th
e Group
has
deferred
tax
asset
s on
tax
loss
carry
forwards a
nd
investment
credits
that
expire starting 2021, as
follows:
Year
In millions
of USD
2021
1
2022
1
2023
1
2024
1
2025
4
Thereafter
271
Total
279
As
at
December 31,
20
21
,
de
ferred
tax
as
sets
not
recogni
zed
in
the
s
tatement
of
finan
cial
p
osition
amounted
to
$
717
million (20
20
: $638 milli
on) and are mainly
composed of the follow
ings:
•
$
213
million
(20
20
:
$
215
million)
relating
to
an
agre
ement
granting
the
Group
certain
tax
credits
for
capital investments purchased through
the year
ended December 31, 2006. Any unused
tax credits
granted
under
the
agreement
will
be
impacted
yearly
by
a
legal
inflationary
index
o
f
-0.45%
(20
20
:
-
0.15%). The credits may be utilized
depending on the Group meeting certain program criteria. In addition
to
this
agreement,
from
2007
onwards,
the Group
h
as con
tinued
and
will
continue
to
receive
tax
credits
on
the y
early
capital in
vestmen
ts
, which
may be
used
to
offset
that
year’s
tax liab
ilities
and
increases by
the legal
inflationary
rate.
However,
pursuan
t to
the
inability
to us
e these
credits cu
rrently
and
in futu
re
years,
the
Group
d
id
not
recognize
in
20
21
and
in
20
20
these
deferred
tax
as
sets
in
the
s
tatement
of
financial position
.
•
$
504
million
(20
20
:
$
423
million)
of
tax
loss
carry
forwards
generated
in
on
-going
operations,
o
r
corresponding to net operating losses acquired in bus
iness combinations, whose recovery was not
considered
probab
le.
The
majo
rity
of
th
ese
u
nrecognized
tax
loss
carry
forwards
h
as
an
expiry
date,
if
any, after 2025.
183
7.6.3
3. Earnings p
er share
For
the
y
ear
ended
December
31,
2021
an
d
December
31,
20
20
,
earnings
per
share
(“EPS”)
were
calculated
as
follows:
In millions of USD except earn
ings p
er share data
December
31,
2021
December
31,
2020
Basic EPS
Net result attribu
table to the equity hold
er of the parent
1,711
694
Weighted average shares o
utstandin
g
904,332,429
894,578,477
Basic EPS
1.89
0.78
Diluted EPS
Net result attribu
table to the equity hold
er of the parent
1,711
694
Weighted average shares
outstan
ding
904,332,429
894,578,477
Dilutive effect of stock award
s
8
,3
34
,
204
9,017,937
Dilutive effect of settlement
of 2017 unsecured senior
convertible bond
s
11,088,820
6,134,426
Dilutive effect of 2020 u
nsecured s
enior convertible bon
ds
—
—
Number of shares u
sed for diluted E
PS
92
3,
755
,453
909,730,840
Diluted EPS
1.85
0.76
There was no dilutive effect of the senior unsecured convertible bonds issu
ed on August 4, 2020
in the 202
0 diluted
Earnings per Sh
are since the conversion
features were out
-
of
-the
-money.
7.6.3
4. Related par
ty tran
sactions
Transactions with
related parties were as
follows:
In millions of USD
December
31,
2021
December
31,
2020
Sales of goods an
d services to entities con
trolled by key
management personnel
8
5
Purchases of goo
ds and services from
entities contro
lled
by key management person
nel
19
21
Accounts receivable fro
m entities contro
lled by key
management personnel
2
1
For the
years
ended Decembe
r 31,
2021 an
d 20
20
,
the
related
party
transactions
were primarily
with compan
ies in
which
management
of
the
Group
perform
similar
policymakin
g
functions.
These
include,
but
are
not
limited
to:
Orange, Telecom
Italia and Id
emia
France. Each of
th
e aforementioned
ar
rangements
and transactions is
negotiated
without
the
personal
inv
olvement
of
th
e
Supervisory
Board
members
and
are
mad
e
in
line
with
market
practices
and condition
s.
The Group
made
a con
tribution
of $0
.5
million
for
the year
ended
December
31, 202
1 an
d
$0.
5 million
for th
e year
ended
December
31,
2020
to
the
ST
Fou
ndation,
a
no
n-profit
organ
ization
esta
blished
to
d
eliver
and
coordinate
independent
p
rograms
in
line
with
its
miss
ion.
Certain
members
of
the
Found
ation’s
Board
are
senior members
of
the Group’s m
an
agement.
184
In 2021 and 20
20
,
the total remun
eration paid to
the sole member of the Managing Boa
rd and
to the other executive officers was
as follows:
Short-term benefits
Post-
Share-
based
payments
For
the
year
ended
December
31,
2021, in USD
Base Salary
Bonus
Benefits
Social
security
contributions
(1)
employment
benefits
Pensions
(2)
Termination
benefits
Unvested
stock
awards
Total
Sole member of the
Managing Board
936,357
1,907,307
101,866
904,742
463,617
—
3,245,640
7,559,529
Executive officers (exclu
ding sole
member of the Managing B
oard)
13,729,105
9,569,622
1,293,643
8,721,451
330,770
3,288,715
39,797,294
76,730,600
Senior Managemen
t
total
remuneration
14,665,462
11,476,929
1,395,509
9,626,193
794,387
3,288,715
43,042,934
84,290,129
Short-term benefits
Post-
Share-
based
payments
For
the
year
ended
December
31,
2020, in USD
Base Salary
Bonus
Benefits
Social
security
contributions
(1)
employment
benefits
Pensions
(2)
Termination
benefits
Unvested
stock
awards
Total
Sole member of the
Managing Board
856,837
1,285,378
103,599
797,306
471,143
—
2,224,984
5,739,247
(3
)
Executive officers (exclu
ding sole
member of the Managing B
oard)
11,783,681
7,422,764
1,502,287
7,093,118
332,824
974,705
24,700,161
53,809,540
(4
)
Senior Managemen
t
total
remuneration
12,640,518
8,708,142
1,605,886
7,890,424
803,967
974,705
26,925,145
59,548,787
(1)
Incl
ude compulso
ry contributi
on to pension pl
ans
(2)
Comple
mentary pensi
on plan f
or Executive M
anagement
185
The Group’s
24
executiv
e officers, including th
e sole member of the Managing Board, were granted
in 20
21
for free
1,118,000 unvested shares subject to the achievement
of performance objectives and service conditions being met.
The
weighted average grant
d
ate fair
v
alue of
unv
ested shares granted
to
em
ployees under the
20
21
Employee
Plan
was $
39.20
.
The Group
’
s
22
executive officers, in
cluding the sole member of the Managin
g Board, were granted in 20
20
for free
1,310,000 unvested shares subject to the achievement
of performance objectives and service conditions being met.
The
weighted average grant
d
ate fair
v
alue of
unv
ested shares granted to
employ
ees under the
20
20
Employee Plan
was $30.17
.
The
bonus
paid
to
the
executive
officers
correspond
s
to
a
Corp
orate
Executive
Incentive
Program
(the
“EIP”
)
that
entitles selected executives to
a yearly bonus based upon
the assessment of th
e achievement of individu
al,
organizational
and
company
o
bjectives
that
are
s
et
on
an
annual
bas
is
an
d
focused,
inter
alia,
on
return
on
net
assets,
cus
tomer
service,
profit, cas
h
flow
and
market
share
.
The
maximum
bonus
awarded
under
the E
IP
is
based
upon a perce
ntage of
the executives’ salary and
the overall
achievement of
th
e above objectives on
an
annual basis.
The 2021 EIP includes a sustainability index for Senior Management, as part of our ef
fort to include corporate social
responsibility in
to the performance framework of ou
r Senior Management. Th
e susta
inability index has
a weighting
of 1/3 o
f personal
objectives, a
nd
is divided
into four
criteria related
to h
ealth and
safety, environ
ment, div
ersity &
inclusion, an
d people engagement.
The
executive officers
and the
Managin
g Board
were covered in
20
21 and
2020
under
certain Group life
and
m
edical
insurance
programs,
p
ension,
state
-run
retirement
and
oth
er
similar
benefit
programs
and
other
miscellaneous
allowances.
At
the
end
of
th
e
year
2005,
the
Compensation
Committ
ee
reco
mmended
an
d
the
Supervisory
Board
decided
to
grant
an
additional
pension
benefit
plan
to
the
Group’s
sole
member
of th
e
Managing
Board
and
a limited
nu
mber
of
s
enior
executives
that
have
made
key
con
tributions
to
th
e
Grou
p’s
success.
Pursuant
to
this
plan,
in
20
21
the
Group made
a con
tribution
of
$0.5
million to
the
plan
of the
sole m
ember of
the Ma
naging
Board,
and
$
0.3 million
to
the
plan
for
all
other beneficiaries.
The amou
nt
of
pension
p
lan
payments
made
for
other
b
eneficiaries,
su
ch
as
former employees retired in 2
021 an
d/or no lon
ger salaried in 20
21 were $1.1 million
.
The
Group
did
not
extend
any
loan
s
or
overdrafts
to
the
sole
member
of
th
e
Managin
g
Board
,
President
and
Chief
Executive
Officer,
nor
to
any o
ther
member
of Senior Management.
Furthermore, the
Gro
up
ha
s
not guaranteed
any
debts
or conclud
ed any
leases with
the
sole m
ember of
the
Managing
Board,
nor with
any
other
member of
Senior
Management or th
eir families.
The
memb
ers
of
Senior
Management,
including
the
sole
member
of
the
Managing
B
oard,
President
an
d
Chief
Executive
Officer,
w
ere
cov
ered
in
20
21
under
certain
group
life
and
medical
insu
rance
programs
p
rovided
by
th
e
Group.
The
aggregat
e
additio
nal
amoun
t
set
aside
in
20
21
to
provide
pens
ion,
retirement
or
similar
benefits
for
Senior Management,
includ
ing the sole
member of
the Ma
naging Board
, President and
C
hief Executive Of
ficer, as
a
group is in add
ition to the amounts allocated to the complementary p
ension plan des
cribed above and is estimated
to have been ap
proximately $
6.4 million,
which includes
statutory employ
er contributions
for state ru
n retirement,
similar benefit programs a
nd other miscellaneous
allowances.
186
Individual remuneration
paid to Supervis
ory Board Members
in 20
21 an
d 20
20
was recor
ded as follows:
In Euros
2021
(1)
2020
(1)
Maurizio Tamagnini
160,000
156,500
Nicolas Dufourcq
(2)
-
—
Janet Davids
on
103,500
101,000
Heleen Kersten
107,500
105,000
Yann Delabri
è
re
(3)
98,500
88,000
Jean-Georges Malcor
(3)
-
7,000
Lucia Morselli
104,000
106,500
Alessandro Riv
era
87,500
84,000
Fr
é
d
é
ric Sanchez
100,000
96,500
Martine Verluyten
(4)
-
6,500
Ana de Pro Gonzalo
(4)
151,000
140,500
912,000
891,500
(1)
T
hese
amount
s
includ
e
a
fi
xed
annual
co
mpensation
for
the
directors’
m
andate,
t
ogether
with
attendance
f
ees
from
Janua
ry
1
until
December
31
.
(2)
Mr. Dufourcq waived hi
s rights to receive any compens
ation from the Company i
n relation to his
mandate as a member of the
Supervisory
Board or
otherwise
.
(3)
T
he term of
Mr. Jean-Geo
rges Malcor ended o
n June 17, 2020. Mr. Yann
Delab
rière was appoi
nted on June 17, 2020.
(4)
T
he term of
Ms. Marti
ne Verluyten ended o
n June 17, 2020. Ms. Ana d
e Pro Go
nzalo was appoi
nted on June 17, 2020.
No share awards
were granted to Su
pervisory Board
Members and Profession
als in 20
21 and 20
20
.
7.6.3
5. Commitm
ents, contingenc
ies, claims and leg
al proc
eedings
Commitments
The Group’s commitm
ents as at December
31, 20
21 were as follows
:
In millions of USD
Total
2022
2023
2024
2025
2026
Thereafter
Purchase obligation
s
4,064
3,272
405
186
163
38
—
Of which:
Equipment
purchase
2,412
2,406
6
—
—
—
—
Foundry purchase
1,488
768
358
167
157
38
—
Software, techno
logy licenses and
design
164
98
41
19
6
—
—
Other obligations
1,059
621
172
107
63
30
66
Total
5,123
3,893
577
293
226
68
66
The Group’s commitm
ents as at December
31, 20
20
were as follo
ws:
In millions of USD
Total
2021
2022
2023
2024
2025
Thereafter
Purchase obligation
s
1,978
1,488
237
124
68
61
—
Of which:
Equipment
purchase
916
916
—
—
—
—
—
Foundry purchase
935
475
216
119
64
61
—
Software, techno
logy licenses and
design
127
97
21
5
4
—
—
Other obligations
869
452
120
62
83
62
90
Total
2,847
1,940
357
186
151
123
90
187
Purchase
obligations
are
primarily
comprised
of
purchas
e
commitments
for
equipme
nt,
for
outsourced
foundry
wafers and for software li
censes.
Other
obligations
primarily
relate
to
f
irm
contra
ctual
com
mitments
with
respect
to
partnersh
ip
and
cooperation
agreements and o
ther service agreements.
Contingencies
The Group
is s
ubject to
pos
sible loss
contingencies
arising
in th
e ordinary
cours
e of b
usiness.
These include
but
are
not
limited
to:
p
roduct
liab
ility
claims
an
d/or
warranty
cost
on
the
products
of
the
Group,
contractual
disputes,
indemnification
c
laims,
clai
ms
for
unauth
orized
us
e
of
third
-party
intellectual
p
roperty,
employee
grievanc
es,
tax
claims
beyond
ass
essed
un
certain
tax
pos
itions
as
well
as
claims
for
environmental
damages.
In
determining
loss
contingencies, the
Group con
siders the
likelihood o
f impair
ing an ass
et or the incurr
ence of a l
iability at th
e date of
the
consolida
ted
financial
statements
as
w
ell
as
th
e
ability
to
reasonably
estimate
th
e
amoun
t
of
s
uch
loss
.
The
Group
records
a
provision
for
a
loss
contingency
when
informa
tion
available
before
t
he
consolidated
financial
statements are iss
ued or are available to be is
sued indicates that
it is probable that an asset has
been impaired or a
liability has b
een incurred at
the date of
the consolidated
finan
cial statements a
nd whe
n
the amoun
t of los
s can be
reasonably
estimated.
The
Group
regularly
re
-evalu
ates claims
to
deter
mine
whether
provision
s
need to
be
readjusted based on the most current information available to the Group. Changes in these
evaluations could result
in an ad
verse material impact on the Group’s results of operations, cash flows or its financial position for the
p
eriod
in which they occur.
Claims and legal proc
eedings
The
Group has rece
ived and
may in
th
e f
uture receive
communicatio
ns alleging
possible infringements of third
p
arty
patents
or
other
third
party
intellectual
property
rights.
Furth
ermore,
the
Group
from
time
to
time
enters
into
discussions regarding a broad patent cross lice
nse arrangement with other industry
participan
ts. There is
no
assurance
tha
t
such
discussions
may
be
brought
to
a
successful
conclusion
and
result
in
the
intended
agreement.
The
Group
may
become
involved
in
co
stly
litigation
brought
against
the
Group
regard
ing
patents
,
mask
works,
copyrights, trademarks or trade secrets. In
the event that the outcome
of any litigation would be unfavorable to the
Group,
the
Group
may
be
required
to
take
a
licens
e to
third
party
patents
and
/or
other in
tellectual
property
rights
at
economically
u
nfavorable terms
and
con
ditions, and
possibly pay
damag
es for
prior use
and/or face
an
injunction,
all
o
f
which individually
or in
the
aggregate could
have a
material
ad
verse
effect
on the
Group’s results
of operations,
cash flows, financial p
osition and/or a
bility to compete.
The
Group has
contractual com
mitments to
variou
s
cus
tomers
which could
require the
Group to
incur
cos
ts
to
repair
or
replace
defective
products
it
supplies
to
such
customer.
