This issue of Challenge is our first in 2002, the year in which ST celebrates its 15th anniversary. Although 2001 was a very difficult year for the semiconductor industry as a whole, the tone of this issue is firmly optimistic and with good reason because, again, ST has significantly outperformed the market. During the worst downturn in the history of the semiconductor industry, we not only increased our market share, but also remained profitable -- and did so without the major employee lay-offs that characterized most of our industry.

This outstanding achievement is of great importance for ST’s continued long-term success. For example, in a year when the world semiconductor market declined by a dramatic 32%, ST was able to maintain its R&D expenditure close to its 2000 level, cutting back by less than 5%.

When ST was formed 15 years ago from the merger of SGS Microelettronica and Thomson Semiconducteurs, the new company was only No.15 in the world rankings and very much smaller than the “giants” that dominated the top ten places. Today, ST is the world’s leading supplier of MPEG-2 decoder ICs, Digital Set-Top Box ICs and EPROM non-volatile memories and also the second leading supplier of analog and mixed signal ICs, disk drive ICs, smartcard ICs and EEPROM memories.

ST’s commitment to technological and manufacturing excellence has been rewarded by exceptional growth; in the last four years, a complete cycle of the semiconductor industry, ST grew at a compound annual growth rate of 14.4%, while the market's CAGR was just 3.7%.

The articles in this issue illustrate some of the factors that have contributed to this outstanding success. These include technology leadership in next-generation CMOS and in RF power amplifiers and leadership in delivering System-on-Chip solutions in applications as diverse as inkjet printers, set-top boxes and optical mice.

Although many analysts believe that the market will begin to pick up again this year, recovery is likely to be gradual rather than immediate and most semiconductor manufacturers still have tough times ahead. At ST, we are confident that our steadfast refusal to compromise our commitment to technological leadership during the downturn has put us in an excellent position to continue outperforming the market we serve as the market recovers.