Tait Sorensen - STMicroelectronics NV Carlo Bozotti - STMicroelectronics NV Carlo Ferro - STMicroelectronics NV Jean-Marc Chery - STMicroelectronics NV

Gareth Jenkins - UBS Ltd. (Broker) Andrew M. Gardiner - Barclays Capital Securities Ltd. Sandeep Sudhir Deshpande - JPMorgan Securities Plc Janardan N. Menon - Liberum Capital Ltd. Jerome Ramel - Exane BNP Paribas Achal Sultania - Credit Suisse Securities (Europe) Ltd. Adithya Metuku - Bank of America Merril Lynch Robert Sanders - Deutsche Bank AG Gianmarco Bonacina - Equita SIM SpA Veysel Taze - ODDO SEYDLER BANK AG Günther Hollfelder - Baader Bank AG (Broker) Stéphane Houri - Natixis SA (Broker)

Ladies and gentlemen, good morning. Welcome to the STMicroelectronics Second Quarter 2016 Earnings Results Conference Call and Live Webcast. I'm Selena, the Chorus Call operator. I would like to remind you that all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be a Q&A session. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Tait Sorensen, Group Vice President, Investor Relations. Please go ahead, sir. Tait Sorensen - STMicroelectronics NV: Thank you, and good morning to everyone. Thank you again for joining our second quarter of 2000 (sic) [2016] (0:55) financial results conference call. Hosting the call today is Carlo Bozotti, ST's President and Chief Executive Officer. Joining Carlo on the call today are Jean-Marc Chery, Chief Operating Officer; Carlo Ferro, Chief Financial Officer; Georges Penalver, Chief Strategy Officer. This live webcast can be accessed through ST's website. A replay will be available shortly after the conclusion of this call. This call will include forward-looking statements that involve risk factors that could cause ST's results to differ materially from management's expectations and plans. We encourage you to review the Safe Harbor statement contained in the press release that was issued with the results this morning and also in ST's most recent regulatory filings for a full description of these risks factors. Also, to ensure all participants have an opportunity to ask questions during the Q&A session, please limit yourself to one question and a brief follow up. I'd now like to turn the call over to Carlo Bozotti, ST's President and CEO. Carlo? Carlo Bozotti - STMicroelectronics NV: Thank you, Tait, and thank you for joining us this morning on our second quarter earning conference call. Today, I would like to share our progress towards our most important objective for 2016. Returning ST to revenue growth, focusing on two strategic areas, Smart Driving and Internet of Things. As you know, we are targeting those applications that are expected to grow the fastest, from car digitalization and electrification to the Internet of Things for portable and wearable devices, as well as the smart home, city and industrial applications. Already during the first quarter, we saw a first step towards returning to year-over-year growth with two of our major product businesses representing about 50% of our 2015 sales, automotive and microcontrollers. And in the second quarter, we made a further step forward; automotive and microcontrollers continued their positive revenues momentum. On top of this, our power discrete business, our Imaging Product Division, as well as our Analog and MEMS product group grew sequentially and that we are now well positioned to grow on a year-over-year basis in the second half of 2016. Now, let's go through our key figures. First, total revenues increased on a sequential basis to $1.703 billion, up 5.6%. This was slightly above the midpoint of our guidance. Importantly, all the three groups and the Imaging Product Division delivered sequential growth. Second, our sequential growth in revenues translated into progress on gross margin. Specifically, the second quarter gross margin came in at 33.9%, a quarter-to-quarter improvement of 50 basis points. Unused capacity charges in the period impacted the gross margin by about 45 basis point compared to about 60 basis point in the first quarter. Third, combined R&D and SG&A expenses of $565 million were lower on a sequential basis by $6 million mainly benefiting from fewer calendar days. Operating expenses also reflected the initial benefits of the set-top box restructuring plan. More importantly, I can confirm that we are on track to capture about $100 million of annualized cost savings from our set-top box restructuring program exiting 2016. Fourth, our operating income before impairment and restructuring turned positive during the second quarter, coming in at $40 million. Thanks to the sequential growth in revenue and improvement in gross margin. Finally, we also saw improvement in our free cash flow increasing to $47 million in the second quarter from $31 million in the first quarter. For the first half of 2016, this brings free cash flow to $78 million. Now, let's move to a more detailed business review. In ADG, our Automotive and Discrete Group, revenues increased 7.5% on a sequential basis. Importantly, we saw a return to sequential growth for our power discrete products increasing by double digits. This sharp improvement is due to a broad-based recovery following the market downturn that began last year, as well as to our marketing initiatives. In automotive, we had another solid quarter of a broad-based sequential growth with revenues up over 4%. On a year-over-year basis, automotive increased about 6%. While the performance of power discrete products improved sequentially, it was not yet enough to grow year-over-year. However, based upon our current market visibility, power discrete products are positioned to contribute to year-over-year growth starting in the second half of 2016. ADG operating income of $61 million in the second quarter was up sharply on a sequential basis, increasing from $39 million in the first quarter. ADG operating margin increased to 8.5% compared to 5.7% in the first quarter. Both power discrete and automotive contributed to ADG's operating margin growth. The second quarter was an important one for ADG in terms of announcement and awards covering our three priority areas: safer, greener and more connected driving. In advanced safety, we announced the continuation of our strong partnership with Mobileye through the development of the 5th generation of the system-on-chip in 7 nanometer FinFET technology. We had wins in Japan with Tier 1s for a complete ABS chipset for motorbikes with a 32 bit microcontroller. And for a next-generation airbag smart power chipset. We also started a collaboration with a major Japanese Tier 1 for a surround view camera system and with a new customer for another – other application, the advance safety applications. Both of these projects are using our 28-nanometer FD-SOI technology. For greener driving, spurred by car identification, our key technologies are the new generation of vertical intelligent power and silicon carbide. Vertical intelligent power continues to be a strong contributor to our sales in this area, and we recently celebrated a 25th anniversary of the creation of this industry-leading ST proprietary technology. For silicon carbide, during the quarter we announced a complete set of advanced SiC power devices for high voltage power modules to extend vehicle range, increase convenience and improve reliability. In