The
duratio
n
of
these
contractual
commitments
varies
and, in
certain cases,
is
indefinite.
The
Group is
otherwise
a
lso involved
in
various
lawsuits, claims,
inquiries,
inspections,
investigations
and/or
proceedings
incidental
to
its
bu
siness
and
operations.
Such
matters,
even
if
not
meritorious,
cou
ld
result
in
th
e
expenditure
o
f
significan
t
finan
cial
or
managerial
res
ou
rces.
Any
of
th
e
foregoing
could have a mat
erial adverse effect on th
e Group’s results
of operations, cash
flows or its financial pos
ition.
Other Contingen
cies
The
Group re
gularly evaluates
claims
an
d
legal proceedings
t
ogether with
their
related probab
le losses
to determine
whether
th
ey
n
eed
to
be
adjusted
based
on
the
current
information
available
to
the
Group.
There
can
be
no
assurance
that
its
recorded
reserves
will
be
s
ufficient
to
cov
er
the
extent
of
its
potential
liabilities.
Legal
costs
associated w
ith
claims
are
expens
ed
as incurred.
In
the
ev
ent
of
litigation
which
is
adversely
determined
with
r
espect
to
the
Group’s
interests,
or
in
the
event
the
Group
needs
to
change
its
evaluat
ion
of
a
potential
third
-party
claim,
based
on
new
evid
ence
or
commun
ications,
a
material
adverse
effect
could
impact
its
operations
or
finan
cial
condition at th
e time it were to materialize.
As
at
December 3
1, 20
21
an
d 20
20
,
respect
ively, provisions
for estimated
p
robable losses
with respect
to claims
and
legal proceedings wer
e not consid
ered material.
188
7.6.3
6. Financial risk m
anagemen
t objectives and p
olicies
The
Group
is
exposed to
chan
ges
in
financial
market
conditio
ns
in
the
normal
cours
e
of
bu
siness
due
to
its operations
in
different forei
gn
currencies
an
d its
on-
going
inves
ting
and
financing
activities.
The
Group’
s activ
ities
expose
it to
a variety
o
f f
inancial risks: market
risk (including foreign
exc
hange risk, f
air value
in
terest rate
risk,
cash
flow
interest
rate
risk
and
price
risk),
credit
risk
and
liquidity
risk.
The
Grou
p’s
overall
risk man
agement
pro
gram
focuses
on
the
unpredictability of
financial
markets
and seeks
to
minimize
potentia
l
advers
e
effects on
the
Group’s financial
performance. The Group
uses derivat
ive financial instru
ments to hedge certain ris
k exposures.
Financial
risk
management
is
carried
o
ut
by
a
centra
l
treasury
department
(Corp
orate
Treasury).
Additionally,
a
Treasury Committ
ee, chaired
by
the CFO, steers
treasury
activities
and ensures
compliance with
corporate
policies.
Treasury activities are thus regulated by the Group’s policies, which def
ine procedures, objectives and cont
rols. The
policies
focus
on
the
management
of
financial
risk
in
terms
of
exposure
to
market
risk,
credit ris
k
and
liquidity
risk.
Treasury
controls
are
subject
to
internal
au
dits.
Most
treasury
activities
are
centra
lized,
with
any
local
treas
ury
activities
s
ubject
to oversight
from
Corp
orate
Treasury.
Corpo
rate
Treasury
identifies,
evaluates
an
d
hedges f
inancial
risks
in
close
cooperation
with
the
Group’s
op
erating
units.
It
provid
es
written
principles
for
overall
risk
management,
as
well
as written
policies
covering
specific
are
as,
s
uch
as
foreign
exchange risk,
interest
ra
te
risk,
price
risk, credit risk, use of
d
erivative financial instruments, and i
nvestments of excess liquidity. The
majority of cash and
cash
equ
ivalents
is
held
in
U.S.
dollars
and
Euros
and
is
placed
with
financial
institutio
ns
rated
at
least
a
single “A”
long
term
rating
from
two
of the
majo
r
rating
agencies, m
eaning
at
least
A3
from
Moody
’s
Investors
Service
(“Moody’s”) and
A
-
from Standard
& Poor’s
(“S&P”) or
Fitch (“Fitch”)
Ratings,
or
b
etter.
Th
ese
ratings are
closely
and
continuous
ly
monitored
in
order
to m
anage
exposure
to
the
cou
nterparty’s
risk.
Hedging
transaction
s
are
performed
only to
hedge
exposures
deriving from op
erating, inv
esting an
d finan
cing activ
ities cond
ucted in
the
normal
course
of business
.
Market risk
Foreign exchange risk
The Group conducts
its business on a global basis in various major
international currencies. As a result,
the Group is
exposed
to
adverse
movements
in
foreign
currency
exchange
rates,
primaril
y
with
respect
to
the
Eu
ro.
Foreign
exchange risk
mainly
arises from
future com
mercial tra
nsactions
and
recognized assets
and
liabilities
at the
Company’s s
ubsidiaries and future commercial tra
nsactions.
Management
has
set
up
a
policy
to
require
su
bsidiar
ies
to
hedge
th
eir
entire
foreign
exc
hange
risk
exposure
with
the
Grou
p
through
financial
ins
truments
transact
ed
or
overseen
by
Corpo
rate
Tr
easury.
To
manage
their
foreign
exchange
risk
arising
from
foreign
-currency-deno
minated
as
sets
and
liabilities,
sub
s
idiaries
use
forward
contracts
and
purchas
ed
currency
options
.
Foreign
exchange
risk
arise
s
when
recognized
as
sets
and
liabilities
are
deno
minated
in
a
currency
that
is
not
th
e
entity’s
functional
currency.
These
instruments
do
n
ot
qualify
as
h
edging
instr
uments
for
accou
nting
purposes.
Forward
con
tracts
and
currency
optio
ns,
including
collars,
are
also
used
by
the
Group
to
reduce
its
exposure
to U.S.
dollar f
luctuations
in
E
uro
-denominated
forecasted intercompany
trans
actions
that
cover
a
large
part
of its
research
and
development,
selling
general
and
administrativ
e exp
enses as
well
as
a
portion
of
its
front-end
manufactu
ring
produ
ction
costs
of
semi
-finished
goods.
The
Group
also
hedges
using
currency
forward
contracts certain Sin
gapore dollar-denominated
manufactu
ring forecasted trans
actions. The derivative instruments
used
to
hedge
the
forecasted
tra
nsactions
relating
to
front
-end
manufacturing
producti
on
costs
meet
the
criteria
for
des
ignation
as
cash
flow
hedge.
The
hedged
forecas
ted
transactions
have
a
high
probability
of
occurring
for
hedge accounting pu
rposes.
It is
th
e G
roup’s policy to
ke
ep the f
oreign exchange exposures in all
the currencies hedged month by
month
against
the
mon
thly standard
rate. At
each month
end,
th
e
forecasted flows
for the
co
ming m
onth are
hedged together
with
the
fixing
of th
e
new s
tandard
rate.
For
this
reason,
the
hedging
transactions
will
hav
e an
exchange
rate
very
clos
e
to
the
standard
ra
te
at
which
the
forecasted
flows
will
be
recorded
on
the
following
month
.
As
such
,
th
e
foreign
exchange
exposure
of
the
Group,
which
consists
in
the
balance
s
heet
positions
and
other
contractually
agreed
transactions
,
is
always
close
to
zero
and
any
movement
in
the
foreign
exchan
ge
rates
wi
ll
n
ot
therefore
influ
ence
the
exchange
e
ffect
on
items
of
the
con
solidated
income
statement.
Any
dis
crepancy
from
the
forecasted
values
and the actual
results is cons
tantly monitored and p
rompt actions are tak
en, if needed.
189
The hedging activity of th
e Group an
d the impact on the financial s
tatements is
described in detail
in note 7.6.15.4.
The
following
sensitivity
an
alysis
was
bas
ed
on
recognized
ass
ets
and
liabilities,
includ
ing
non
-monetary
items,
of
the
Company and
its
subsidiaries.
Eq
uity
would
have
been
approximately
$
54
million higher/lower
(20
20
: $
40
m
illion
higher/lower)
i
f
the
Eu
ro
strength
ened/weakened
b
y
300
basis
points
against
the
U.S.
dollar,
arising
main
ly
from
translation o
f net assets from sub
sidiaries whose fun
ctional currency is the E
uro.
At
December
31,
2021
if
the
Euro/U.S.
dollar
excha
ng
e
rate
had
strengthened
by
300
basis
points
with
all
oth
er
variables held
constant, net
result
for
th
e
year would
have b
een
$
45
million
higher (20
20
: $
32
m
illion higher),
mainly
as
a
result
of
foreign
exchange
gains
o
n
outstand
ing
derivative
instruments
.
If
the
Euro/U.S.
dollar
exchange
rate
had weakened
b
y 300
b
asis points with
all other
var
iables held
con
stant, impact in
net income would have
b
een
$
50
million
lower
(20
20
:
$28 million
lower),
mainly
due
to
foreign
exchange
loss
es
on
outstanding
d
erivativ
e
instruments.
Cash flow and fair value inte
rest rate risk
The
Group’s
interest
rate
risk
arises
from
long
-term
borrowings.
Borrowings
issued
at
variab
le
rates
expose
the
Group
to
cas
h
flow
interest
rate
risk.
Borrowings
issued
at
fixed
rates
expose
th
e
Group
to
fair
v
alue
interest
rate
risk.
The
Group
analyzes
its
interest
rate
expo
sure
on
a
dynamic
basis.
Vario
us
scenarios
are
simulated
taking
into
consideration refinancing, renewal of e
xisting positions, alternative financing
and
hedging. The Group
invests
primarily
on
a
short
-term
basis
and
as
such it
s
liquidity
is
invested
in f
loating
interest
rate
instru
ments.
As
a
consequence, th
e Group is exp
osed to interest
rate risk due to p
otential mismatch b
etween the return o
n its
short
-
term floating interest ra
te investments an
d the portion
of its long
-term debt issu
ed at fixed rate.
At December 31, 2021 and 20
20
, if
interest rates had been
20 basis points higher/lower with all other variables
held
constant, net income for the year would have been $1 million higher/low
er respectively, mainly as a result of a
h
igh
level of liquid assets
in relation to d
ebt, with no material impact o
n equity.
During 2021 and 20
20
,
the Group’
s borrowings at var
iable rate were denominated in Euro
s and in U.S. doll
ars.
Price risk
As
part
of
its
on
-going
investi
ng
activities,
the
Group
may
be expos
ed
to
quoted
securit
y
price
risk
for
investments
measured at
fair value, as des
cribed in
Note 7.6.1
5.
1. The Group did
not hold as
at December 31, 20
21
and 20
20
any
significant investments
in quoted equity
securities.
The measurement for accounting purposes of the embedded derivative instruments of the
senior unsecured
convertible
bonds
issued
on
August
4,
2020
is
dependent
on
various
factors
in
cluding
th
e
performance
of
ST
Microelectronics ordinary
shares.
With
respect
to
the
v
aluation
of
the
embedded
issuer’s
call
option
s
as
at
December 31,
20
21
,
if
the
price
of
the
Company’
s
ordinary
s
hares,
as
measured
on
the
New
York
stock
exchange,
with
o
ther
v
aluation
inputs
remaining
equal,
increases
by
10%,
the
valu
e
of
the
embedded
call
option
s
would
increase by $2 million (20
20
: i
ncrease of $
13
million), wher
eas for a decrease of 10% in the sh
are price, the value of
the
embedded
call options
wo
uld
decrease
by
$4
million
(20
20
:
decreas
e
of
$2 million).
Wi
th
res
pect
to
the
valuat
ion
of the embedded bo
ndholders’ con
version option
s
as at December
31
, 20
21
, if the pric
e of the Company’s
ordinary
shares,
as
measured
on
the
N
ew
York
stock
exchan
ge,
wi
th
other
valuation
inputs
remaining
equal,
increas
es
b
y
10%,
the value
o
f
th
e e
mbedded conversion
option
s would
increase by
$
126
million
(20
20
: increase
o
f
$1
95 million),
whereas for a decre
ase of 10% in the share price,
th
e value of the
embedded conversion option
s
would decrease by
$
108
million
(20
20
: decreas
e of $192 million). Details of the sensitivity of the other valuation factors, more
specifically implied vo
latility, are presented in
Note 7.6.1
5.5.
Credit risk
Credit
risk
is
the
risk
that
a
counterparty
will
not
meet
its
ob
ligations
under
a
financial
instrument
or
customer
contract leading to a financial
loss. Credit risk typically arises
from cash and cash equivalents, contractual cash flows
of
debt
in
vestments
carried
at
amorti
zed
cost,
measured
at
FVOCI
an
d
at
FVPL,
the
counterparty
of
d
erivative
190
financial
instruments
an
d
deposits
with
ban
ks
an
d
financial
ins
titutions,
as
well
as
credit
exposu
re
to
cus
tomers,
including outs
tanding receivables.
The
Group
is
exposed to
credit
risk f
rom
its
operating
activ
ities
(primarily
for
trade
r
eceivables)
and
from
its
finan
cing
activities, includin
g deposits with ban
ks and finan
cial institutions, foreign exchan
g
e transaction
s and other finan
cial
instruments.
Credit
ris
k
is
managed
on
the
Group
basis.
The
Group
selects
b
anks
and
/or
financial
institutions
that
op
erate
with
the Group
b
ased on
the
criteria of long-term
rating from
at l
east two
major Rating Agencies
and keeping
a maximum
outstand
ing amount per instrument with each bank not to exceed 20% of the total. For derivative financial
instruments,
management
has
established
limits
so th
at,
at
any
time, th
e
fair
valu
e
of
contracts
outstand
ing
is
not
concentrated with an
y individual cou
nterparty.
The
Group
monitors
the
creditworthin
ess
of
its
customers
to
which
it
grants
credit
terms
in
th
e
normal
course
of
business. If
certain
customers
are independently rated,
these
ratings are
used. Otherwise, if
there is
no i
ndependent
rating, risk control
as
sesses the
credit quality of
the customer, cons
idering its
financial position, past experie
nce and
other
factors.
Individu
al
risk
limits
are
set
bas
ed
on
internal
and
external
ratings
in
accordance
with
limits
set
by
management. The u
tilization of credit li
mits is regularly mo
nitored. Sales to cu
stomers ar
e primarily settled in
cash,
which
mitigates
credit
risk.
There
is
no
majo
r
concentration
of
credit
risk,
whether
through
exposure
to
individu
al
customers,
specific
indu
stry
sectors
or
regions
.
At
D
ecember
31,
20
21
and
20
20
,
no
custo
mer
r
epresented
more
than
10%
of
total
trade
accounts
receivable.
Any
remaining
concentra
tions
of
credit
risk
with
respect
to
tra
de
receivables are limited due to
the large nu
mber of custome
rs and th
eir dispersion across many geographic a
reas.
The
Group’s
investments
in
debt
instruments
primarily
include
U.S.
Treasury
Bonds
and
long
-term
receivables
towards
government bo
dies. As
such, they
are investments with
unmaterial
credit los
s. Any remaining
receivable
is
of low
credit
ris
k
and
are
individually
n
ot s
ignificant.
The
credit
ratings
of
the
investments
are
monitored
for
credit
deterioration.
The Group has th
ree types of financial as
sets that a
re subject to the expected credit los
s model:
•
Trade receivab
les for sales of good
s and services, as
described in Note 7.6.1
8
;
•
Debt securities m
easured at
FVOCI, as described in
Note 7.6.1
5.1;
•
Debt
investments,
primarily
long-term
receivables,
carried
at
amortized
cost,
as
described
in
Note
7.6.
19
and Note 7.6.16
.
The
impairment methodology by category
of financial a
ssets is
furth
er described
in each
respective note.
Wh
ile cas
h
and
cash
equiv
alents
are
also
subject
to
the
impairment
requ
irements
of
IFRS
9,
the
identified
impairment
los
s
is
deemed to be immaterial. Th
e maximum exposu
re for all fin
ancial assets
is
their carrying amou
nt.
