This focus on reducing consumption has allowed ST to save close to $130M in 2006--i.e. if we had maintained the same energy efficiency as in 1994 -in terms of kWh per wafer, we would have spent $130M more on energy. Similar actions on reducing consumption of water and chemicals have delivered savings of $26M and $82M, respectively.

ST has found payback on these investments to be usually rapid. For example, in Shenzhen, China, an investment of $175,000 to replace mechanical dryers by adsorption dryers significantly reduced the cost of producing dry compressed air, saving $149,000 per year in electricity costs, representing a payback time of just 14 months.

2- ENERGY SAVINGS DUE TO OUR PRODUCTS
The use of electronic techniques instead of mechanical, electromechanical or other methods almost always results in reduced operating power. Examples include almost anything that contains an electric motor, as well as domestic and industrial lighting, water and electricity metering. With its strengths in industrial and power applications, ST is a key contributor to this environmentally responsible approach.

For example, in the field of TV amplifiers, changing from Class B to Class D amplifiers saves 1.2W per device. With 60 million devices shipped up to 2006 and assuming average utilization of 2.5h per day, this is equivalent to 8MW saved. A similar calculation for mobile-phone chargers with stand-by feature (300 millions units sold per year, 49,000GWh saved per year, life time of 3 years) leads to 17MW of savings.

ST offers many products specifically designed to save energy in the end application. For example, it recently introduced the first high-brightness LED drivers to include auto-power-saving features. In lighting, signage and transport applications this delivers real-world savings of 80% compared to existing solutions. This product was specifically designed to support all worldwide energy-saving programs which encourage power efficiency in lighting applications.

Similarly, as one of many examples, if all refrigerators in Europe were using ST technology for power management and thermal control, we would save 1000MW and 5 million tons of CO2 per year.

An internal analysis shows that in 2006, ST shipped approximately 250M units of power-saving products, which have saved 140MW (1220GWh) of electricity at the point of use. This represents 50% of ST’s annual energy consumption.

3- GREENHOUSE GASES
2006 was a milestone year for ST: after many years of continuous improvement and consistent reduction of emissions per unit of production, 2006 was the first time we were able to significantly reduced equivalent CO2 emissions in absolute terms. Since 1994, our emissions per unit of production (wafers) have dropped from 825 kg CO2 to 324, a 61% reduction. This was achieved through a combination of measures:

a) The continuous reduction of our energy consumption;
b) The increasing use of green energy from the national grids, generally hydroelectric or wind powered, which reached 17% in 2006, including 10MW from our wind farm;
c) Some proactive installations such as photovoltaics in Phoenix, Grenoble and Geneva. In addition, we a building a new co-generation plant in Catania, to be operational in 2007-08, to further reduce emissions;
d) Reduction of emissions due to PFC, through replacing PFCs with other gases (non-PFC gases now account for 43% usage in ST plants) and installing PFC abatement systems. Together with some other semiconductor companies, ST has made a voluntary commitment to reduce its PFC emissions by 10% in 2008, compared to the baseline of 1995.
e) Carbon sequestration: several reforestation projects launched since 2000 in Australia (2,600ha), Texas (1,400ha) and Morocco (4,800ha) are now making significant contributions as the trees mature. The overall sequestration achieved in 2006 was 81kTons CO2 and is now entering the rapid growth phase (should be 180 in 2007).
f) In “Green Transportation”, ST has a company-car policy that sets a limit of 7.5liters/100km (close to 200g CO2 per km) and has implemented specific transportation schemes to encourage employees to use public transport, high-occupancy vehicles, or alternative solutions such as bicycles. In two examples, 53% of employees at ST’s Grenoble site were using alternatives to their own cars at the end of 2005, while at our Agrate site more than 1500 employees use shared transport, an effort that has resulted in an Italian “Sustainable Mobility” award.
g) ST is a founding member of the CCX (Chicago Climate Exchange), a voluntary commitment to reduce CO2 emissions and to pilot a carbon-trade experiment in the US.