the area of connected cars, we continue with the expansion of our 32-bit automotive microcontroller business with a major award from a Japanese Tier 1. We also announced together with Autotalks, the development of a solution to combine satellite navigation with vehicle-to-vehicle and the infrastructure communication for better positioning information in difficult city environments. In addition to our automotive focus, we have also have products inside ADG that serve many other markets. Some key wins were ESD protection devices for smartphones and wearable market leaders in the U.S. and Asia. And designs for our super-junction and silicon carbide MOSFET product families across a range of applications including servers, solar, gaming systems and dc/dc converters. Turning now to AMG, our Analog and MEMs Group, revenues increased 1.8% sequentially, thanks to both our general purpose and analog products, while the sales of our MEMS product decreased mainly reflecting lower sales of microphones for wireless applications. AMG operating margin was 0.2% in the second quarter, comparable to the 0.5% in the first quarter. While we started sequential growth in revenues, operating results decreased slightly. We can, however, reaffirm our expectation of an improved second half for AMG for both revenues and operating results. In our consumer business, we ramped production of our 6-axis ultra-low-power MEMS accelerometer and gyroscope, optical image stabilization gyroscope and barometric sensor MEMS for the latest Samsung Galaxy S7 and S7 edge smartphones. During the quarter, we also announced the collaboration with Qualcomm on sensors for smart devices. In China and more generally in Asia, we landed multiple design wins for motion sensors, for user interface and optical image stabilizations and for applications like sport watches. We ramped the production of pressure sensors for wearables and smartphones. And our latest touch screen sensor was selected by smartphone and tablet customers. Finally, we introduced a programmable single-chip Bluetooth low-energy solution. The diversification of our sensor business is ongoing. In automotive, we booked new design wins for custom MEMS accelerometers in Japan. And for our 3-axis gyroscope from a Tier 1. Within AMG, we have also had continuous success in the drone market. One example is with motor drivers where we began ramping shipments of our latest STSPIN chip for a new higher performance drone from a well-known Chinese OEM. Last for AMG, I would like to highlight our success in electricity metering for smart homes and cities. During the quarter, we began volume production of multiple chips for the next-generation smart meters of Enel. And these chips include processing and meteorology ICs and accelerometer, as well as near field communication tags and high density EEPROMs from our Microcontrollers, and Digital ICs Group to which I will now turn. MDG's net revenues increased 4.6% on a sequential basis and totaled $556 million. Microcontrollers represent the large majority of the sales in this group, and were the principal driver of sequential revenue growth, thanks to our general purpose STM32 family. On a sequential and year-over-year basis, microcontrollers were up over 4%. Digital product sales grew sequentially driven by digital ASICs for networking applications. MDG's operating margin improved sequentially to 1.5%. The loss in digital was substantially lower than that of the first quarter as we are progressing with savings from the outgoing set-of-box restructuring plan. As we said before, we expect the combination of this restructuring plan and the growth of digital ASICs revenues to drive substantial improvement in MDG profitability. Again, I want to emphasize the strong position we have in microcontrollers. In fact, our STM32 family of general purpose microcontrollers continues to be a leading choice for a broad range of smart things in the IoT. One example is the drone market I talk about earlier where our microcontrollers were chosen by several major drone manufacturers for flight and motor control families (15:05). Another example is in the Smart Lighting applications where we were selected by a major European lighting manufacturer. During the quarter, we've also strengthened the STM32 ecosystem launching a cooperation agreement with Arduino to expand access to the community of makers across the globe. We have also announced new free development tools and added a USB Type-C middleware stack to support developers. Security is essential for IoT expansion and a very key element of our strategy. During the quarter, we introduced a new family of secure called STSAFE. These are designed to protect all types of connected devices in the Internet of Things. In our custom silicon business we had an FD-SOI ASIC award from a major Japanese player and several 55 nanometer BiCMOS designs. We also ramp the production of ST's first 100 gigabit per second silicon photonic transceiver. Let me speak briefly of our Imaging Product Division which is reported in the line others. Here, we had strong sequential increase in sales, thanks to our Time-of-Flight specialized image sensors entering multiple smartphone models, 10 new flagship smartphones in Q2 alone. Among these, we can mention that Huawei P9 Plus and Honor V8. And we continue to see a very good momentum. Now, let's turn to our business outlook. In the third quarter, we are anticipating a strong sequential growth in net revenues which would drive a further improvement in our gross margin. In terms of bookings, we saw an improvement last quarter in many applications. And looking to the third quarter, we expect all our product groups and the Imaging Product Division to contribute to sequential growth. However, while we see further improvement in our business, the macro backdrop particularly for Europe has become more complex with increased uncertainty. Therefore, it is not clear if or how this may impact overall GDP, the semiconductor market or individual customer demand. With that word of caution, based upon our current visibility and our end market and customer plans, the increase in bookings translate into a sequential revenue growth guidance of about 5.5%, plus or minus 3.5%. We expect the growth in revenues and more favorable product mix to bring meaningful improvement to gross margin. Especially for the third quarter, we are targeting a gross margin of about 35.5% plus or minus 2 percentage points. This gross margin target still embeds a negative impact from unused capacity of about 65 basis points. More broadly, we see growth in the second half of 2016 compared to the year-ago period. Automotive and microcontrollers are already contributing in a strong manner since the start of the year. We took a step forward in the second quarter with sequential growth in power discrete imaging and AMG. So for the second half of the year in total, again based upon our current visibility and market backdrop, we anticipate another step forward with all product groups and the Imaging Product Division positions to deliver year-over-year sales growth. In turn, the improvement in our operating performance will lead to higher free cash flow in comparison to the first half of the year. My colleagues and I would now be happy to take your questions. Thank you.