Liquidity risk
Prudent
liqu
idity
risk
management
includ
es
ma
intaining
enough
cash
and
cash
equivalents
and
marketable
securities,
the
av
ailability
of
funding
from
committed
credi
t
facilities
and
th
e
ab
ility
to
close
o
ut
market
pos
itions.
The
Group’s
objectiv
e
is
to
maintain
a
s
ignificant
cash
pos
ition
and
a
low
deb
t-
to
-equity
ratio,
which
ensure
adequate
financial flexibility
. Liqu
idity management
policy
is to
finance
the Group
’s in
vestments with
net cas
h pro
vided from
operating activities.
Management monitors
rolling forecasts of th
e Group’s liquidity reserve
based on exp
ected cash flows.
A maturity analy
sis of interest-bearing lo
ans and
borrowings is sho
wn in note 7.6.1
5.3.
Capital risk managemen
t
The Group’s objectives
when managing capital
ar
e to
s
afeguard
the
Group’s
ability
to continue as
a going
con
cern in
order
to
create
value
for
shareholders
and
benefits
and
returns
for
other
stakeholders,
as
to
maintain
an
optimal
capital structure. In
order to
maintain or adj
ust the
capita
l
s
tructure, the
Group m
ay revi
ew
the amount
of dividends
paid to shareholders
, return ca
pital to sh
areholders, or issue new shares.
191
8.
Company’s fina
ncial statements
8.1. Company’s statement of financial
position
In millions of USD (Before proposed appropriation of result)
Notes
December
31,
2021
December
31,
2020*
Assets
Non
-current assets
Lease right-
of
-use assets
8.3.4
16
20
Goodwill
8.3.6
64
64
Intangible assets
8.3.5
17
18
Investments in subsidiaries
8.3.6
6,220
5,832
Other non-current financial assets
8.3.7.1
36
42
Other non-current assets
1
1
Total non-current assets
6,354
5,977
Current assets
Group companies interest-bearing short-term loans
8.3.9
1,794
2,121
Other group companies receivables
8.3.10
86
70
Other current financial assets
8.3.7.1
-
194
Other receivables and assets
9
16
Short-term deposits
8.3.7.1
291
550
Cash and cash equivalents
8.3.8
3,096
2,884
Total current assets
5,276
5,835
Total assets
11,630
11,812
Equity and liabiliti
es
Equity
8.3.11
Issued and paid-in capital
1,073
1,163
Additional paid-in capital
2,283
2,272
Retained earnings
2,795
2,252
Treasury shares
(200
)
(93
)
Legal reserves
1,855
1,975
Result for the year
1,711
694
Total equity
9,517
8,263
Non
-current liabilities
Interest-bearing loans and borrowings
8.3.13
1,382
1,359
Other non-current financial liabilities
8.3.7.2
550
358
Other non-current liabilities
8.3.14
5
5
Total non-current liabiliti
es
1,937
1,722
Current liabilities
Interest-bearing loans and borrowings
–
current portion
8.3.13
-
734
Other current financial liabilities
8.3.7.2
4
680
Group companies short-term notes payables
8.3.10
63
99
Other group companies payables
8.3.10
42
265
Other payables and accrued liabilities
8.3.12
62
49
Income tax payable
5
—
Total current liabilities
176
1,827
Total equity and liabiliti
es
11,630
11,812
The accompanyin
g notes are an in
tegral part of these Com
pany’s financial s
tatements
*Comparative figures
have b
een adjusted
to
reflect a
c
hange in ac
counting policy,
fo
llowing the
IFRIC
agenda deci
sion issued
in
2021. T
he change
in acco
unting policy
affec
ts pension ac
counting
for
defined benefit
plans wit
h certain
characteristics fo
und in
retirement
indemnities
pla
ns
in
one
of
the
countries
w
here
the
Group
operates.
The
change
in
accounting
policy
was
applied
192
retrospectively an
d
resulted
in
an
increase
i
n
investments
i
n
subsidiaries
of
$1
3
million
and
an
increase
i
n
retained
earnings
o
f
$13 million as of December 31, 2020.
8.2. Company’s income statement
Year ended
In millions of USD
Notes
December
31,
2021
December
31,
2020
Selling expenses
(1
)
(1
)
General and administrativ
e expenses
8.3.16
(20
)
(17
)
Other income (expenses)
8.3.18
26
1
Income (loss) from
operations
5
(17
)
Finance income
8.3.17
20
114
Finance costs
8.3.17
(435
)
(535
)
Income (loss) befor
e taxes
(410
)
(438
)
Income tax benefit (exp
ense)
(7
)
(7
)
Income (loss) after t
ax
(417
)
(445
)
Results relating to in
vestments in
associates
-
2
Net income from affiliated co
mpanies
8.3.6
2,128
1,137
Net income
1,711
694
The accompanyin
g notes are an in
tegral part of these Com
pany’s financial s
tatements
8.3. Notes to Company’s financial statements
8.3.1. General
A
description of
the
Company
,
its
activities
and
group
s
tructure
are
includ
ed
in
the
consolidated
financial statements,
prepared on the basis of accounting p
olicies that conform to International
Financial Reporting Standard
s (“IFRS”) as
endorsed
by
the
European
Un
ion.
The
Company
holds
investments
in
subsidiaries
operating
in
the
semicondu
ctor
manufacturing indu
stry.
8.3.2. Basis of Presentation
The Company’s financial statements have been prepared in accordance with art 9 of Book 2 of the Dutch Civil Code.
In accordance
with the
prov
isions
of
Section 362-8 of Book
2
of
th
e Dutch
C
ivil code
the accounting policies used
are
the same
as
those
u
sed in
th
e
n
otes to
th
e consolidated f
inancial statements
prepared under
IFRS as
ad
opted by the
European Union
, unless otherwise stated. The finan
cial statements
were prepared on March
2
3, 2022.
In
accord
ance
with
article 2:3
62
par.
8
of
the
Dutch
Civil
Cod
e,
the
Company
has
prepared
its
financial
statements
in
accordance
with
acco
unting
principles
g
enerally
accepte
d
in
The
Netherland
s
applying
th
e
accounting
principles
as
adopted
in
the
cons
olidated
finan
cial
s
tatements
and
further
described
in
details
in
the
conso
lidated
financial
statements note 7.6.7.
The functional and p
resentation currency
of the Company is
the U.S. dollar.
All balances and
values are in millions of U.S. d
ollars, except as
oth
erwise noted
.
The accounting policies ad
opted are cons
istent with thos
e of the previous financial y
ear.
193
8.3.3. Summary of sign
ificant accou
nting policies
Subsidiaries
Subsidiaries are
all
entities
over
which the
Company has
control.
The Company
contro
ls a
n entity
when the
Company
is
exposed to,
or
has
rights
to
,
variab
le
returns
from
its involvement
with the
entity and
has the
ability to
affect those
returns throu
gh its power to d
irect the activities of
the entity
.
Valuation of Subsidiaries
Investments
in
subs
idiaries
are
stated
at
n
et
asset
v
alue
as
th
e
Company
effectively
contro
ls
the
operational
an
d
financial
activities
of
these
inv
estments.
The
net
asset
valu
e
is
d
etermined
on
th
e
basis
of
the
IFRS
accounting
principles applied b
y the Company in
its consolidated fin
ancial statements.
Amounts due from grou
p companies are stated initially at fair value and subs
equently at amorti
zed cost. Amortiz
ed
cost
is
determined
us
ing
the
effective
int
erest
rate.
The
Company
recogni
zes
a
cr
edit
loss
for
finan
cial as
sets
(su
ch
as
a
loan)
bas
ed
on
an
expect
ed
credit
loss
(ECL
)
model
based
first
on
esti
mated
credit
lo
sses
expected
to
occur
in
the
coming
twelve month
s
an
d
lifetime
expected
credit
los
ses
after
a
significant
decrease
in
credit
q
uality
or
when
the
simplified
mod
el
can
b
e
used.
For
intercompany
receivables
the
ECL
would
be
applicab
le
as
well, h
owever
this
could
cause
differences
between
equity
in
the cons
olidated an
d s
epar
ate
finan
cial statements
.
For
this
reason,
the
Company elected to eliminate
these differences thro
ugh the respective receivable accou
nt in t
he separate financial
statements.
For
intercompany
financial
guarantees
issu
ed
by
the
Company,
there
is
no
expected
default
and
therefore
the
financial guaran
tees are
not
recogni
zed.
Guarantees
given
by
the Compan
y to
its
subsidiaries are
further
described
in Note 8.3.15.
8.3.4.
Lease right-
of
-use assets
A leas
e con
tract
is
a
contract,
or
part
of
a con
tract,
that
conveys
the
right
to
control
the use
of
identified
prop
erty,
plant,
or
equipment
(an
identi
fied
asset)
for
a
period
of
time
in
exchange
for
consideration
.
The
Company
determines
if
an
arrangement
is
a
lease
at
inception.
Leases
are
included
in
right-
of
-use
assets
.
Curre
nt
lease
liabilities
are
included
in
other
cu
rrent
fin
ancial
liab
ilities,
while
non-
current
lease
liabilities
are
in
cluded
in
oth
er
non
-current
financial liabilities in th
e Company’s
statement of finan
cial position.
Right-
of
-
use assets represent the Company’s rights
to use an underlying asset for the
lease term and lease liabilities
represent the
Company’s
obligations
to make le
ase payments
arising from the
lease. Right
-
of
-use assets and
liabilities are recognized at the lease commence
ment date based on th
e estimated present value of lease payments
over the lease term.
The right-
of
-use asset
is
a nonmonetary
ass
et while th
e leas
e liability
is
a monetary
liability.
When
accounting
for
a
lease
that
is
denominated
in
a
foreign
curren
cy,
the
lease
l
iability
is
re
-meas
ured
us
ing
the
current
exchan
ge
rate,
while the right-
of
-use ass
et is measured us
ing the exchange rat
e as of the commencemen
t date.
The
Company
leases
b
uildings,
cars
an
d
cer
tain
equipment
(includ
ing
IT
equipm
ent)
wh
ich
have
rem
aining
lease
terms between less than one year and 5 years. Ce
rtain lease contracts contain option
s to extend the
leases by up to
5
y
ears,
which
the Company
has
in
cluded
in
the
lease
t
erm when
it is
reas
onably
certain
f
or
the
Company to
exercise
that option. In addition, the Company made an accounting policy election for all the asset classes to not account for
short-term
and
low
-value
leases.
A
sh
ort-term
lease
is
defi
ned
as
a
lease
that,
at
th
e
commence
ment
date,
has
a
lease
term
of
12
month
s
or
less
and
does
not
include
an
option
to
purchase
the
underlying
asset.
The
short
-term
lease
election
can
only
be
made
at
the
commencement
d
ate.
Expens
es
related
to s
hort
-te
rm
and
low-value
leases
were not significan
t in 2021 and 2020.
194
Variable
lease
payments
that
depend
on
an
index
or
a
rate
are
included
in
the
lease
payments
and
are
measured
using
the
prevailing
index
or
rate
at
the
measurement
date.
Potential
future
increases
in
variab
le
lease
payments
based
on
an
ind
ex
or
rate
are
not
included
in
the
lease
liability
until
th
ey
take
effect.
When
adjus
tments
to
lease
payments based on
an index
or rate
take effect,
the lease
liability is reassessed and
adjusted against
the right
-
of
-use
asset.
Cha
nges
to
index
an
d
rate-bas
ed
variab
le
lease
pay
ments
are
recognized
in
income
sta
tement
in
the
period
of the change.
Maturities of lease liab
ilities are as follo
ws:
In millions of USD
December 31, 2021
2022
4
2023
4
2024
4
2025
4
2026
2
Total future un
discounted cash outflows
18
Effect of discounting
(1
)
Total lease liabilities
17
In millions of USD
December 31, 2020
2021
4
2022
4
2023
4
2024
4
2025
4
Thereafter
3
Total future un
discounted cash outflows
23
Effect of discounting
(1)
Total lease liabilities
22
A reconciliation of opening a
nd clos
ing right
-
of
-use assets is prov
ided below:
In millions of USD
Right-
of
-use assets as of Janu
ary 1, 2020
23
Depreciation for the period
(3
)
Right-
of
-use assets as of Dec
ember
31, 2020
20
Depreciation for the period
(4
)
Right-
of
-use assets as of Dec
ember
31, 2021
16
195
8.3.
5. Intangible asset
s
In millions of USD
Internally developed
software
Acquisition an
d production cost:
Balance at Janu
ary 1, 2021
207
Additions
6
Balance at Decemb
er 31, 2021
213
Accumulated amortization:
Balance at Janu
ary 1, 2021
(189
)
Amortization expense
(7
)
Balance at Decemb
er 31, 2021
(196
)
Net book value
At December 31, 2021
17
At December 31, 2020
18
8.3.
6. Investments in su
bsidiaries
and good
will
In millions of USD
2021
2020*
Beginning of the year
5,832
5,586
Result from subs
idiaries
2,128
1,137
Changes in oth
er reserves of subs
idiaries*
(69
)
34
Dividends paid
(1,552
)
(1,188
)
Capital increase (decreas
e)
69
68
Translation effect of exchang
e rates of su
bsidiaries
(188
)
195
End of th
e year
6,220
5,832
*
Comparativ
e
figur
es
have
been
ad
justed
to
reflect
a
change
in
accountin
g
p
olicy,
following
the
IFRIC
agenda
decision
is
sued
in
2021.
Th
e
ch
ange
in
accounting
policy
affects
pens
ion
accou
nting
for
defined
benefit
plans
with
certain characteristics found in retirement indemnities plans in one of the
countries where the Group operates. T
he
change in accounting policy was applied retrosp
ectively and resulted in an increase in
investments
in subsidiaries of
$13 million and a
n increase in retained earn
ings of $13 milli
on as of December 31,
2020.
The follow
ing
table
lists
the
Company’s
consolidated
subsidiaries
and
percentage
of
ownersh
ip
as
of December
31,
202
1:
Legal Seat
Name
Percentage
owne
rship
(direct or
indirect)
Percentage
owne
rship
(direct or
indirect)
December 31, 2021
December 31, 2020
Australia, Syd
ney
STMicroelectronics PT
Y Ltd
100
100
Austria, Vienna
STMicroelectronics Aus
tria GmbH
100
100
Belgium, Diegem
Proton World In
ternational N.V.
100
100
Brazil, Sao Paulo
South America Com
é
rcio
de Cart
õ
es
Inteligentes Ltda
100
100
Brazil, Sao Paulo
STMicroelectronics Ltd
a
100
100
Canada, Ottawa
STMicroelectronics (Canad
a), Inc.
100
100
China, Beijing
STMicroelectronics (Beijin
g) R&D Co. Ltd
100
100
China, Shangh
ai
STMicroelectronics (China)
Investment
Co. Ltd
100
100
196
Legal Seat
Name
Percentage
owne
rship
(direct or
indirect)
Percentage
owne
rship
(direct or
indirect)
December 31, 2021
December 31, 2020
China, Shenzhen
Shenzhen STS Microel
ectronics Co. Lt
d
60
60
China, Shenzhen
STMicroelectronics (Shenzh
en) R&D Co.
Ltd
100
100
Czech Republic, Prague
STMicroelectronics Design
and
Application s.r.o
.
100
100
Denmark, Aarhus
STMicroelectronics A/S
100
100
Egypt, Cairo
STMicroelectronics E
gypt SSC
100
100
Finland, Nummela
STMicroelectronics Finlan
d OY
100
100
France, Crolles
STMicroelectronics (Croll
es 2) SAS
100
100
France, Grenoble
STMicroelectronics (Alps
) SAS
100
100
France, Grenoble
Exagan SAS
80
80
France, Grenoble
STMicroelectronics (Gr
enoble 2) SAS
100
100
France, Le Mans
STMicroelectronics (Grand
Ouest) SAS
100
100
France, Montrouge
STMicroelectronics S.A.