4- GREEN PRODUCTS
ST supports the evolution of legislation concerning the use of hazardous substances in products, although not all practical aspects are defined and not all consequences are identified yet. The current legal reference is the European directive RoHS (Restriction Of Hazardous Substances) covering Lead, Cadmium, Mercury, Hexavalent Cromium, and the flame retardants Polybrominated biphenyl (PBB) and Polybrominated diphenylethers (PBDE). The RoHS limits for these substances are 1000ppm, except for cadmium, which has a limit of 100ppm.

ST’s self-imposed limits are much stricter than the legal requirements. For example, where RoHS allows up to 1000ppm of Mercury, ST allows no more than 5ppm in assembly materials and less than 100ppm in packing materials for the sum of Cadmium + Mercury + Lead + Hexavalent Cromium. Where RoHS allows up to 1000ppm of PBB and PBDE, ST allows no more than 5ppm, which is the practical limit of detection. RoHS -like legislation is likely to spread geographically, starting with China, and ST is already far in advance of expected limits.

5- HEALTH AND SAFETY
After several years of work to improve our safety performance, ST is now in the Top 3 of semiconductor manufacturers worldwide and is extending its approach to also protect the health of employees outside the workplace.

In terms of Safety at Work, ST has improved its record from 0.93 Recordable Cases per 200,000 hours worked in 2002 to 0.58 in 2006. This is far below the US industry average (6.6 in 2004) and even the US semiconductor industry (1.8 in 2005). One site (Shenzhen) is without a single accident since January 2004.

All our sites have been OHSAS certified since 2003 but we recently evaluated over 20,000 workstations where chemicals were being used, in order to eliminate all risks. This effort lasted for about 2 years, and is almost completed: out of 1,400 workstations identified, less than 60 now remain to be upgraded.

A new Health Program for employees, launched in 2006, aims to provide the same level of health coverage for all ST employees, wherever they are, based on the best practices worldwide. This health program is based on three main directions:

- Individual medical check ups (once/18 months): blood analysis, mammography, pap smear, PSA, colorectal cancer, vaccination;
- Bio-monitoring for employees exposed to chemical products;
- Education: awareness on tobacco risks, healthy food, cancer prevention, cardio vascular risk, etc.

At the end of 2006, this health scheme was organized for most Asia-Pac sites, covering 17,000 people. All ST employees will be covered by the end of 2007. The cost of this program is approximately $3M per year.

6- SUPPLY CHAIN MANAGEMENT
Although ST does not sell directly to consumers, it supports the growing trend toward establishing “clean” supply chains in which all players share agreed standards in environment, human rights, and other socially responsible areas. This is the starting point for the creation of the EICC (Electronics Industry Code of Conduct), of which ST is a member. We are committed to applying this code to ourselves and to ensuring its application to our suppliers upstream.

Dedication to the EICC is a significant commitment considering the number of suppliers and subcontractors that we have, but we are helped in this process by the fact that:
- EICC has developed a comprehensive audit tool which can be used either for self assessment (step 1), or for formal audit by a third party (step 2); we have already deployed this tool in our Shenzhen plant, which was formally audited in January 2007.
- EICC members will be able to share their findings. As a result, audits done on one supplier can be visible to all EICC members, allowing time and money to be saved.

The field of Sustainable Development is a competitive paradox: ST wants to be the industry leader but we also want everyone else, including our competitors, to be as close behind us as possible in protecting the planet! For example, when we develop a new way of reducing our own energy consumption we not only implement it in all appropriate ST sites around the world but we are willing to share the knowledge and even encourage our competitors to use it, even though this makes them inherently more competitive. This represents a new industrial dynamic which we call Responsible Competition.

ST is - and intends to remain - the most responsibly competitive semiconductor manufacturer in the world.

September 2007