We will now begin the question-and-answer session. The first question is from Gareth Jenkins from UBS. Please go ahead. Tait Sorensen - STMicroelectronics NV: Gareth, are you there? Gareth Jenkins - UBS Ltd. (Broker): Yeah. Sorry. I wondered if I could ask a question on ordering patterns. I wonder whether you could just give us a shape of orders that you've seen into July given what's been going on in the macro? And then maybe the book-to-bill, where we currently stand going into the second half? It looks like you've got a very strong pipeline into H2. So I just wondered if you could give us some sense of that. Thank you. Carlo Bozotti - STMicroelectronics NV: Yeah. Of course, we have the results of the first three weeks of July. The booking trend, I would say, positive booking trend is continuing. Also in the first three weeks of July, we have the same run rate we had in Q2. And certainly, as in Q2, the book-to-bill is positive. Gareth Jenkins - UBS Ltd. (Broker): Thank you. Carlo Bozotti - STMicroelectronics NV: Thank you. Tait Sorensen - STMicroelectronics NV: Next question please.

The next question is from Mr. Andrew Gardiner from Barclays. Andrew M. Gardiner - Barclays Capital Securities Ltd.: Thanks. I just have two quick ones please. First, related to the first question. Are you seeing any change in how distributors are thinking about holding stock given that economic uncertainty? Is there a difference between sort of the disti side versus, say, your sort of bigger OEMs? Carlo Bozotti - STMicroelectronics NV: No. We are very pleased about the evolution of the point of sales with our distributors. It was a very substantial growth of the point of sales, both sequentially and year-over-year. It was really good. And during the course of the quarter, I think there was also an improvement of the stock term (22:02). So our objective of course is to keep going, and this is what we want to do. It was very much of course the board in terms of products and with very good growth, particularly in Asia and in Europe. Andrew M. Gardiner - Barclays Capital Securities Ltd.: Okay. Thanks. And then I just had a second one on the utilization charges within the gross margin. We saw a step down in the second quarter, as you highlighted, to about 45 basis points from the 60 basis points in the first quarter. For 3Q, you've guided it back up to 65 basis points or above where we were in the first half of the year. Can you just give us a sense as to what's happening in terms of loading and why those charges may be more of a drag in the third quarter despite a higher revenue level? Thank you. Carlo Bozotti - STMicroelectronics NV: Yeah. Yeah. I think Carlo Ferro will take the question. Carlo Ferro - STMicroelectronics NV: Certainly, Carlo. Good morning, Andrew. Good morning, everyone. Yes, indeed, again the loading of fab in the second quarter fall very similar to expectations, have increased, slightly better than expectations with – an overall loading rate at about 85% or slightly over 85%. And with our 300 millimeter, 75%. What we anticipate for the current quarter, overall is a similar level of loading. However, with a different distribution among the various fabs and eventually less loading during the quarter in our 300 millimeter. And this is the reason why we anticipate a slight increase in the charges for unused capacity that are embedded in our gross margin guidance for the third quarter. Andrew M. Gardiner - Barclays Capital Securities Ltd.: Okay. Thank you for that explanation. Thanks, guys. Tait Sorensen - STMicroelectronics NV: Thank you, Andrew. Next question?

The next question is from Mr. Sandeep Deshpande from JPMorgan. Sandeep Sudhir Deshpande - JPMorgan Securities Plc: Yeah. Hi. Thanks for letting me on. My first question is regarding the growth that we are seeing. Carlo Bozotti, I mean, from 2011, ST has not grown. And now, you are growing on a quarter-on-quarter basis. Based on what you see in terms of your product road map over the next year, do you expect this growth to continue if the macro environment remains the same? Carlo Bozotti - STMicroelectronics NV: Yeah. Certainly yes. Of course, we had a very difficult transition with a major block, as you know, of our legacy products that impacted the top line. This transition is over during the course of the last quarter of last year. So we have important opportunities. I would say the two sectors we are in, that is automotive and smart industry application, certain wearable and portable applications, I think, are areas where the growth is there. I think certainly higher than the average growth of the semiconductor market. And I believe what we have done in terms of portfolio, building a lot around our STM32 for the mass market with a very fragmented customer base. More than 40,000 customers today. And really focusing on the two major trends in the automobile. On one side, the digitalization of the car and on the other side the electrification of the car. I think, this focus is starting to payoff. As you know, we have moved a lot of R&D resources from other areas, from the regular chip business to these new areas and we are confident that this is the start of a new trend of year-over-year growth for the company. Sandeep Sudhir Deshpande - JPMorgan Securities Plc: Thanks. And just following up, Carlo. If you've seen – I mean, there are a number of very large M&A transactions happening in the semiconductor space over the last few quarters as such really. I mean... Carlo Bozotti - STMicroelectronics NV: (26:24) Sandeep Sudhir Deshpande - JPMorgan Securities Plc: Sorry. Carlo Bozotti - STMicroelectronics NV: Yeah. Yeah. Sandeep Sudhir Deshpande - JPMorgan Securities Plc: And if you've noticed, one of the things that you might have to do once you are – I mean, I think the restructuring of ST is over, whether you need to adjust your mix to improve your margins and that does mean that ST needs to take part in some of these M&A transactions? Thank you. Carlo Bozotti - STMicroelectronics NV: Well, today, it's not on the table. I think we are executing our program. We are investing a lot on research and development. And when we talk about M&A, it's important of course to make sure that we, as ST, have the dimension of scale to compete in the research and development. And we have, our research and development effort is very material. We have a big mass of R&D in a variety of areas that in fact I just described. This of course does not mean that M&A is not important for us. For instance, it's very important to make sure in this phase of our life, if there are IPs related to what we already do and to reinforce the product to what we already have and we're already focusing on, of course, this is an area of attention for us. But we do not have any, let's say, major deal on the table. It's more focusing on making sure our product portfolio is becoming stronger on what we already do, adding good IPs for the applications we want to target. Sandeep Sudhir Deshpande - JPMorgan Securities Plc: Thank you. Carlo Bozotti - STMicroelectronics NV: Thank you. Tait Sorensen - STMicroelectronics NV: Thank you, Sandeep. Next question, please.