100
100
France, Le Bourget-
du
-
Lac
BeSpoon SAS
100
100
France, Rousset
STMicroelectronics (Rous
set) SAS
100
100
France, Tours
STMicroelectronics (Tours
) SAS
100
100
Germany, Aschh
eim-
Dornach
STMicroelectronics GmbH
100
100
Germany, Aschh
eim-
Dornach
STMicroelectronics App
lication GmbH
100
100
Hong Kong, Kowloon
STMicroelectronics Ltd
100
100
India, New Delhi
ST
-Ericsson I
ndia Pvt Ltd
100
100
India, Noida
STMicroelectronics Pv
t Ltd
100
100
Israel, Netanya
STMicroelectronics Limit
ed
100
100
Italy, Agrate Brianza
STMicroelectronics S.r.l.
100
100
Italy, Naples
STMicroelectronics Servic
es S.r.l.
100
100
Japan, Toky
o
STMicroelectronics KK
100
100
Malaysia, Kuala
Lumpur
STMicroelectronics Marketin
g SDN BHD
100
100
Malaysia, Muar
STMicroelectronics SDN BH
D
100
100
Malta, Kirkop
STMicroelectronics (Malta) Lt
d
100
100
Mexico, Guadalajara
STMicroelectronics Marketin
g, S. de R.L.
de C.V.
100
100
Morocco, Casablan
ca
Electronic Holding S.A.
100
100
Morocco, Casablan
ca
STMicroelectronics S.A.S. (
Maroc)
100
100
The Netherlands,
Amsterdam
STMicroelectronics Finan
ce B.V.
100
100
The Netherlands,
Amsterdam
STMicroelectronics Finan
ce II N.V.
100
100
The Netherlands,
Amsterdam
STMicroelectronics In
ternational N.V.
100
100
Philippines, Calamba
STMicroelectronics, In
c.
100
100
Philippines, Calamba
Mountain Drive Pro
perty, Inc.
40
40
Singapore, Ang Mo Kio
STMicroelectronics As
ia Pacific Pte Ltd
100
100
Singapore, Ang Mo Kio
STMicroelectronics Pte Lt
d
100
100
Slovenia, Ljublja
na
STMicroelectronics d
.o.o.
100
100
197
Legal Seat
Name
Percentage
owne
rship
(direct or
indirect)
Percentage
owne
rship
(direct or
indirect)
December 31, 2021
December 31, 2020
Spain, Barcelona
STMicroelectronics Ib
eria S.A.
100
100
Sweden, J
ö
nk
ö
ping
STMicroelectronics Soft
ware AB
100
100
Sweden, Kista
STMicroelectronics A.B.
100
100
Sweden, Norrko
ping
STMicroelectronics Silicon Car
bide A.B.
100
100
Switzerland, Geneva
STMicroelectronics S.A.
100
100
Taiwan, Tapei City
Exagan Taiwan Ltd
.
80
80
Thailand, Bangkok
STMicroelectronics (Thailan
d) Ltd
100
100
United Kingdom, Bristol
STMicroelectronics (Resear
ch &
Development) Limited
100
100
United Kingdom, Marlo
w
STMicroelectronics Limit
ed
100
100
United Kingdom, Marlo
w
Synad Technologies Limit
ed
100
100
United States, Coppell
STMicroelectronics Soft
ware Inc.
100
100
United States, Coppell
STMicroelectronics In
c.
100
100
United States, Coppell
STMicroelectronics (No
rth America)
Holding, Inc.
100
100
Goodwill
In millions of USD
Automotive
and
Discrete
Group
(ADG)
Total
As at January 1, 2021
64
64
Foreign currency trans
lation
—
—
As at December 31, 2021
64
64
As at December 3
1, 2021, th
e gross
value of goodwill
was $
64
million ($
64
million in 20
20
) and
with no i
mpairment
recorded in 2021 and 20
20
.
8.3.
7. Other financ
ial assets and
financial liabilities
8.3.
7.1.
Other financial as
sets
Movements on oth
er financial as
sets are presented a
s follows:
In millions of USD
December
31,
2021
Beginning of the year
236
Proceeds at maturity o
f debt securities iss
ued by the U.S.Treasu
ry
(132
)
Change in fair value of d
ebt securities is
sued by
the U.S.Treasury
(1
)
Change in fair value of th
e embedded ca
ll option of the s
enior unsecured con
vertible
bonds issu
ed on July 3, 2017 prior to s
ettlement (Tranche B)
(121
)
Extinguishment of th
e embedded call optio
n of
the senior uns
ecured convertible
bonds issu
ed on July 3, 2017 (Tranche B)
60
Change in fair value of th
e embedded ca
ll option of the s
enior unsecured con
vertible
bonds issu
ed on August 4, 2020 (Tranche A an
d Tranche B)
(6
)
End of th
e year
36
Less: non-current
portion
36
Current por
tion
—
198
In millions of USD
December
31,
2020
Beginning of the year
181
Change in fair value of th
e embedded ca
ll option of the s
enior unsecured con
vertible
bonds issu
ed on July 3, 2017 prior
to settlement (Tranche
A)
(53)
Change in fair value of th
e embedded ca
ll option of the s
enior unsecured con
vertible
bonds issu
ed on July 3, 2017 (Tranche B)
39
Extinguishment of th
e embedded call optio
n of the senior uns
ecured
convertib
le
bonds issu
ed on July 3, 2017 (Tranche A)
38
Change in fair value of th
e embedded ca
ll option of the s
enior unsecured con
vertible
bonds issu
ed on August 4, 2020 (Tranche A an
d Tranche B)
33
Change in fair value of u
nquoted equity
securities
(2)
End of th
e year
236
Less: non-current
portion
(42)
Current por
tion
194
Investments h
eld in debt securities
As at
December 31, 2020,
th
e Com
pany held $133
million of U.S.
Tr
easury bonds, me
asured at FVOC
I, all transferred
to a financial institution with high credit quality. These transaction
s were concluded in compliance with the
Company’s p
olicy to optimize the return on its short
-term interest rate investments,
always placed with institutions
with high credit ratin
g. In 2021, these debt securities reached maturity an
d the related proceeds amounted to $132
million.
Investments h
eld in equity securities
The
Company
irrevocably
elected
to
measu
re
at
F
VOCI
unqu
oted
equity
securities
for
an
aggregate
valu
e
of
$10
million
(December
31,
2020:
$9
million).
Since
these
are
stra
tegic
investments,
th
e Company
considers
this
classification,
which
implies
that changes
in
fair
value
are
not
subsequently re
cycled
to
earnings,
to
be
more
relevant.
Financial assets
include the
following:
In millions of USD
December
31,
2021
December
31,
2020
Quoted secu
rities:
Debt securities issu
ed by the U.S. Treasury
—
133
Unquoted equity secu
rities:
Unquoted equity
securities
10
9
Embedded call option
- Senior u
nsecured conv
ertible bonds issu
ed
on July 3, 2017 (Tranche
B)
—
61
Embedded call option
- Senior u
nsecured conv
ertible bonds issu
ed
on August 4,
2020 (Tranche A)
11
13
Embedded call option
- Senior u
nsecured conv
ertible bonds issu
ed
on August 4,
2020 (Tranche B)
15
20
Total
36
236
199
Financial assets
are denominated in t
he following currencies
:
In millions of USD
December
31,
2021
December
31,
2020
Euro
10
9
US dollar
26
227
Total
36
236
For
furth
er
d
etails
o
n
G
roup’s
financial
assets,
see
note
7.6.15.1
of
the
consolidated
finan
cial
statements
of
the
Group.
Short-term d
eposits
To op
timize th
e
return
yield
on
its
short
-term
investments
,
the
Company
inv
ested
$
291
million o
f av
ailable
cash
in
short-term d
eposits
as
at Dec
ember 31,
202
1.
These
short
-term
deposits
had
a maturity
beyon
d th
ree months
and
no significant risk of changes i
n fair value. They were
reported in “Short
-
term deposits” in
the Company’s
statement
of financial position
.
8.3.
7.2.
Other financial liab
ilities
Movements on oth
er financial liabilities a
re presented as follows:
In millions of USD
December
31,
2021
Beginning of the year
1,038
Change in fair value of th
e emb
edded conversion
option of the senior u
nsecured
convertible bonds
issued on July 3, 2017 prior
to settlement (Tranche B)
68
Extinguishment of th
e embedded conv
ersion option o
f the senior unsecured
convertible bonds
issued on July 3, 2017
(Tranche B)
(744
)
Change in fair value of th
e embedded co
nversion op
tion of the senior uns
ecured
convertible bonds
issued on August
4, 2020 (Tranche A and Tranche B)
197
Lease payments
(5
)
End of th
e year
554
Less current p
ortion
(4
)
Non
-current portion
550
200
In millions of USD
December
31,
2020
Beginning of the year
733
Change in fair value of th
e embedded co
nversion op
tion of the senior uns
ecured
convertible bonds
issued on July 3, 2017 prior
to
settlement (Tranche A)
11
Extinguishment of th
e embedded conv
ersion option o
f the senior unsecured
convertible bonds
issued on July 3, 2017 (Tranche A
)
(341)
Change in fair value of th
e embedded co
nversion op
tion of the senior uns
ecured
convertible bonds
issued on July 3, 2017 (Tranche B
)
296
Embedded non
-equity derivative in
struments recognized at
inception on t
he senior
unsecured conv
ertible bonds issu
ed on August 4, 2020
219
Change in fair value of th
e embedded
conv
ersion option
of the senior unsecured
convertible bonds
issued on August
4, 2020 (Tranche A and Tranche B)
121
Lease payments
(1)
End of th
e year
1,038
Less current po
rtion
(680)
Non
-current portion
358
Other non-current finan
cial liabilities in
clude the following:
In millions of USD
December
31,
2021
December
31,
2020
Embedded conversion
option
- Senior unsecured conv
ertible bond
s
issued on Au
gust 4, 2020 (Tranche A)
255
158
Embedded conversion
option
- Senior unsecured conv
ertible bond
s
issued on Au
gust 4, 2020 (Tranche B)
282
182
Lease liabilities
13
18
Total
550
358
8.3.
8. Cash and c
ash equivalents
Cash and ca
sh equivalents consis
ted of the following:
In millions of USD
December 31,
2021
December 31,
2020
Cash at ban
k and in hand
248
247
Deposits at call with
banks
2,848
2,637
Total
3,096
2,884
201
8.3.
9. Group com
panies interest
-bearing short
-term loans
Group companies s
hort-term loan
s cons
isted of the following:
In millions of USD
December 31,
2021
December 31,
2020
STMicroelectronics Ltd
. (Israel)
Loan due 2022 b
earing interest at
3-month LIBOR
4
Loan due 2021 bearing in
terest at 3
-month LIBOR
4
STMicroelectronics A/S (Den
mark)
Loan due 2022 bearing in
terest at 3
-month CIBOR + 0.
50%
1
Loan due 2021 b
earing interest at
3-month CIBOR + 0.
50%
1
STMicroelectronics Financ
e II N.V. (Netherland
s)
Loan due 2022 bearing in
terest at 1
-month LIBOR + 0.25
%
1,311
Loan due 2021 bearing in
terest at 1
-month LIBOR +
0.25%
994
STMicroelectronics Inte
rnational N.V. (Neth
erlands)
Loan due 2022 bearing in
terest at 3
-month LIBOR + 0.25
%
453
Loan due 2021 bearing in
terest at 3
-month LIBOR + 0.25
%
1,100
STMicroelectronics Austr
ia GmbH (Austr
ia)
Loan due 2021 bearing in
terest at 12
-month EURIBOR + 0
.50%
—
1
STMicroelectronics sem
iconductor
s development LLC (Sloven
ia)
Loan due 2021 bearing in
terest at
12
-month E
URIBOR + 0.50%
—
1
STMicroelectronics S.A.S. (M
aroc)
Loan due 2022 bearing in
terest at 1
-month E
URIBOR+ 0.25%
17
Loan due 2021 bearing in
terest at 1
-month E
URIBOR+ 0.25%
12
Exagan SAS (Franc
e)
Loan due 2022 bearing in
terest at E
URIBOR +1%
8
Loan due 2021 bearing in
terest at E
URIBOR +1%
8
Total short-term
intercompany loans
1,794
2,121
Fair value of Group compan
ies
short
-term loans is similar to net bo
ok value.
8.3.1
0. Other G
roup compan
ies receivables and payables
In millions of USD
December 31,
2021
December 31,
2020
Other group compan
ies receivab
les (advances)
86
70
Total group c
ompanies rece
ivables
86
70
Other group compan
ies payables
42
265
Group companies s
hort-term n
otes payab
le
63
99
Total group com
panies payables
105
364
202
Group companies s
hort-term n
otes payab
le consisted of the following:
In millions of USD
December 31,
2021
December 31,
2020
STMicroelectronics Ltd
. (United Kingdom)
Note due 2022 bearing inter
est at
12-month L
IBOR + 0.25%
13
Note due 2021 bearing inter
est at
12-month L
IBOR + 0.25%
16
STMicroelectronics Softwar
e AB (Sweden)
Note due 2022 bearing inter
est at
3-month STIBOR
+ 0.75%
2
Note due 2021 bearing
interes
t at 3-month STIBOR
+ 0.75%
3
STMicroelectronics R&
D Ltd (United Kingdom)
Note due 2022 bearing inter
est at
12-month L
IBOR + 0.25%
27
Note due 2021 bearing inter
est at
12-month L
IBOR + 0.25%
31
STMicroelectronics Financ
e B.V. (Nether
lands)
Note due 2022 bearing inter
est at
3-month E
URIBOR + 0.65%
3
Note due 2021 bearing inter
est at
3-month E
URIBOR + 0.65%
1
STMicroelectronics Finland O
Y
Note due 2022 bearing inter
est at
12-month E
URIBOR + 0.25%
1
Note due 2021 bearing inter
est at
12-month E
URIBOR + 0.25%
—
STMicroelectronics Silicon C
arbide A.B. (Sweden
)
Note due 2022 bearing inter
est at
1-month L
IBOR + 0.10%
17
Note due 2021 bearing inter
est at
1-month L
IBOR + 0.10%
48
Total short-term
intercompany notes p
ayable
63
99
8.3.1
1. Equity
In millions of USD
Issued
and
paid-
in
capital
Additional
paid-
in
capital
Retained
Earnings
**
Treasury
shares
Legal
reserves
Result
for
the
year
Total**
Balance Januar
y 1, 2021*
1,163
2,272
2,252
(93
)
1,975
694
8,263
2020 Net income
—
—
694
—
—
(694
)
—
Transfer to (from) legal reserv
e
—
—
(68
)
—
68
—
—
Repurchase of common s
tock
—
—
—
(485
)
—
—
(485
)
Stock-based compensat
ion
—
—
62
—
—
—
62
Settlement of senior uns
ecured
convertible bonds
—
11
—
220
—
—
231
Rights acquired on
vested stock
awards
—
—
—
158
—
—
158
Changes in fair v
alue of financial
assets measu
red at FVOCI
—
—
(1
)
—
—
—
(1
)
Dividends paid
—
—
(218
)
—
—
—
(218
)
2021 Net income
—
—
—
—
—
1,711
1,711
Cash flow hedge r
eserve, net of tax
—
—
(53
)
—
—
—
(53
)
AOCI - Pension plan
—
—
37
—
—
—
37
Translation adjus
tment*
(90
)
—
90
—
(188
)
—
(188
)
Balance Decembe
r 31, 2021
1,073
2,283
2,795
(200
)
1,855
1,711
9,517
*
The share capital of ST
Microelect
roni
cs is denominated in
Euros and the
period-end balance
is translated into
U.S. dollars at the
year-end
exchange rat
e (Euro/USD 1.13265). T
he translation differenc
es are taken to ret
ained earnings.
203
**
Comparative figures
have
been
adjusted
to
reflect
a
change
in
accounting
policy,
following the
IFRIC
agenda
decision
issued
in
2021.