The next question is from Janardan Menon from Liberum. Janardan N. Menon - Liberum Capital Ltd.: Hi. Good morning. Thanks for taking the question. A couple, one is on your gross margin. You're guiding up 160 basis points despite a small headwind on the utilization charges. Can you just run through what is giving you that upside? How much is from sales? How much may be coming from currency? Especially, Carlo, you had talked about a 100 basis point improvement in currency coming through over the coming quarters. How much of that impact will be there by Q3 itself, if you could tell us? And what is yet to come in subsequent quarters? And then I have a follow-up. Carlo Bozotti - STMicroelectronics NV: Yeah. I think Carlo will take that. Carlo Ferro - STMicroelectronics NV: Janardan, happy to take the question, so in the evolution of the gross margin from the second quarter actual to the midpoint of guidance for the third quarter at 35.5%, frankly, the dollar impact is quite negligible. We talked earlier about some slightly deterioration in the earnings capacity, about 20 basis point, so overall this is not so much the driver. The driver instead is a good and virtual combination with an expected improvement in the overall mix that overall offset the natural price erosion and give the opportunity of taking advantages and benefit from almost all the manufacturing efficiencies that we are generating in our fab. Janardan N. Menon - Liberum Capital Ltd.: So does that mean that you still have some currency upside to come through still on your gross margins? Carlo Ferro - STMicroelectronics NV: Yeah. Our estimation is that starting from that level, we may have about another less than a half a point upside from currency. Janardan N. Menon - Liberum Capital Ltd.: Understood. And just a question on the power discrete side. The growth that you're seeing, is that a rebound from the weakness that you previously saw from the PC market, or is it some new areas of growth that you're seeing right now? Carlo Bozotti - STMicroelectronics NV: No. It's a rebound. It's not yet incorporating, for instance, all the opportunities that we see in other (30:55) technologies like the silicon carbide. It is a rebound, it's broad ranged. And I think the backlog is solid. So I think this is one of the families where we believe there would be a contribution in terms of year-over-year growth. Janardan N. Menon - Liberum Capital Ltd.: Understood. And just a small follow-up, the small drop in utilization on the Crolles 300-millimeter fab, is that from the shutdown of the set-top box business or is there some other factor there? Carlo Ferro - STMicroelectronics NV: No. It's almost seasonality on the overall planning of the fab, also considering that there is, as you know, some effect of the summer vacation and in planning the activity of the fab when we have significant demand, we can use summer job, when there is no significant demand, it's more cash wise to reduce a little bit the production and to avoid the cash cost of the summer job. So it's more planning-related as opposed to demand-related. Janardan N. Menon - Liberum Capital Ltd.: Got it. Thank you very much. Tait Sorensen - STMicroelectronics NV: Thank you, Janardan. Next question?

The next question is from Jerome Ramel from Exane. Please go ahead. Jerome Ramel - Exane BNP Paribas: Yeah. Good morning. Carlo Bozotti - STMicroelectronics NV: Good morning. Jerome Ramel - Exane BNP Paribas: First question would be how should we model the OpEx for Q3? Carlo Bozotti - STMicroelectronics NV: This is certainly for Carlo. Carlo Ferro - STMicroelectronics NV: Thank you for the question, Jerome. We started with the second quarter that has delivered in line with what we said three months ago. And, of course, this also reflect and include, as Carlo has anticipated, some step up (32:43) award in the set-top box restructuring. We are progressing there. Then for the third quarter, we entered the quarter with the opportunity of a further step in the set-top box restructuring towards the target we confirmed to exit 2016 with a run rate of savings in the range of $100 million. Additionally, on the third quarter, we have the advantage of the summer vacation. On the other side, I should remember that – remind that that we do adopt worldwide the sudden increase that start in the month of July. So this is a negative for expenses. To make short, again, we expect the gross expenses for Q3 to be $20 million plus lower than in the second quarter, so in a range between $540 million and $545 million. When looking at net expense, another important indication I would like to share for you to model is that with the current level of grants, operating income and expenses, therefore, for the current and the next quarter are more in the range of $20 million as opposed to about $28 million in the first half, in each of the quarter, the first half of the year. So overall, we are confident that we can continue to stay in the $500 million to $550 million range for net expenses, and the third quarter will be around or just below the midpoint of this range. Jerome Ramel - Exane BNP Paribas: Thank you. Carlo Bozotti - STMicroelectronics NV: You're welcome. Jerome Ramel - Exane BNP Paribas: And maybe a follow-up. Concerning the guidance for Q3 and this one top-line guidance. Could you give us a little bit color on which segment or division are driving the growth? Or if you could rank them, that would be helpful. Carlo Bozotti - STMicroelectronics NV: Yeah. I think, Carlo – I mean, as we said, for the group (34:54), but let's go through group by group, Carlo, to do some follow-up here. Carlo Ferro - STMicroelectronics NV: Yeah. We see starting from eventually on an increasing ranking. In automotive and ADG, we anticipate some growth, also taking account that there is some seasonality for the automotive business, and there is momentum on demand with power discrete, as I said. In the area of the Microcontroller and Digital Group, also we expect some growth, some level of sequential growth with our general purpose microcontrollers continuing to have momentum and also some positive in digital ASIC. Then we have the opportunity of a significant recovery of presence in MEMS which will drive Analog and the MEMS Group to a significant sequential growth driven by MEMS. And the other good opportunity is that in the imaging and particularly in our specialty image sensors with the Time-of-Flight technology, we see momentum and we are starting also new opportunities, and this is another important contributor of our sequential growth expectation. Jerome Ramel - Exane BNP Paribas: Thank you very much. Tait Sorensen - STMicroelectronics NV: Thank you, Jerome. Jerome Ramel - Exane BNP Paribas: You're welcome. Tait Sorensen - STMicroelectronics NV: Next question?

We have a question from Achal Sultania from Credit Suisse. Please go ahead. Achal Sultania - Credit Suisse Securities (Europe) Ltd.: Hi. Good morning. So I've got two questions. First on the MEMS business. So we're already seeing improvement in automotive and analog business. What gives you the confidence on the MEMS side of things? Are you talking about significant quarter-on-quarter growth? Can you talk about some of the recent design wins for MEMS? And specifically here, also, obviously, you lost one of your big customers in the U.S. You had some market share loss. How should we think that – is there any potential to get that business back at some point in time? Or is it mainly driven by pricing which is why you think it's difficult to or not profitable to get that business back. Can you maybe talk about that? Carlo Bozotti - STMicroelectronics NV: Yeah. So, I think what we – the confidence for the sequential growth in MEMS is first of all coming from, as I mentioned, of the backlog and the increase of the backlog. We have a very, very strong backlog on MEMS in Q3. And I would like to say that it's very much across the board. It's across the board with several new products for various regions, of course, with a strong focus in Asia, in China, but also in America. It is ranging from pressure sensors to microphones, but also the more traditional accelerometer and the new family of gyroscopes, a very, very low power consumption products. I think, it's a good generation of new products. And it's, I would say, more fragmented than in the past in terms of customer coverage. As you know, I cannot comment on specific customer, but I would say the three most important things here is bookings were very strong and the backlog is particularly robust. The second is many, many customers which is, of course, is good. And is a very much across the board from a functionality point of view, microcontroller, I mean, microphones, gyroscopes, accelerometers, pressure sensors, et cetera. Achal Sultania - Credit Suisse Securities (Europe) Ltd.: Okay. Thank you. And maybe one for Carlos Ferro. I think, on the set-top-box business, can you – like, obviously, you talked about $100 million cost savings run rate exiting this year. Can you also give us some color? I think, revenues were $209 million last year, loss was $250 million. How should we think about those two revenue and loss numbers for this year and 2017? Can you give some color on those two things please? Carlo Ferro - STMicroelectronics NV: Yeah. We are in line with what we were expecting when announcing the plan for the overall 2016 versus 2015 starting from the about the $210 million revenues of last year. We expect an erosion in the range of $70 million. And overall, the savings is moving based on the expectations and at the end of the second quarter the level of savings is at about 38% of the total target savings of $170 million. Then there's still a significant chunk, 60%, to come into our operating income. Achal Sultania - Credit Suisse Securities (Europe) Ltd.: Okay. Thanks a lot, Carlo. Carlo Ferro - STMicroelectronics NV: You're welcome. Tait Sorensen - STMicroelectronics NV: Thank you, Achal. Next question?

Next question is from Adithya Metuku from Bank of America Merrill Lynch. Adithya Metuku - Bank of America Merril Lynch: Yeah. Good morning, guys. Firstly, a clarification and second, I have a question on the payments market. Firstly, when you – did I hear you correctly when you said, orders actually went down in the quarter, so can you clarify that? And secondly, on the payments market, with EMV demand slowing in the U.S. and China, are you saying your secure microcontroller business decline now and what level of growth do you expect in the next 6 to 12 months in that business? Thank you. Tait Sorensen - STMicroelectronics NV: Adi, just to clarify, this is Tait. No, we did not say that auto was down, in fact, the opposite. Adithya Metuku - Bank of America Merril Lynch: Okay. Carlo Bozotti - STMicroelectronics NV: Second? Tait Sorensen - STMicroelectronics NV: And, so your second question, Adi. Can you just repeat that? Adithya Metuku - Bank of America Merril Lynch: Second question, just on the EMV market, chip card market. Now, we're getting lots of data points on the U.S. and Chinese market declining on a year-over-year basis. And so I was wondering what impact of that is on your secure microcontroller business? And if you could give us some views on how you see demand developing in that business over the next 6 to 12 months? Thank you. Carlo Bozotti - STMicroelectronics NV: Well, I think here, the point that I would like to make is for a number of reasons, this is not a market where we have a very, very strong position. We are participating into this market, of course, both in China and in the United States, is not one of the main driver in our secure microcontrollers business. I can confirm that we see this trend. And I would say the impact on ST is marginal. And of course, this is a consequence of the fact that our present in this business is not at all glamorous. Adithya Metuku - Bank of America Merril Lynch: Okay. Okay. Thank you. Carlo Bozotti - STMicroelectronics NV: Thank you. Tait Sorensen - STMicroelectronics NV: Thank you, Adi. Next question please.