The
change
in
accounting
policy
affects
pension
accounting
for
defined
benefit
plans
with
certain
characteristic
s
found
in
retire
ment
indemnities
plans
in
one
of
the countries
where
the
Group
operat
es.
The
change
in
accounting
policy
was
applied retrospectively
and
resulted
in
an
increase
in investments in
subsidiaries of
$13 million an
d an increase in r
etained earni
ng
s of $13 milli
on as of December 31, 2020.
In millions of USD
Issued
and
paid-
in
capital
Additional
paid-
in
capital
Retained
earnings*
Treasury
shares
Legal
reserves
Result
for
the
year
Total*
Balance Januar
y 1, 2020, as
reported
1,064
2,189
2,036
(328
)
1,738
387
7,086
Change in accountin
g policy*
—
—
13
—
—
—
13
Balance Januar
y 1, 2020, as
restated
1,064
2,189
2,049
(328
)
1,738
387
7,099
2019 Net income
—
—
387
—
—
(387
)
—
Transfer to (from) legal reserv
e
—
—
(35
)
—
35
—
—
Repurchase of common s
tock
—
—
—
(125
)
—
—
(125
)
Stock-based compensat
ion
—
—
71
—
—
—
71
Settlement of senior uns
ecured
convertible bonds
—
83
—
258
—
—
341
Rights acquired on
vested stock
awards
—
—
—
102
—
—
102
Changes in fair valu
e of financial
assets measured at FVOCI
—
—
(2
)
—
—
—
(2
)
Dividends paid
—
—
(152
)
—
—
—
(152
)
2020 Net income
—
—
—
—
—
694
694
Cash flow hedge reserv
e, net of tax
—
—
33
—
—
—
33
Translation adju
stment**
99
—
(99
)
—
202
—
202
Balance Decembe
r 31,
2020
1,163
2,272
2,252
(93
)
1,975
694
8,263
*
The share capital of ST
Microelect
roni
cs is
denominated in Euros and
the p
eriod-end balance is translated into
U.S. dollars at the
year-end
exchange rat
e (Euro/USD
1.22685
). T
he translation differenc
es are taken to re
tained earni
ngs.
**
Comparative figures
have
been
adjusted
to
reflect
a
change in
accounting
policy,
following the IF
RIC
agenda
decision issued
in
2021.
The
change
in
accounting
policy
affects
pension
accounting
for
defined
benefit
plans
with
certain
characteristic
s
found
in
retire
ment
indemnities
plans
in
one
of
the countries
where
the
Group
operates.
The
change
in
accounting
policy
was
applied
retrospectively
and
resulted
in
a
n
increase
in investments in
subsidiaries of
$13 million an
d an increase in r
etained earni
ng
s of $13 milli
on as of December 31,
2020
.
The
authorized
sha
re
capital
of
the
Compan
y
is
€1,810
m
illion
consisting
of
1,200,00
0,000
common
sh
ares
and
540,000,000 preference share
s, each with a nominal valu
e of €1.04. As at December
3
1, 2021 the number of s
hares
of common stock
issued was 911,276,920 s
hares (911,239
,420 at Dec
ember 31, 2020
).
As
of
De
cember 31,
2021
,
the
number
o
f
s
hares
of
comm
on
stock
outs
tanding
was
906,518,057
(90
5,415,002
at
December 31, 2020).
The
Eu
ros
equivalent
of
the
issued
share
capital
at
December
31,
2021
amounts
to
€
947,727,997
(
2020:
€947,688,997).
For
the
chan
ges
in
issu
ed
and
paid
-
in
-capital,
ad
ditional
paid
-
in
-capital
and
retained
earnings,
see
the Group’s con
solidated financial sta
tements.
204
The
cumulativ
e
amou
nt
of
legal reserves
at Dece
mber 31, 2021
is split
as
follows:
$17
million of
capitalized
internally
developed
software
expenditu
res,
$1,260 million of
s
ubsidiaries
non
distributab
le
reserves
and
$578 million
of
currency translat
ion adjustment gain.
The
cumulativ
e
amou
nt
of
legal reserves
at Dece
mber 31, 2020
is split
as
follows:
$18 million of
capitalized
internally
developed
software
expenditu
res,
$1,191 million of
s
ubsidiaries
non
distributab
le
reserves
and
$766 million
of
currency translat
ion adjustment gain.
Treasury shares
As
of
De
cember
31,
2021,
the
Co
mpany
owned
4,758,863
shares
classified
as
treasury
s
hares
in
the
Company’s
statement of equity compare
d to 5,824,418 s
hares as of December 31,
2020.
The treasury
shares
have b
een originally
designated
for allocation
under
the Compan
y’s share
-based remuneration
programs
of
unvested
shares.
As
of
December
31,
2021,
67,933,213
of
these
treasury
shares
were
transferred
to
employees under the
Company
’s share
-based remuneration programs, of
which 7,448,615 in
the year ended
December 31, 2021.
On
July
1,
2021,
the
Co
mpany
an
n
ounced
th
e
launch
of
a
s
hare
buy
-back
program
of
up
to
$1,040
million
to
be
executed within a
three-year period. The Company
intends to carry out
the buy
-back program, and ho
ld the shares
bought back
as
treas
ury
s
tock
for
th
e
p
urpose of
meeting
the
Com
p
any’s obligations
in rel
at
ion to
its
employee stock
award
plans
and
to
support
the
p
otential
settlement
o
f
its
ou
tstanding
convertible
debt.
In
2021,
as
par
t
of
th
e
share b
uy-back
program an
nounced on
July
1, 2021,
the Compan
y repurch
ased ap
proximately
3
.9
million
shares
of
its common stock for a
total of $
172
million.
As
described
in
note
7.6.15.3,
bondholders
exercised
in
2021
their
conversion
righ
ts
o
n
T
ranche
B
of
th
e
senior
unsecured
con
vertible
bon
ds
issued
on
July
3,
2017.
Out
of
the
3,750
bonds
co
mposing
Tranche
B,
the
Company
elected to settle 1,238
bonds on a net-share basis
through the delivery
of approximately 5.8 million treasury shares.
In
2020,
b
ondholders
exercised
their
conversion
rights
on
Tranch
e
A
of
the
senior
u
nsecured
convertible
b
o
nds
issued
on July 3,
2017, which th
e Company
elected to
net
-share
settle.
The full
settlement
of Tranche
A resulted
in
11.4 million shar
es delivered to bond
holders.
Non Distributable Reserve
The
amount
of
the
non-dis
tributable
reserve
was
$2,928
million
and
$
3,138
million
in
the
year
20
21
and
20
20
,
respectively, and
it represents the amou
nt of issued a
nd paid
-in capital and legal
reserves of th
e Company.
8.3.1
2. Other p
ayables and ac
crued liabilities
Other payables a
nd accrued liabilities cons
isted of:
In millions of USD
December 31,
2021
December 31,
2020
Dividends pay
able to Shareholders
55
42
Trade payable
2
—
Other liabilities
5
7
Total other p
ayables and accrued liabilities
62
49
205
8.3.1
3. Interest
-bearing loans an
d borrowings
Interest-bearing loans
and borrowings cons
isted of the following:
In millions of USD
December 31,
2021
December 31,
2020
Senior unsecured conv
ertible bond
s issued on Au
gust 4, 2020 (Tranche A)
705
694
Senior unsecured conv
ertible bond
s issued on Au
gust 4, 2020 (Tranche B)
677
665
Total long-term deb
t
1,382
1,359
Current portion of
credit facilities
—
59
Senior unsecured conv
ertible bond
s issued on July
3, 2017 (Tranche B)
—
675
Total current por
tion of long-
term de
bt
—
734
Senior convertible bon
ds
In millions of USD
December 31,
2020
December 31,
2019
Balance at beginning of th
e year
2,034
1,351
Amortization of issu
ance costs
2
1
Amortization of discou
nted value
20
30
Issuance of Senior
unsecured conv
ertible bonds issu
ed on
August 4, 2020
—
1,348
Settlement of Senior un
secured convertible bo
nds issued on J
uly 3, 2017
(Tranche A)
—
(696
)
Settlement of Senior un
secured convertible bo
nds issued on J
uly 3, 2017
(Tranche B)
(674
)
—
Balance at end o
f the year
1,382
2,034
Out of which long
-term
1,382
1,359
On
July 3,
2017,
the
Company
issued
$1,500
million
principal
amou
nt
dual
tranche
senior
unsecured
convertible
bonds (T
ra
nche
A
for $750 million
and
Tran
che
B
for
$750
million),
due
2022
an
d
2024,
res
pectively.
Tranche
A
bonds
were
is
sued
at
101.265%
as
zero-coupon
bond
s
while
Tranch
e
B
bond
s
were
issu
ed
at
par
and
bear
a
0.25%
per
annum nominal intere
st, payable semi-annually. The conversion price
at issuance was
$2
0.54, equivalent to
a 37.5
%
premium
on
both
tranches,
which
corresponds
to
9,737
equivalent
s
hares
per
each
$200,000
b
ond
par
valu
e.
The
bonds
are
convertible
by
the
bondholders
or
are
callable
by
the
issuer
upon
certain
conditions,
on
a
net
-share
settlement basis
, except if the issuer elects a fu
ll-cash
or full-share conv
ersion as a
n alternative s
ettlement. The net
proceeds from the bond
offering were $1,502
million, after dedu
cting issuan
ce costs payable by th
e Compan
y
.
The
issuer’s
call
option
an
d
the
holder’s
conversion
option
were
identified
as
embedd
ed
non
-equity
derivative
instruments,
resulting in the recognition
of the options separately from the d
ebt host contract. Upon initia
l
recognition, the derivatives were measured at fair value based on the
income approach, the debt being determined
as a
residual
amount of
the $1.5 b
illion tota
l pro
ceeds. The
value of
the issuer’s
call option
was deemed to
be
nil at
initial
recognition.
The value
of
the
holder’s conversion
op
tion
was estimated
at $248
million at
issuance date,
which
determined
the
initial
recogn
ition
of
the
liability
co
mponent
at
$1,
261
million
before
allo
cation
of
issuan
ce
costs.
The fair value measurement of the embedded derivativ
e instruments correspon
ded to a Level 3 fair
value hierarchy
measurement. T
he
Company
elected
to
allo
cate
is
suance costs,
totaling $7 million,
to
the
debt component.
The debt
was subs
equently measured at amortized
cost using t
he effective interest method
.
The
call
option
av
ailable
to
the
Company
for
the
early
redemption
of
Tranche
A
was
exercised
in
July
2020.
As
a
consequence,
bondh
olders
exercised
th
eir
co
nversion
righ
ts
on
Tranche
A.
As
the
Co
mpan
y
elected
to
net
-share
settle
the
bonds,
each
conversion
exercised
by
the
bond
holders
followed
the
pro
cess
defin
ed
in
the
original
terms
and
con
ditions
of
th
e
senior
uns
ecured
convertible
b
onds,
which
determined
t
h
e
actual
n
umber
of
sh
ares
to
b
e
transferred upon
each conversion.
The Company
settled the
bond
s
up
on
conversion, b
y
redeeming
throu
gh
cash the
206
$750
million
p
rincipal amount
an
d
by
s
ettling
th
e
resid
ual
consideration through
the
delivery
of
11.4 million
tr
easury
shares. The
n
et-share settlement was
fully completed
as
of
Octob
er 1,
2020. The
consider
ation transferred in
shares
was
a
non-cash.The
Company
allocat
ed
th
e
to
tal
consideration tran
sferred
b
etween
th
e
carry
ing
amount of
the
debt
and the
non-equity derivative instruments, by m
easuring at
fair value the
non
-equity
derivativ
e instruments prior
to
settlement.
Tranche
A
liability
component,
net
of unamort
ized iss
uance cos
ts,
as
measured
at amort
ized
cost
prior
to
settlement,
amounted
to
$71
2
million.
The
holder’s
co
nversion
op
tion
totaled
$341
million
and
was
measured
based
on
the
intrinsic
v
alue
of
th
e
option.
The
fair
value
measurement
of
the
non
-eq
uity
embedded
derivative
instruments and
the
extinguishment
of
the
liability component
aga
inst
th
e
$750
mil
lion
cash
paid ge
nerated
a
charge
of
$64
million
reported on
the line
“Finance costs”
on the Company’s
income
statement
for the
year ended
December 31, 2020.
The
call
option
av
ailable
to
the
Company
for
th
e
early
redemption
of
Tranche
B
was
exercised
in
J
uly
2021.
As
a
consequence, bondhold
ers exercised
their conversion rights on the full Tranche
B. Each conversion exercised by the
bondholders followe
d
the
process
defined
in
the
original
terms
and
conditio
ns
of
the
2017
Senior
Unsecured
Convertible
Bonds,
which
determined
th
e
actual
consid
eration
to
be
tran
sferred
to
bondh
olders
upon
each
conversion. Out
of the
3,750 bonds composing
Tranche B,
the
Company elected to
settle 1,238
bond
s on
a net-share
basis
for
a
total
con
sideration
of
$479
million,
th
rough
the pay
ment
of
th
e
$248
million
nominal
value
in
cash
and
the
delivery
of
ap
proximately 5.8
m
illion
treasu
ry
sh
ares.
Th
e
remaining
2,512
b
onds
were
s
ettled
on
a
full
cas
h
bas
is
for a
total con
sideration
of $
1,015 mi
llion. Th
e settle
ment
was fully
completed
during
th
e second
half
of 202
1. Th
e
consideration transferred in
s
hares was
a non-cash item.
The Company allocated
the total consideration transferred
between the carrying a
mount of the debt
and the non
-equity derivative in
struments, by measuring at fair valu
e the
non-equity
derivat
ive
instruments
prior
to settlement.
Tranche
A
liability
compo
nent,
net
of
unamortized
is
suance
costs, as measured at amortiz
ed cost
prior to
settlement, amounted to $690 m
illion. The holder’s conversion option
totaled
$744
million
and
was
measured
based
on
the
intrinsic
value
of
th
e
op
tion.
The
fair
value
measurement
of
the
n
on-equity
embedded
deriv
ative
instruments
an
d
the
extinguish
ment
o
f
the
liability
component
agains
t
the
$750
million
cash
paid
gener
ated
a
charge
of
$121
m
illion
reported
on
th
e
line
“Financ
e
costs”
on
th
e
Compan
y’s
income statement for th
e year ended December 3
1, 2021.
On August
4,
20
20
, the
Company
issued $1,500 million in
principal
amount of
dual
tranche senior
unsecured
convertible
bonds
(Tranche
A
for
$750
million
and
Tranche
B
for
$750
mil
lion),
due
202
5
and
2027,
resp
ectively.
Tranche
A bonds w
ere
iss
ued
at 105.8%
as zero-coupon
b
onds
while
Tranche B
bo
nds we
re issued
at 104.5%
as zero-
coupon
bonds.
The
conversion
price
at issuance
was
$43.62
for
Tranche
A equivalent
to
a 47.5%
conversion
premiu
m
and
$45.10
for
Tranche
B,
equivalent
to
a
52.5%
conversion
premium.
These
conversion
features
corres
pond
to
an
equivalent of 4,585 sh
ares per each Tranche A bo
nd $200,000 par
value and a
n equivalent of 4,435 shar
es per each
Tranche B
bond
$200
,000 par
value
. The
bond
s are
convertible
by the
b
ondholders or
are callable
by the
issu
er up
on
certain cond
itions,
on a
net-shar
e settlement
basis
, except
if the
issuer elects
a
full
-cash
or
full-share con
version
as
an
alternative
settlement
.
The
net
proce
eds
from
the
bond
o
ffering
were
$1,5
67
million,
after
d
educting
issuance
costs payable b
y the Compan
y
.
The issuer’s call option and the holder’s conversion option have been identified as embedded non
-equity derivative
instruments,
resulting in the recognition of th
e options separately from the debt host con
tract. Upon initial
recognition, the derivatives were measured at fair value based on the income approach, the debt being determined
as a
residual
amount of
the $1.5
b
illion tota
l proceeds.
The valu
e of
the issuer’s
call option was
deemed to
be
nil at
initial
recognition.