The next question is from Mr. Robert Sanders from Deutsche Bank. Please go ahead. Robert Sanders - Deutsche Bank AG: Yeah. Good morning, guys. Most of my questions have been asked, but maybe just a follow up on the MEMS business, it sound like that business is going to be growing the most sequentially in the third quarter. Can you just give a bit more clarity about whether – for example, in the microphone area, you're taking share or it's that just additional content with customers adding mics or – could you just give a little bit more color about what you're seeing in the MEMS area, particularly in microphones. That would be interesting. Thanks. Carlo Bozotti - STMicroelectronics NV: Yeah. Well, I believe that considering the good situation in terms of backlog and with bookings trend, et cetera, and the target that we have for the third quarter, certainly starting from the level of Q2 that is not the level that we want it to be. And moving from Q2 to Q3, we are going to gain market share, and we are going to gain market share, again, on a broad base of products. Certainly, we are going to gain market share on the microphones, but I believe we are going to gain market share also in the more traditional products like accelerometers and gyroscope. I think, as I said, is – overall, a new family of products, new family of technology is good performance. I think, overall, is technically very, very low power. And I believe moving into this generation, we see a step forward in terms of – in terms of presence and in terms of market share. Robert Sanders - Deutsche Bank AG: That's great. And just one quick follow-up would just be around what you see in the automotive market. Do you see a recovery in infotainment for example in the second half or is it more just driven by power or something else? Thanks. Carlo Bozotti - STMicroelectronics NV: Now, for us, I think what is increasingly important is digital. Of course, power is the part of what we have. Power is growing. And particularly, smart power is still an important opportunity for the next few quarter and next year. On the other hand, we see a wave of new designer wars. A wave of new design wins with our microcontrollers, but also on others. We all know that designed to market for this automotive and sometimes very complex applications is longer. But if I look from a strategic point of view, I see more and more opportunities to grow our automotive business in the digital domain. Car infotainment, the traditional car entertainment is not yet that strong, back to be strong, but there are a lot of new digital applications that are certainly driving our growth. Robert Sanders - Deutsche Bank AG: Thank you very much. Carlo Bozotti - STMicroelectronics NV: Thank you Rob.

The next question is from Gianmarco Bonacina from Equita SIM. Please go ahead. Gianmarco Bonacina - Equita SIM SpA: Good morning. A couple of question. Regarding the savings with set-top- box. Can we say that the run rate in Q4 2017 could be in the region of $35 million from $25 million in Q4 of this year. Considering you said in the past if I'm not mistaken that you want to reach about 80% of your synergies by the end of next year. Second question, about the automotive business, just a curiosity, because we saw yesterday there was this announcement from Mobileye about, say, dropping the relationship with Tesla. If you can give us an idea of your business in others. How much is camera-based versus radar-based given that I think probably radar seems to have a probably, say, more demand versus camera for the future? Thank you. Carlo Bozotti - STMicroelectronics NV: Yeah. The first one, the answer is yes. Carlo Ferro - STMicroelectronics NV: Yes. Of course, with the caveat, we said that since the announcement of the plan that at the end the resources will be modulated based on the time to progressively phase out the business and the need of support the business. And so at this stage, the visibility remains the one we have anticipated with an about 80% savings achieved at the end of Q4. In the course of next year, we will modulate based on the evolution of the set-top box business. Carlo Bozotti - STMicroelectronics NV: Well, of course, I cannot comment on the specific about customers and partners here. What I can certainly say is that broad applications are very important for us. I think the one that is using image sensors, but also the radar applications. And, in fact, I'll note that just during the course of Q3, we have won a very important new project for, say, computing applications in the car, but also we have won – we got an award for a radar processor, another one that is very important. So we are present in the two field. The two areas are very important for us. Now, the split of our business, I have to confess that we need to ask Marco Monti, the responsible for automotive. But I can certainly confirm that from a strategic point of view, we have strong focus on both. I think today, what we see is of course, through the partnership with Mobileye, a strong traction. And I believe that overall, our business in the area of vision-based computing is bigger, but radar is remain an important priority for the company. Gianmarco Bonacina - Equita SIM SpA: Thank you. Carlo Bozotti - STMicroelectronics NV: Thank you. Tait Sorensen - STMicroelectronics NV: Thank you. Next question please?

Next question is from Veysel Taze from ODDO. Veysel Taze - ODDO SEYDLER BANK AG: Yeah. Hi. Good morning. Veysel Taze from ODDO. Basically, not much questions left. But one will be interesting around your image sensor business. There were recently rumors that one of the North American smartphone OEMs is ramping a new R&D in France, a fab for camera modules and image sensors. And I was wondering if that's an option for you? I know you discontinued the camera module business, but is that an opportunity, or yeah? Carlo Bozotti - STMicroelectronics NV: Well, I think it's a good occasion for Jean-Marc to comment on all the nice things that we are doing on these specialty image sensors. Jean-Marc? Jean-Marc Chery - STMicroelectronics NV: Yeah, Carlos. Thank you. So first of all, I confirm that ST decided to discontinue the camera module, the commodity camera module, so we have no intent to come back in this camera module. So we are focusing on specialized imaging sensor and especially our Time-of-Flight technology where we see a very good traction, especially with a nice product called Ewok (51:21) where we have mainly Asia Pac and especially in China smartphone opportunities. And this is where we are focusing and focus a lot on that. Veysel Taze - ODDO SEYDLER BANK AG: Okay. Thanks. One more question. I don't know if I got that correct during the call, but your microphone IP revenues were declining in Q2 or – I'm not sure if I got this correct. Carlo Bozotti - STMicroelectronics NV: We did not talk about the sales on microphones, sorry, maybe there was a confusion from our side, but we did not talk at all about sales on microphones. Certainly, we said that our sales on microcontrollers year-over-year grew materially and with a strong drive from general-purpose microcontrollers. We also said that in the area of MEMS, one of the areas where we have an important opportunity for growth moving from the second quarter to the third quarter is microphones. Veysel Taze - ODDO SEYDLER BANK AG: Okay. Thanks a lot. Carlo Bozotti - STMicroelectronics NV: Okay. Thank you. Tait Sorensen - STMicroelectronics NV: Thank you. Next question, please?