The value
of
the
holder’s conversion
op
tion
was
es
timated
at
$219 million at
iss
uance
date, which
determined
the
initial
recogn
ition
of
the
liability
co
mponent
at
$1,358
million
before
allocat
ion
of
issuance
costs
.
The fair value measurement of the embedded derivativ
e instruments correspon
ded to a
Level 3 fair value hierarchy
measurement, which is
furthe
r described in n
ote 7.6.15.5
. T
he Company
elected to
allocate iss
uance costs
, totaling
$
10
million,
to
the
debt
component.
The
debt
was
subsequently
measu
red
at
amort
ized
cos
t
usin
g
the
effective
interest method.
207
Credit facilities
In millions of USD
December 31,
2021
December 31,
2020
Balance at beginning of th
e year
59
157
Credit facilities repayment
(59
)
(98
)
Balance at end o
f the year
—
59
Out of which s
hort-term
—
59
Out of which long
-term
—
—
The
Co
mpany
had
un
utilized
committed
medium
-term
credit
facilities
with
core
relation
ship
banks
totaling
$
910
million as at December
31, 2021.
208
Fair values
Carrying amount
Fair value
In millions of USD
December 31,
2021
December 31,
2020
December 31,
2021
December 31,
2020
Financial assets
Other receivables an
d assets
9
16
9
16
Quoted financial ins
truments
—
133
—
133
Unquoted equity s
ecurities
10
9
10
9
Embedded call option
- Senior u
nsecured
convertible bonds
issued on July 3, 2017
(Tranche B)
—
61
—
61
Embedded call option
- Senior u
nsecured
convertible bonds
issued on August
4, 2020
(Tranche A)
11
13
11
13
Embedded call option
- Senior u
nsecured
convertible bonds
issued on August
4, 2020
(Tranche B)
15
20
15
20
Cash equivalents
(1)
2,848
2,637
2,848
2,637
Financial liabilities
Lease liabilities
17
22
17
22
Other payables a
nd accrued liabilities
62
49
62
49
Interest-bearing loans
and borrowings
(excluding senior uns
ecured convertib
le
bonds)
—
59
—
59
Senior unsecured conv
ertible bond
s issued
on July 3, 2017
(2)
—
675
—
1,359
Embedded conversion
option
- Senior
unsecured conv
ertible bonds issu
ed on July
3, 2017 (Tranche B)
—
676
—
—
Senior unsecured conv
ertible bond
s issued
on August 4,
2020
(3)
1,382
1,359
1,975
1,835
Embedded conversion
option
- Senior
unsecured conv
ertible bonds issu
ed on
August 4, 2020 (Tranche A
)
255
—
255
—
Embedded conversion
option
- Senior
unsecured conv
ertible bonds issu
ed on
August 4, 2020 (Tranche B
)
282
—
282
—
(1)
Cash equ
ivalents
primarily corre
spond to depo
sits at call wit
h banks.
(2)
The car
rying amount o
f the senior unsec
ured convertibl
e bonds issued on Jul
y 3, 2017 and outstandi
ng at December 31, 20
20
corresponds
to the liability
component only, since,
at initial recognition, an
amount of
$
24
8 million was
separatel
y r
ecognized as
embedded derivati
ve
financial
instruments. Tran
che B liability c
omponent, which
amounted to $675 million as at
December 31, 2020,
was fully settled in 2021.
(3)
The
carrying
amount
of
the
senior
unsecured
convertible
bonds
issued
o
n
August
4,
2020
and
outstanding
at
December 31,
2021
an
d
December 31,
2020
correspond
s
to
the
liability
component
only,
since,
at
initial
recognition,
an
amount
of
$
219
million
was
separately
recognized as e
m
bedded der
ivative financial i
ns
truments.
209
8.3.1
4. Other n
on-curr
ent liabilities
Other non-current liab
ilities cons
isted of the following:
In millions of USD
December 31,
2021
December 31,
2020
Pension liability a
gainst former employees
3
3
Other non-current liab
ilities
2
2
Total
5
5
8.3.1
5. Guaran
tees and con
tingencies
Guarantees
given
by the
Company to
its
affiliates
for
the
benefit
of
th
ird
parties
amounted
to
appro
ximately
$1,487 million as
of December 31,
20
21
(20
20
: $8
42
million).
Out of
this, €
500
mill
ion are
related to STMicroelectronics
Finance B.V.’s
o
bligation under
the €
500
million
EIB credit
facilities
signed
in
2020;
€
375
million
are
related
to
STMicroelectro
nics
Finan
ce
B.V.’s
ob
ligation
un
der
the
€500
million
EIB
credit
facilities
sig
ned
in
2017
and
€
138
million
related
to
STMicroelectronic
s
Finance
B.V.’s
obligat
ion
under the €
150
mill
ion Cassa Depositi
Prestiti credit facil
ities signed
in 2021.
As
from
August
22,
2013,
the
Compan
y
assumes
joint
and
several
liabilities
for
all
d
ebts
arising
from
legal
acts
for
STMicroelectronics In
ternational N.V., STMicroel
ectronics Finance II N
.V. and STM
icroelectron
ics Finance B.V., all in
accordance with section 2:4
03 Dutch
Civil Code.
There is no other typ
e of contingencies as of Dec
ember
31, 20
21
and 20
20
.
8.3.1
6. Gener
al and administrative expen
ses
General and
administrative expenses are
the administrative costs related to
the operations
of
the holding company.
Employees benefits con
sisted of th
e following:
In millions of USD
December 31,
2021
December 31,
2020
Employees benefits
(6
)
(5
)
Total
(6
)
(5
)
The
average
number
of
persons
employed
by
the
Company
durin
g
the
y
ear
end
ed
Dece
mber
31,
20
21
was
15
out
of which 6 outsid
e The Netherlands
(20
20
: 16 out
of which 8
outside The Netherland
s).
210
8.3.1
7
.
Finance
in
come an
d Financ
e costs
In millions of USD
December
31,
2021
December
31,
2020
Change in fair value of th
e embedded ca
ll option of the s
enior unsecured
convertible bonds
issued on July 3, 2017 (Tranche B
)
—
39
Change in fair valu
e of the embedd
ed call option of th
e senior unsecured
convertible bonds
issued on August
4, 2020 (Tranche A)
—
13
Change in fair value of th
e embedded ca
ll option of the s
enior unsecured
convertible bonds
issued on August
4, 2020 (Tranch
e B)
—
20
Interest income on qu
oted debt securities
—
3
Other finance income
20
39
Total finance income
20
114
Interest on Senior Bon
ds
(38
)
(47
)
2017 issued senior
convertible bon
d net-sh
are settlement (Tranche A)
—
(64
)
2017 issued senior
convertible bond n
et-sh
are settlement (Tranche B)
(189
)
(296
)
Change in fair value of th
e embedded ca
ll option of the s
enior unsecured
convertible bonds
issued on
July 3, 2017 (Tranche B)
—
—
Change in fair value of th
e embedded co
nversion op
tion of the senior
unsecured conv
ertible bonds issu
ed on August 4, 2020 (Tranche A)
(98
)
(58
)
Change in fair value of th
e embedded
conv
ersion option
of the senior
unsecured conv
ertible bonds issu
ed on August 4, 2020 (Tranche B)
(99
)
(63
)
Change in fair value of th
e embedded ca
ll option of the s
enior unsecured
convertible bonds
issued on August
4, 2020 (Tranche A)
(2
)
—
Change in fair value of th
e embedded ca
ll option of the s
enior unsecured
convertible bonds
issued on August
4, 2020 (Tranche B)
(4
)
—
Interests on lo
ng-term loans an
d borrowings
—
(3
)
Interests on leas
e liabilities
(2
)
(2
)
Bank charges and
commissions
(3
)
(2
)
Total finance costs
(435
)
(535
)
8.3.1
8. Other inc
ome (expen
ses)
Other income (expenses) con
sisted of the following
:
In millions of USD
December 31,
2021
December 31,
2020
Exchange differences
25
(9
)
Gain on sale of Finan
cial Investments
1
10
Total
26
1
211
8.3.19
. Contr
actual obligations
The Company’s
contractu
al obligations
as of December 31, 2021 w
ere as follows:
In millions of USD
Total
2022
2023
2024
2025
2026
There-
after
Long term debt obligation
s (including
current portion)
(1)
1,500
—
—
—
750
—
750
Pension obligation
s
3
—
—
—
—
—
3
Total
1,503
—
—
—
750
—
753
(1)
The difference between
the
total agg
regated future
maturities and
th
e
total
carrying amount
of
Interest-bear
ing
loans
and
borrowings
is
due to t
he unamortized disc
ount on the dual
tranche seni
or unsecured conver
tible bonds.
8.3.2
0. Related par
ty transactions
There were no material trans
actions with significant
related parties du
ring the years ended December 31, 2021 and
2020
.
Remuneration to man
aging board and s
upervisory board m
embers
For
details
on
th
e
remuneration
to
the
Man
aging
Board
and
Supervisory
Board
members,
see
the
consolidated
financial statements o
f the Company (N
ote 7.6.34).
8.3.2
1
. Auditors’ fees
The following audit fe
es were allocated to th
e period:
In USD
December 31,
2021
December 31,
2020
Statutory au
dit, certification, audit of indiv
idual and consolidated fin
ancial
statements
5,134,390
4,980,123
Audit-related fees
135,778
164,578
Tax fees
104,843
—
Total
5,375,011
5,144,701
The
fees
lis
ted
abov
e
relate
only
to
the
procedures
app
lied
to
the
Company
an
d
its
consolidated
group
entities
by
Ernst & Youn
g.
The procedures were app
lied by audit
firm’s member of the EY network. In 20
21
, the fees related to
services provided by Ernst & Young Acc
ountants LLP for the
aud
it of t
he statutory annual
acco
unts totaled $
130,200
($1
20,750 in 20
20
).
212
8.3.2
2. Proposed
cash d
ividend
Upon the proposal of the Managing Board
, the Supervisory Board will prop
ose to the 202
2 Annual General Meeting
of Shareholders in l
ine with o
ur Dividend
Policy, to declar
e a cas
h dividend o
f US$0.
24
per
outstand
ing share of the
Company’s
commo
n
s
tock,
to
b
e
distribu
ted
in
quarterly
instalments
of
US$0.
06
in
each
of
the
second,
third
and
fourth q
uarter of 202
2 and
first quarter
of 202
3 to s
hareholders of
record in
the month
of each qu
arterly payment,
as further described in
the General Meeting o
f Shareholders agenda an
d explanatory notes thereto.
March
24
,
20
22
THE MANAGING BOAR
D
Jean-Marc Chery (Pres
ident and Chief Executiv
e Officer)
THE SUPERVISORY BOAR
D
Maurizio Tamagnini (
Chairman)
Nicolas Dufourcq (Vice
-Chairman)
Janet G. Davids
on
Yann Delabrière
Heleen Kersten
Lucia Morselli
Ana de Pro Gonzalo
Alessandro Riv
era
Frédéric Sanchez
213
9. Other inform
ation
9.1. Auditors’ report
The
report of
th
e
auditors, Ernst & Young Accountants
LLP, is
presented on
the
following pages
in this annual
report.
9.2. Appropriation of results
–
provisions in Company’s articles of associa
ti
on
The
Supervisory Board, upon the
pro
posal of
the Managing Board, is allowed
to allocate net profit
to
a
r
eserve fund.
The Arti
cles
of
Ass
ociation
provid
e th
at
the
net
resu
lt
for
the
year,
aft
er
deduction
of
(i)
any
amount
to
set
up
and
maintain
reserves required
b
y
Dutch
Law
an
d
the
Articles of
Association, (ii) if
any
of
o
ur
preference
shares
ar
e
issued
and outstanding, the dividend to be paid to
the holders of pre
ference shares and (iii)
the aforementioned allocation
to the reserve fund, is
subject to the dis
position by the General Meeting of Sh
areholders.
In
th
e
case
th
at
a
net
loss
for
the
year
exce
eds
retained
earnings,
no
dividend
payments
are
allowed
u
ntil
the
loss
has been recovered from n
et profit(s) in futu
re years.
9.3. Branches
The
Company has a branch
in Switzerland,
loca
ted at
39 Chemin du Champ
d
es
Filles, 1228 Plan-l
es
-Ouates, Geneva.
214
Independe
nt auditor’s repo
rt
T
o: the shareholders and supervisory b
oard of STMicroelectr
onics N.
V
.
Report on the audit of the
financial s
tat
ements 202
1 inclu
ded in the
Annual Report
Our opinion
W
e
have aud
ited the
financial
state
ments 202
1
of
STMicroelectronics
N.
V
.,
based
in
(h
ereinaft
er al
so
ref
erred
to
as
“the
Company”),
based
in
A
msterdam.
The
financial
sta
tem
ents
include
the
consolidated
financial
statements
and
the company’
s financial statements.
In our opinion
:
•
the
accompanying
consolidated
financial
statem
ents
give
a
true
and
fair
view
of
the
financial
position
of
STMicroelectr
onics N.
V
. as at 31 December 202
1, and of its result and its cash flows for 2021 in a
ccordance
with In
ternational
Financial Re
porting Standards
as adopt
ed b
y the
European Union (
E
U
‐IFRS)
and with
Par
t
9 of Book 2 of the Dutch Civil
Code.
•
the
accompanying
company’
s
financial
stat
ements
give
a
tru
e
and
fair
view
of
the
fina
ncial
positi
on
of
STMicroelectr
onics
N
.
V
.
as at
3
1
Dec
ember
202
1, and
of its
result
for 2021
in acc
ordance with
Part
9 of
Book
2 of the Dutch Civil Code.
The consolidated financial stat
ements comprise:
•
the consolidated sta
temen
t of
financial position as at 31 D
ecember
202
1
;
•
the
following
st
atemen
ts
for
202
1:
the
consolidated
income
stat
ement,
the
consolidated
stat
ements
of
compre
hensive income, chan
ges in equity and cash flows;
•
the notes comprising a summ
ary of the significant accounting policies and oth
er explanatory
information.
The company’
s financial statements comprise:
•
the company’
s statement of financial position as at 31 December 202
1
;
•
the company’
s income statemen
t for 2021;
•
the notes comprising a summ
ary of accounting policies and o
ther explanatory inf
ormatio
n.
Basis for our opinion
W
e
conducted
our
audit
in
accordance
with
Dutch
law
,
in
cluding
th
e
Dutch
Standards
on
Auditing.
Our
responsibilities u
nder
those
standards
are f
urther
de
scribed
in
the
Our re
sponsibilities
for
the
a
udit
of
the
financ
ial
st
atements
section of our report.
W
e
are
independent
of
STMicroele
ctronics
N
.
V
.
in
accordance
with
the
EU
Regulation
on
specific
r
equirements
reg
arding
statutory
au
dit
of
public‐interest
entities,
th
e
“Wet
toezicht
ac
countan
tsorganisa
tie
s”
(Wta,
Audit
fir
ms
supervision
act
),
the
“V
erorde
ning
inzak
e
de
onafhankelijkheid
van
accountants
bij
assur
an
ce
‐opdr
achten”
(ViO
,
Code
of
Ethics for
Profe
ssional
Accountants, a
regulation
with
respect
to in
dependence)
and
oth
er relevant
independence
regulations
in
the
Netherlands.
Furthermore
we
have
complied
with
the
“
V
erordening
gedrags
‐
en
beroeps
regels accountan
ts” (VGBA, Dutch Code of Ethics).
W
e believe the audit evid
ence we have obt
a
ined is
sufficient and appropriate to pro
vide a b
asis for our opinion.
215
Information in support of our opinion
W
e
designed
our au
dit procedures in
the conte
xt o
f our
audit
of th
e financial
stat
ements as a
whole
and
in forming
our
opinion
thereon.
The
following
information
in
support
of
our
op
inion
and
any
findings
were
addres
sed
in
this
cont
ext, and we do not provide a separa
te o
pinion or conclusion on t
hese matt
ers.
Our understanding of the business
STMicroelectr
onics N.