The next question is from Mr. Günther Hollfelder from Baader Bank. Günther Hollfelder - Baader Bank AG (Broker): Thank you. Two questions left. First one on gross margins, you mentioned – yeah, a strong product mix in Q3 which is having an impact here. So, I was just wondering – I assume this is a trend going forward. It's not like a one-off event, this strong product mix in Q3. And the second question would be about the electrification of cars. So I was just wondering with your SiC MOSFET, I assume you have design wins so far regarding onboard battery chargers in electric cars. So I was just wondering whether your current technology, whether you are also targeting the main inverter and what could be the timeline here for design wins? Thanks. Carlo Bozotti - STMicroelectronics NV: Let me respond first on the silicon carbide, and then we have more time for the mix evolution of our products and Carlo will take that. Of course, the inverter is the target. Of course, the inverter is the main target of our silicon carbide products. And this is an important priority for the company. It is a very important area of focus, and we want to be in production at the end of this year. I mean, this is our target with products for the main inverters of the car. Of course, with the silicon carbide, we can cover other automotive applications, and importantly, we can cover also the mass market and a wider base of industrial applications. But the car electrification is certainly top priority. Günther Hollfelder - Baader Bank AG (Broker): Thanks. Carlo Ferro - STMicroelectronics NV: And I take the question on the gross margin. First of all, Günther, I reassure that, again, in the gross margin evolution from Q2 to Q3, there is nothing special, nothing onetime, again, when I look, for instance, that our other revenues, revenues from licensing, again, the contribution we expected this quarter is very similar to the one that the prior quarter has benefit from. So no one time there. It's another quarter in a row where our product mix positively contributed, also it has positively contributed to the harsh point of improvement actually from Q1 to Q2. At the end, certainly the progressive result from set-top- box plays favorably as anticipated and the new product and particularly some of the new products are coming in being accretive to the overall margin. Günther Hollfelder - Baader Bank AG (Broker): Maybe one follow-up on the gross margin. I would expect in the fourth quarter that your idle charges will remain relatively unchanged in preparation of weaker seasonality in the first quarter. Is this pretty much the scenario? Carlo Ferro - STMicroelectronics NV: If it is enabled, I'm sure at this (55:59) stage. Günther Hollfelder - Baader Bank AG (Broker): Okay. Great. Many thanks. Carlo Bozotti - STMicroelectronics NV: Thank you. Carlo Ferro - STMicroelectronics NV: You're welcome. Tait Sorensen - STMicroelectronics NV: Thanks Günther. Next question please.

The next question is a follow-up question from Janardan Menon. Please go ahead. Janardan N. Menon - Liberum Capital Ltd.: Yeah. Hi. Just a couple of quick follow-ups from me. One is on your imaging business, the Time-of-Flight sensors. If I remember right, you've made a loss of about $80 million last year on the imaging side. I was just wondering, given the very strong growth that you've seen so far in the first half of this year and what you expect to see through the second half based on your design wins, would you be able to sort of almost eliminate that loss by the end of this year or is that going to be work in progress into next year as well? And another small one is on IoT. You talked about design wins and drones and things like that. Outside of the ones you've announced in Europe on smart metering, smart lighting, what are the kind of design wins you're seeing in other parts of the world. Is there a lot of design activity going on in IoT devices in a broad sense right now where you're successful? Carlo Bozotti - STMicroelectronics NV: Yeah. To respond to the first question, the answer is yes, and this is certainly an area where we can turnaround because we have the result of the camera modules and the commodity that was also linked to certain needs in terms of fab loading. And this now is done. So, it was a massive R&D effort. It was an important R&D effort with very limited sales. So now sales are coming and, of course, there is a very significant improvement. Then, yeah, on the IoT, we mentioned the drones. I mean, for us, IoT, first of all, is not just wearable and portable products. This is, I believe, is the first comment. Wearable and portable products are (58:05) for us. We are in many, many sockets. And one of the element here that is really driving is very low power microcontroller solutions. Because in these portable equipment we need a very, very low power microcontroller technologies. However, IoT is much broader. Certainly, the evolution in the area of smart home applications. We mentioned in my reading today the fact that we have a new important smart meter applications taking off. This is very material. This is very material and there are a lot of smart products inside of particularly the microcontrollers, there is a power line modem. But there is also the way to connect not only to the line, to the power line, but also the way to connect through radio frequency to the home. So it's opening up at more smart home applications. This is a very integrated solution for smart metering with a lot of technologies. And it is almost – a chipset of ST is almost exclusively ST chipset covering many, many technologies and products. This is a very good example. But of course, we can have more. I mean, another area that is extremely important for us is Industry 4.0. Here, again, we have our microcontrollers. Connectivity is key. And security is key. So we are focusing on also these transversal areas to complete what we have in the area of microcontrollers. Another area that I would like to mention is healthcare. In the area of healthcare, again, we need to focus more and more of connected applications. I think, we are working on some very important new applications where connectivity and microcontrollers together are crucial to achieve what we want to do in these healthcare applications. For us, this is another example of Internet of Things because certainly this is another example of an electronic system that is connected to the web. So there are many, the way that we characterize is smart things, smart industry, smart homes and smart cities. For city, for instance, our agreement with Semtech. We have the opportunity to have this LoRa, long-range connectivity embedded in microcontrollers, is another example. So you see there are many, but it's around these four areas for us; smart things, smart cities, smart homes and smart industry. Janardan N. Menon - Liberum Capital Ltd.: Understood. Thank you very much. Carlo Bozotti - STMicroelectronics NV: Thank you. Tait Sorensen - STMicroelectronics NV: Thank you. Next question, please?