V
. is a gl
obal
semiconductor manufacturer oper
ating in
a broad range of mark
ets.
The group is
structured
in
components
and
we
tailor
ed
our
group
audit
approach
accordingly
.
W
e
paid
specific
attention
in
our
audit to a number of areas driven by the operations of the group
and our risk assessment.
W
e start by determining mat
e
riality and identifying a
nd assessing the risks of mat
erial mi
ssta
tement of the financial
stat
ements,
whether
due
to
fr
aud
,
non‐compliance
with
laws
and
regula
tions
or
error
in
order
to
design
audit
procedures
responsive
to
th
ose
risks
and
to obt
ain
au
dit e
vidence
that is
suff
icient
and appropriate
to pr
ovide
a basis
for
our
o
pinion.
The risk
of
not
detecting
a
material
misst
atemen
t
resulting
from
fraud
is higher
than
for
one
resulting
from
error
,
as
fraud
may
involve
collusion,
for
gery
,
inten
tional
omissions,
misrepresent
ations,
or
th
e
o
verride
o
f
internal c
ontrol.
Materiality
Materiality
USD
11
5.0 million (202
0: USD 40.0 mil
lion)
Benchmark applied
4
.8
% of normalized profit bef
o
re ta
x
for 2021 (2020: 3.4%)
Explanation
Based
on
our
prof
e
ssional
j
udgment
we
have
considered
earnings
‐ba
sed
measures
a
s
the
appropriate
b
asis
to
determine
materiality
. W
e
consider
profit
befor
e
t
ax,
normaliz
ed
for
the
volatility
derived
from
the
accounting
of
the
con
vertible
bonds
t
o
be
th
e
most
relevant
measure
given
the
n
ature
of
th
e
business,
the
characte
ristics
of
the
Company
and
th
e
expected
focus
of
the
users of the financial stat
ements.
W
e
have
also taken into
account
misstat
ements
and/or
possible
misstat
e
ments th
at in
our
opin
ion
are material
for
the users of the financial statemen
t
s for qualitative r
easons.
W
e agreed with th
e supervisory
board that missta
temen
ts in
ex
cess of U
SD 5
.75 million,
which are identified during
the
audit,
would
be
reported
to
th
em,
as
well
as
smalle
r
misstat
ements
that
in
our
view
m
ust
be
r
eported
o
n
qualitative gr
ounds.
Scope of the group audit
STMicroelectr
onics N.
V
. is
at the head of a
group of entities. The
financial inf
ormation of this gr
ou
p is included in the
consolidate
d financial statements of STMicroe
lectronics N.
V
.
Because
we are
ultima
tely
responsible f
or the
opinion, we
are
also re
sponsible f
or directing, supervising and
performing the
group audit. In this
res
pect we ha
ve determined the natur
e and ext
ent of the
audit procedures
to be
carried
out
for
group
entities.
Decisive
were
the
size
and
/or
the
risk
p
rofile
of
the
group
entities
or
operations.
On
this
basis,
we
selected
group
en
tities
for
which
an
audit
o
r
review
had
t
o
be
c
arried
o
ut
on
th
e
complete
set
of
financial informa
tion or specif
ic items.
216
Profit be
fore
tax
Gross r
evenues
T
otal
assets
Our group
audit
mainly focused on
significant group
entities bas
ed on
significance
in act
ivities an
d risk
asse
ssment.
Considering
the
audit
procedures
which
have be
en
performed at
head
office
level
by
the
corpora
te
au
dit
team, we
have
:
•
performed audit procedur
es at par
ent en
tity STMicroele
ctronics N.
V
., loca
ted in
the Netherlands which w
as
assigned a full scope;
•
used the work of other EY auditors when auditing entities in Switz
erland, France, Singapore and Italy which
were assigned a full scope;
•
performed specific audit procedures at other group entities.
Because of the
continuing (international)
tra
vel restrictions
and
social d
istancing due
to the Covid
‐19
pandemic,
we
have
been unable to visit management and/or component audit
ors to discuss
, among oth
ers, the business activities
and the
identified
significant
risks
or to
revie
w
and ev
al
uate
relev
ant
parts of
the componen
t
auditor's audit
documentation and t
o
discuss significant mat
ters
arisin
g from tha
t evalua
tion on site. In these extr
ao
rdinary
circumst
ances
we
predomina
ntly
used
communication
technology
and
writt
en
information
e
xchange
in
order
to
obtain sufficien
t and app
ropriate
audit evidence.
These procedures re
present 96% of the group's total assets, 98% of profit befor
e tax and 99.9% of gross revenues.
Full scope
Specific scope
Limited sc
ope
No scope
By
performing
the
procedures
mentioned
above
at
group
entities,
together
with
additio
nal
procedures
at
group le
vel,
we
have
b
een
ab
le
to
o
btain
sufficient
an
d
appropriate
audit
evidence
about
the
group’
s
finan
cial
information
to
provide an opinion about th
e consolidate
d finan
cial stat
em
ents
.
T
eaming and use o
f specialists
W
e ensur
ed
that the
audit
teams
both at
group
and
at
componen
t
levels included
the
appropriate
skills
and
compete
nces which are nee
ded for
the audit of
a lis
ted client in t
h
e Semic
on
ducto
r industry
. W
e included specialists
in
the
areas of
IT
audit,
forensics
and
income
tax
and
hav
e
made
use
of
ou
r
own
experts in
the
areas
of
valuations
and actuaries.
Our focus on climate-rela
ted
risks
Climate
objectives
will
be
high
on
the
public
agenda
in
the
next
decades.
Issues
such
as
CO2
reduction
impac
t
financial
reporting,
as
these
issues
entail ri
sks
for
the
b
usiness
op
er
ation,
the
valuation
of
as
sets
and
provisions or
the sustainability of the business model an
d access to financial markets of compan
ies with a la
rge
r CO2 footprint.
The Managing Board has reported in Section 3.4 ‘Sustainability
’
on the Environmen
tal, Social and Governance (ESG)
factor
s directly and in
directly impacting STMicroelectronics’ business, and their consideration of
th
e impact of
climate change including the potential impact of climate‐related risks.
217
As
part of
ou
r audit
of the
finan
cial st
atements,
we
evaluated
th
e e
xtent t
o
which
climate‐
relat
ed risks are
materially
impacting
judgements,
estimates
and
significant
a
ssu
mptions
applied
by
STMicroelectronics
N.
V
.
Furthermore,
we
read
the
report
of
the
Managing
Board
an
d
considere
d
whether
there
is
any
material
inconsistency
between
the
non‐financial information in Section 3.4 ‘Sustainability
’
and the financial stat
ements. Based o
n the audit procedures
performed,
we
d
o
not
deem
climate‐related
risks
to
hav
e
a
material
impact
on
th
e
financial
reporting
judgm
ents,
estimat
e
s or significant assumptions an
d as such we have not identified a k
ey a
udit matter
.
Our focus on fraud and non-compliance with
laws and regulations
Our responsibility
Although
we
are
not
responsible
for
preventing
fraud
or
n
on
‐compliance
and
cannot
b
e
expected
to
detect
non
‐
compliance
with
al
l
laws
an
d
regulations,
it
is
ou
r
responsi
bility
to
o
btain
reasonable
assurance
that
th
e
financial
stat
ements, take
n as a whole, a
re fr
ee from material misst
atement, whether caused by fraud or error
.
Our audit response related to fr
aud r
isks
In
order
to
id
entify
and
assess
the
risks o
f
material
misstatemen
ts
of
the
financial
statements
due
to
f
raud.
During
our audit we obt
ain
ed an underst
anding of the entity and its
envir
onm
ent and its env
ironment
and the components
of the
syst
em
of int
ernal c
ontrol, including
the risk
assessme
nt
process
and
management
’
s process
f
or responding to
the
risks of
fraud and
monitoring th
e system of internal
control and
how
the
supervisory
board
exer
cises
oversigh
t,
as well as the outcomes. W
e ref
er to section 3.2.
6 and 3.3.1
of the report
of the Man
aging Board
for management’
s
(fr
aud) risk asses
sment.
W
e
evaluated
the
design
an
d
relev
ant
a
spects
of
the
system
o
f
internal
control
and
in
particular
the
fraud
risk
assessment,
as we
ll as
th
e
code
of
conduct,
whistle
blower
procedures and
incident
registration. We evaluat
ed
th
e
design
and
the
implementation
of
internal
controls
de
signed
to
mitigat
e
fraud
risks
and
,
where
considered
appropriate, te
sted the oper
ating eff
ectiveness
.
As
part
of
our
process
of
identif
ying
fr
aud
risks,
we
evaluated
fraud
risk
factor
s
with
respect
to
financial
reporting
fr
aud,
misappropriation
of
assets
and
bribery
and
corruption.
We
ev
alu
ated
whether
these
factor
s
indicate
that
a
risk of material misst
atement due to fraud is presen
t.
W
e
incorporated
eleme
nts
of
unpredictability
in
our
audit.
W
e
als
o
con
sidered
the
outcome
of
ou
r
other
audit
procedures and ev
aluated whether any findings wer
e indicative of fraud or non
‐compliance.
As
in
all
of
our
audits,
we
addr
essed
the
risk
of
man
agement
override
of
internal
control an
d
when
identifyin
g
and
assessing
fraud
risks
we
presumed
th
at
there
are
risks
of
fraud
in
r
evenue
recognition.
For
the
risk
s
r
elated
to
management o
ve
rride of c
ont
rols, we
ha
ve perf
o
rmed proc
edu
res
to ev
aluate k
ey accounting estima
tes as disclosed
in
Note
7.6.8
in
the
financial
sta
tements.
We
have
also
used
data
analysis
to
identify
and
add
ress
high
‐risk
journal
entries.
W
e
have determined
the
risk
o
f
improper
revenue
recognition
as
a
k
ey
audit
matter specifically
re
lating
to
the
risk
of
side
arrangements
entered
into
by
management
to
i
nduce
future
sales
with
distributors
an
d
without
knowledge of the
finance dep
artment.
W
e ref
er
to our
Key Audit Matte
r related to Reve
nue Recognition for further
informa
tion
, as to our procedures in this reg
ard.
W
e
considered
available
information
an
d
made
inquiries
of
rele
vant
ex
e
cutives,
directors
(inclu
ding
inte
rnal
audit,
legal, com
pliance, human res
ources and regional direct
ors) and the sup
ervisory board.
The fr
aud risk we identified, enquires
an
d other a
vailable in
formation did not lead to s
pecific ind
ications
for f
raud or
suspected fr
aud potentially materially impacting the view of
the financial statem
ents.
In
our
risk
assessment w
e
considered
the
potential
impact of
performance
bas
ed
bonus s
chemes w
hich
the
company
has in place at certain components
.
218
Our audit response related to risk
s o
f non
-compliance with
laws and regulations
W
e
assesse
d
factors
re
lated
to
the
risks
of
non
‐compliance
with
la
ws
and
regulations
that
could
reasonably
be
expect
ed
to
have
a ma
terial
eff
ect
on
the
financial
stat
ements
from
our
gener
al
industry
experience,
thr
ough
discussions
with
the
Man
aging
Board,
reading
minutes,
inspection
of
inte
rnal
audit
and
com
pliance
reports
and
performing
substan
tive
tests
of
details
of
classes
of
transactions,
account
balances
o
r
disclosures.
As
STMicroelectr
onics N.
V
.
is a
global
company
,
opera
ting in
multiple jurisdictions,
we
considere
d the
risk of bribery
and
corruption.
W
e also
inspected
lawyers’
letter
s and
correspondence
with r
egulatory authorities
and
remained
alert t
o
any
indication of (suspected) non‐
compliance throughout the a
udit. Finally we obtained written represe
ntations that all
known instances of non‐compliance with laws and
regulations have
been disclosed to us.
Going concern
The
Managin
g
Boa
rd
made
a
specific
a
ssessment
of
th
e
Company
’
s
ab
ility
to
continue
as
a
going
concern
an
d
to
continue
its
ope
ra
tions
for
at
least
the
next
12
months.
W
e
discussed
and
evaluate
d
the
specific
assessment
with
management e
xer
cising profess
ional judgm
ent and maintaining prof
essio
nal
sk
e
pticism.
W
e
c
on
sidered
whether
man
agement’
s
goin
g
concern
ass
essment,
based
on
our
knowle
dge
and
un
derst
anding
obtained through our
audit of th
e financial
stat
ements or
otherwise,
contains all events or conditions
that may cast
significant doubt on the c
o
mpany’
s ability to continue as
a going concern. If we c
on
clude that a mat
er
ial uncertainty
exists,
we are
required t
o dr
aw att
ention in our auditor
’
s
report to
the relat
ed disclosures in
the financial s
tat
ements
or
,
if
such disclosur
es
are
in
adequate,
to
modify
our
opinion.
Based
on
our
procedures
performed,
we
d
id
not iden
tif
y
serious doubts on the Compa
ny’
s ability
to continue as a going concern for the ne
xt 12 months.
Our
conclusions
are
based
on
the
au
dit
evidence
obtained
up
to
the
dat
e
o
f
our
a
uditor
’
s
report.
H
owever
,
future
events or c
onditions may cause a company to cease to continue as a going concern.
Our key audit mat
ters
Key audit ma
tters
are those matt
ers that, in our pr
o
f
essional judgment, were of m
ost significance in our audit of the
financial stat
ements. W
e have c
ommunicated the k
ey a
udit matter
s to the
supervisory
board. The k
ey audit matter
s
are not a comprehensive re
flection of all matter
s d
iscussed.
In
comparison
with
prev
ious
year
,
we
no
longer
identified
‘Conv
ertible
bond
accounting
and
subsequent
fair
value
remeasuremen
t
’
as
a
k
ey
audit
matte
r
as
th
e
Company
did
no
t
issue
new
con
vertible
bo
nds.
The
se
matter
s
wer
e
addressed in the
cont
ext of
o
ur audit of
the financial
stat
ements as a
whole and in
forming
ou
r opinion ther
eon,
and
we do not provide a separ
ate opinion on
these matt
ers.
219
Revenue recognition (notes 7.6.
7.3 and 7.6.26)
Risk
Our
audit app
roach
Ke
y observations
As described in Note 7.6.26 to t
he
consolidat
ed financial statements,
the Company rec
o
gnized net
reve
nues of $12,761
million as of
31 December 2021. The Co
mpany
rec
ognizes re
venue from products
sold to customer
s, whi
ch includes
Original Equipment Manufacturers
(OEMs) and distributors,
amounting to $8,486 million, and
$4,275 million, respectively
.
Auditing the Company
’
s reve
nue
requires
significant focus f
or the
audit team since it is a key financial
metric, with a large volume of
transactions and multiple mar
k
et
channels. W
e considered the risk of
improper rev
enu
e rec
ognition a
s a
k
ey a
udit matter s
pecifically
rela
ting to the risk of side
arrang
ements not appropriately
accounte
d for
.
W
e obtained an u
nderstanding,
evaluat
ed th
e contr
ol design, an
d
test
ed the operating eff
ectiveness of
contr
ols over the Company’
s revenue
rec
ognition process, which inc
ludes
the processes to det
ect side
arrang
ements and in
spection and
evaluation of management’
s
assessment of non‐standard terms and
conditions, and certification
s
complet
ed by the Company
’
s sales
organiz
ation.
W
e also p
erformed procedures
to
evaluat
e the d
esign and op
er
ation of IT
processes, including testing of
application contr
o
ls and the data and
reports used in the ex
e
cution of
certain contr
o
ls.
Our substantive
audit procedures
included, among oth
ers, cir
culation of
terms and conditions confirmations
with selected customer
s, analy
tical
revie
w procedures around
disaggrega
ted rev
enue data, review of
contr
act terms and testing of j
ournal
entries.
W
e also as
sessed the adequ
acy of th
e
Company’
s revenue disclosure in the
financial stat
ements.
W
e consider th
at the
Company’
s revenue
rec
ognition accounting
policies were appropriat
ely
applied, and we d
id not
identify any improper or
unaccounted significan
t
side arrangements not
appropriately re
flected in
the accounting rec
o
rds of
the Company
.
220
Recov
erability of def
erred tax assets (notes 7.6.7.6 and 7.6.32)
Risk
Our audit app
roach
Ke
y observations
As discussed in Note 7.6.32 to th
e
consolidat
ed financial
stat
ements,
the Company oper
ates in a complex
multinational tax env
ironment and is
subject to tax tr
eaty arrang
ements
and transf
er pricing gu
idelines for
inter
company transactions.
As of 31 December 2021, th
e
Company rec
o
gnized net def
erred
tax asse
ts of $390 mill
ion. As
explained in note 7.6.32 to the
consolidat
ed financial statements,
the Company performs an evalua
tion
of the lik
eliho
od that future tax
able
income will be genera
ted in a
n
amount sufficient t
o utilize such
def
erred ta
x assets prior to thei
r
expir
ation, an
d, after ha
v
ing
considered positive and negativ
e
av
ailable e
vidence, recognize
an
allowance for an
y d
ef
erred ta
x assets
not deemed recover
able.
Assessing the recognition of and
reco
ver
ab
ility of deferred t
ax assets
inv
olves significant judgement and
estimat
e
s, including
, among others:
the prospective financial inf
ormation
used by management in order to
assess future tax
abl
e income,
transf
er pricing polici
es and the
timing of rever
sal o
f temporary
diff
erences. These assumptions have
a high degree of uncertainty and
subjectivity
,
since they are
dependent on the outcome of future
events. Consequently
, we identified
this as a k
ey audit matter
.
W
e obtained an u
nderstanding,
evaluat
ed th
e contr
ol design, an
d
test
ed the operating ef
fe
ctiveness of
contr
ols over the Company’
s
process
to calculat
e th
e gross amount of
def
erred ta
x assets recor
ded, prepare
the prospective financial inf
ormation
used to determine the Company’
s
future ta
xable inc
ome and d
etermine
any v
aluation allowance needed for
def
erred ta
x assets not deem
ed
reco
ver
ab
le.
T
ogether with ta
x
prof
e
ssionals, we
evaluat
ed th
e timing of the reversal of
the tempor
a
ry differ
ences an
d
management’
s prospective finan
cial
informa
tion
used to determine future
tax
able income and
its consistency
with current tr
ansf
er pricing policie
s.
W
e compared the projections o
f future
tax
able income
with the actual results
of prior periods, as well as
management’
s
considera
tio
n of
current and expect
ed industry an
d
economic trends. W
e also as
sessed the
historical accur
acy o
f management
’
s
projections.
W
e also evaluated the Company
’
s
income ta
x
disclosures included in
Note 7.6.32 to the consolidated
financial stat
ements in rela
tion to
these matt
ers.
W
e consider th
e
Company’
s accounting
policies appropriate, and
we did not identify
any
evidence of material
misst
atement of the
def
erred ta
x assets
reported within the
financial stat
ements and
disclosures.
221
Recognition and valuation of capit
al
iz
ed development costs (note 7.6.7.10, 7.6.8.5 and 7
.6.13)
Risk
Our audit ap
proach
Ke
y observations
As discussed in notes 7.6.7.10
,
7.6.8.5 and 7.6.13, development
costs ar
e capitalize
d based on
management’
s jud
gment that
technological f
eas
ibility and
economic profitability is probable,
as required under IAS 38.
In determining the amounts to be
capitaliz
ed, th
e Company makes
assumptions regar
ding the
expect
ed future economic benefits
gener
ated by a project. Capitaliz
ed
development c
osts at 31 December
2021 amount to $969 million, of
which $642 million are in progress
and therefor
e not yet amortiz
ed.
Intangible assets, including
capitaliz
ed development costs, are
assessed for impairment by the
Company
.
Auditing the capitalized
development c
osts requires
significant f
ocus for the audit team
given the inherent uncertain
ty
around the fore
casting process
supporting the in
itial rec
ognition
and subsequent valuation of
capitaliz
ed development costs.
Given the inherent uncert
ainty of
for
ecasting future ec
on
omic
benefits, we consider the risk of
over
statement and incorrect
valuation of capit
alized
development c
osts a k
ey audit
matt
er
.
W
e obtained an u
nderstanding and
evaluat
ed th
e contr
ol design over the
Company’
s process, which incl
udes the
Company’
s asses
sment of the eligibility
of the development costs based on the
relev
ant capitalization crite
ria.
Our audit procedures included,
amongst others, assessment of the
eligibility of the development costs for
capitaliz
ation, based o
n a
repre
sentativ
e sample.
In relation to the impairment tes
t for
capitaliz
ed development costs we have
evaluat
ed th
e indicator
s and
methodology used by management.
W
e also as
sessed the adequac
y of the
Company’
s disclo
sure in the financial
stat
ements.
W
e consider th
e
Company’
s accounting
policies appropriate and
management’
s
assumptions and estimates
to be within a reasonable
rang
e.
Furthermore, we did not
identify any mate
rial
misst
atement in the
capitaliz
ed development
costs r
eported within the
financial stat
ements.
222
Report on other information included in the annual report
In
add
ition
to
th
e
financial
stat
ements
and
our
auditor
’
s
report
thereon,
the
annual
report
contains
oth
er
informa
tion
that consists of:
•
The Corpora
te Overview
•
The report of the Managing Board
•
The report of the Supervisory
Board, including th
e remuner
ation report
•
The Corpora
te Governance report
•
The Dividend policy
•
Other informa
tion, as required by Part 9 of Book 2 of the Dutch Civil Code.
Based on the following procedures perform
ed, we conclude that the oth
er inf
ormation:
•
Is consisten
t with the financial
stat
ements and does not contain mat
erial misstatements
•
Contains
the in
formation
as
required b
y
Part
9
of Book
2 f
or
the
report
of the
Managing Bo
ard
and the
other
informa
tion
as required by P
a
rt 9 of Book 2 o
f the Dutch Civil Code and as required by and Sections 2:135b
and 2:145 sub section 2
of the D
utch Civil Code for the remunera
tio
n report.
W
e have
read the Other
i
nforma
tion. Based on our knowledge
and understanding ob
tained through our a
udit of the
financial
stat
ements
or
other
wise,
we
have
considered
whether
the
other
infor
mation
contains
materia
l
misst
atements. By
performing
these
procedures, we
comply
with
the
requirements of
Part
9
of
Book
2
and
Section
2:135b sub‐Section 7 of
the Dutch Civil
Code and the Dutch
Standard 720.
The scope of
the procedures
performed is
substan
tially less than th
e scope of those performed in our au
dit of the financial statements.
Management is
responsible f
or the prepar
ation of t
he other
informa
tio
n, including the
management
b
oard report in
accordance with
Part 9
of
Book
2
of
the
Dutch
Civil
Code
and
oth
er
informa
tion
required by
Part 9
of
Book
2
of
th
e
Dutch Ci
vil
Code. The
Managi
ng Board
and the
super
visory board
are re
sponsible f
or ensuring tha
t the
remuner
ation
report
is dr
awn
u
p
and publishe
d
in
accordance
with
Sections 2:
135b and
2:145 s
ub
section 2
of the
Dutch
Ci
vil
Code.
Report on other legal and regula
tory requirements and ESEF
Engagement
W
e
were
engaged
by
the
Supervi
sory
Board
as
auditor
of
STMicroelectronics
N.
V
.
following
our
re
‐appointment
at
the annual meeting held o
n 17 June 2021 f
o
r the years
2021
‐2023, and h
ave
opera
ted as sta
tutory auditor since the
financial year 2016.
No prohibited non-audit ser
vices
W
e
have
not
provided
prohibite
d
non
‐aud
it
services
as
ref
erred
to
in
Article
5(1)
of
the
EU
Regulation
on
specific
requiremen
ts reg
arding sta
tutory aud
it of public
‐inte
rest entities.
European Single Electron
ic Reporting Format (ESEF)
STMicroelectr
onics
N.
V
.
has
prepared
the
annu
al
report
in
ESEF
.
The
requirements
for
this
are
set
ou
t
in
the
Delegat
ed
Regulation
(EU)
2019/815
with
regar
d
to
regul
atory
technical
standards
on
th
e
specification
of
a
singl
e
electronic
reporting forma
t (hereinafter: the RTS on ESEF).
In
our
opinion,
the
annual
report,
prepared
in
the
XHTML
format,
including
the
partially
mark
ed
‐up
consolidated
financial s
tat
ements,
as
inclu
ded
in the
reporting
package
by
STMicroelectronics
N.
V
., c
omplie
s
in all
mate
rial
respects with the RTS on ESEF
.
223
Management i
s responsibl
e
for p
reparing th
e an
nual
report,
includ
ing
the
financial
statements, in
ac
cordance
with
the RTS on ESEF
, wher
eby management combines the various components into a single reporting p
ackag
e.
Our
r
espons
ibility
is
to
o
btain
reasonable
assur
an
ce
f
o
r
o
ur
opinion
w
hether
the
annual
report
in
this
reporting
packag
e complies with the RTS on ESE
F
.
Our
pr
ocedures,
taking
into
account
Alert
43
of
the
NBA
(the
Netherlands
In
stitute
of
Cha
rter
ed
Acc
ountants),
included amongst others:
•
obtaining an
underst
an
ding
of th
e
Company’
s
financial
reporting
process, in
cluding
the
prepara
tion
of
the
reporting packag
e
•
obtaining
the
reporting
pack
age
an
d
performing
v
alidations
to
determine
whether
the
reporting
package
cont
aining
the
In
line
XBRL
instance
document
and
the
XBRL
ext
ension
ta
xonom
y
files
,
has
been
prepared
in accordance with the technical specifications as included i
n
the RTS on ESEF
•
ex
amining
th
e
in
formation
related
to
the
consolidated
f
inancial
sta
temen
ts
in
the
reportin
g
pack
age
to
determine whether
all requir
ed mark‐ups
ha
ve been applied and whether these
are in
accordance with the
RTS on ESEF
.
Description of responsibilities for th
e financial sta
tements
Responsibilities of management and
the super
visory board for th
e financial stat
ements
Management is responsible for the prepar
ation and
fair pr
esenta
tion of the financial statements in accordance with
EU
‐IFR
S
and
Part
9
of
Book
2
of
the
Du
tch
Civil
Code.
Furt
hermore,
management
is
respon
sible
for
such
internal
contr
ol as
management
determines is
necessary
to enab
le t
he preparation of th
e finan
cial statemen
ts that
are free
from ma
terial misstat
ement, whether du
e to fr
au
d or error
.
As
part
of the
preparation
of
t
he
financial
stat
e
ments,
mana
gement
i
s
responsible
for
ass
essing
th
e
Company
’
s
ability
to
c
ontinu
e
as
a
going c
on
cern.
Based
on
the
financial
re
porting
fr
ameworks
mentioned,
management
s
hould
prepare the
financial
statements using
the
going
concern
basis
o
f accounting
unle
ss
management
either
intends to
liquidate
the
c
ompany
or
to
cease
oper
ation
s,
or
has
no
realistic
alte
rnative
but
to
do
so.
Managemen
t
should
disclose
events
an
d
circumst
ances
that
may
cast
signi
ficant
doubt
on
the
company’
s
ability
to
continue
as
a
going
concern in the financial statemen
ts.
The supervisory
board is responsible for ov
erseeing the company’
s financial reportin
g process.
Our responsibilities for the
audit of the finan
cial statements
Our
objective
i
s
t
o
plan
and
perform
the
audit
engagement
in
a
manner
that
allows
us
to
obt
ain
sufficient
an
d
appropriate audit evidence f
or our opinion
.
Our audit has b
een performed with a high,
but not
absolute, level of assurance, which
means we may not detect all
mate
rial errors and fr
aud du
ring our audit.
Missta
tements
can
arise
from
fraud
or
error
and
are
consid
ered
material
if
,
individually
or
in
th
e
ag
grega
te,
they
could
reasonably
be
expected
to
influence
the
economic
decision
s
of
u
sers
tak
en
on
th
e
basis
of
these
financial
stat
ements.
The
materiality affects the
nature,
timing
and
e
xtent of
our
audit
procedures and
the
evaluation of
the
eff
ect of identified mi
ssta
tements on our opinion
.
W
e
have
exer
c
ised
prof
essio
nal
judgment
an
d
have
maintained
professional
sk
epticism
throughout
the
audit,
in
accordance with Dutch Standards on Auditing, ethical requiremen
ts and in
dependence requirements
.
The
‘Information
in
sup
port
of
our
opinion
’
section
above
includes
an
informative
summary
of
ou
r
responsibilities
and the work p
erformed as the basis f
o
r our opinion
.
224
Our audit furth
er included among oth
ers:
•
Pe
rforming audit
procedures responsive to the
risks identified,
and
obtaining aud
it evidence that
is
sufficient and appropriate t
o
provide a basis for our opinion
•
Obtaining
an under
standing
of
internal
control
relev
ant to
the
aud
it
in
order
to design
audit
procedures
that
are appropria
te in
the cir
cu
mstances,
but not f
or the purpose
of e
xpressing an opinion on
th
e eff
ectiveness
of the company’
s internal control
•
Ev
alu
ating
the appr
opriateness
of accounting
po
licies
used and the r
eason
ableness
of acc
o
unting estima
tes
and relate
d disclosures made by man
agement
•
Ev
alu
ating th
e
over
all
presentation,
structure and
cont
ent of
th
e
financial
statements,
including
the
disclosures
•
Ev
alu
ating whether th
e financial
stat
ements
represen
t
the
underlying
transactions and
events in a
manner
that achieves f
air presenta
tion.
Communication
W
e
communicate with the
supervisory
board
reg
arding,
among other
matt
ers, the
planned
scope and
timing of
the
audit
an
d
significant
au
dit
fin
dings,
includ
ing
any
significant
findings
in
internal
control
th
at
we
identify
during
our
audit. In this
respect we
also submit an additional r
epo
rt t
o the
audit committ
e
e in
ac
cordance with Article
11 of
th
e
EU
Regulation
on
spe
cific
requirements
regarding
statutory
audit of
pub
lic
‐intere
st
entities.
The
information
in
cluded
in this additional
report is consis
tent with our audit opinion
in this auditor
’
s report.
W
e
pr
ovide
the
s
uper
visory
board
with
a
st
atement
that
we
have
complied
with
relev
ant
ethical
requirements
reg
arding independence, and t
o communicate
with
them all r
elationships
an
d other mat
ters
that ma
y
re
asonably be
thought to bear on our independence, a
nd where applicabl
e, relate
d safeguards.
From
the
matters
c
ommuni
cated
with
the
supervi
sory
boa
rd,
we
determine
the
key
audit
matter
s
:
those
matter
s
that
were
of
most
significance
in
the
audit
of
the
financial
sta
tements.
W
e
describe
these
mat
ters
in
our
auditor
’
s
report
u
nless
law
or
regulation
precludes
pub
lic
disclosure
abou
t
the
ma
tter
or
when,
in
extremely
r
are
circumst
ances, not communicating the matte
r is in the p
ublic inter
est.
Eindhoven, 24 March 2022
Ernst & Y
o
ung Accountants LLP
J.
R. Frentz
225
10.
Important date
s
May 12,
2022
: Capital Ma
rkets
Day
At
the
time
of
publication
of
th
is
annu
al
report,
no
d
ate
has
been
set
yet
for
the
2022
AGM.
We
expect
th
e
2022
AGM to take place within
the first half of the y
ear 2022.
Please consult ou
r website www.st.co
m for the lates
t importan
t dates.
226
SIGNATURES
Pursuant
to
the
requirements
of
the
Securities
Exchan
ge
A
ct
of
1934,
the
registrant
h
as
d
uly
cau
sed
this
report
to
be signed on its
behalf by the und
ersigned, thereunto d
uly authorized.
STMicroelectronics N.V.
Date: March
24
, 20
22
By:
/s/
Lorenzo
Grandi
Name:
Lorenzo Gr
andi
Title:
Chief Financial Officer
and Presiden
t
Finance, Purchasing, Ente
rprise Risk Managem
ent
& Resilience