The next question is from Stéphane Houri from Natixis. Stéphane Houri - Natixis SA (Broker): Hello. Good morning. Sorry I joined the call late. So maybe my question has been asked before, but I have two, if I may. The first one is on the visibility that you have for the end of the year with the current backlog that is if I understand well, currently continuing to build as in the last quarter. So normally, Q4 is a bit down sequentially or flat in the base case. Do you see any reason why it could be different this year? And the second question is about the tax rate. It seems like there is a bit of volatility in the tax rate at the moment. Can you guide us toward the end of the year? Thank you. Carlo Bozotti - STMicroelectronics NV: Well, I think as I said, the moving trend remained pretty strong also during the first weeks of – in the third quarter. Of course, this is an encouraging sign looking forward. But I think it's premature for us to comment on Q4. I would not comment on Q4 at this point. We are encouraged by the trend of bookings. Of course, this is the fundamental ingredient to make sure that Q4 is going to be another step of improvement. But I would not comment specifically on Q4 because it's certainly too early at this very moment. Carlo Ferro - STMicroelectronics NV: On the tax line, Stéphane, the volatility at the end depends on the level of earnings, considering that given our presence in certain European countries, where there is an amount of corporate tax which are related to the earnings is almost fixed. There is a portion of fixed taxes. So my recommendation, my suggestion of how to model is to consider about $14 million on an yearly basis as fixed costs. And then to add to that based on your model, assuming ETR in the range of 10% to 13% on your expected profitability before tax. Stéphane Houri - Natixis SA (Broker): Okay. Thank you very much. Carlo Ferro - STMicroelectronics NV: You're welcome. Tait Sorensen - STMicroelectronics NV: Thank you, Stéphane. Next question please.

Next question is another follow-up question from Gareth Jenkins. Gareth Jenkins - UBS Ltd. (Broker): Thanks. Just a couple of follow-ups, if I could. I think in the past, you've talked about needing to reach $1.8 billion to $1.9 billion of revenue quarterly to reach 10% margins. I just wondered whether you still confirm that. And secondly, just on FD-SOI it feels like there's real momentum behind FD-SOI right now. Can you try and quantify that for us in terms of wafers out or what you're seeing in terms of contribution from products on FD-SOI specifically. Thank you. Carlo Ferro - STMicroelectronics NV: Hey, Gareth, maybe I take your first question to reaffirm what we said at the Capital Markets Day in last May. We are confident that with the level of revenues between $8.85 billion, $8.9 billion, we have the potential of an operating margin, in the range of 10%. The way that it's evolving and certainly is positively evolving, not only from Q1 to Q2, but based on expectation from the second quarter to the third quarter is reflecting progress on some of these metrics, but is not or will not be exhaustive of all of this potential. Like in area of the set-top box restructuring still some half a point of unused capacity charges, another step in the revenue leverage to continue to – while continuing to grow revenues. And as we said also from the currency, there is another half a point to come. So we see based on our current plan and the visibility, some opportunity of further progress after the third quarter. Carlo Bozotti - STMicroelectronics NV: And on the FD-SOI very briefly, I do not believe that we can provide on the number of wafer start per week, but certainly, this is important. But particularly, it's important for all our (1:06:46) customers and opportunities for us, and also (1:06:50) and this is pretty broad. We have more and more. And this we can run both internally in our fab growth, but as you know, we also have a second source with silicon foundry companies. So we have two sources of production on the FD-SOI, and this is important to not only – to give flexibility to ST but also in terms of more, as I say, it's safer (1:07:31) for our customer. Gareth Jenkins - UBS Ltd. (Broker): Could I just follow up with Carlo Ferro on the 10%, 1.85% to 1.9%. Given the visibility you've got currently and the strength in the kind of lead times, I just wonder whether you could – whether you can place a timing on that 10% now that you would look after? Do you think it will be achievable in one quarter next year, or for the full year following year? What's the sort of timetable? Thank you. Carlo Ferro - STMicroelectronics NV: Gareth, I guess, this is your fifth, sixth questions in the call, and Tait told me that there is a limit at five questions. Sorry for that. I cannot take it. Carlo Bozotti - STMicroelectronics NV: It is better we talk on improvements quarter-after-quarter. Gareth Jenkins - UBS Ltd. (Broker): That's a good dodge. Thanks, guys. Carlo Bozotti - STMicroelectronics NV: Thank you. Carlo Ferro - STMicroelectronics NV: Thank you. Tait Sorensen - STMicroelectronics NV: Next question please.

We have another follow-up question from Mr. Gianmarco Bonacina. Please go ahead. Gianmarco Bonacina - Equita SIM SpA: Sorry. Just if you can comment on the free cash flow. I forgot if you can – if you said something for the full year? So if you can confirm for the full year? Do you expect the free cash flow to be at least in line with the performance of last year which was in excess of $300 million which was a very good performance? Thank you. Carlo Ferro - STMicroelectronics NV: I would say that Carlo has anticipated in his introduction that we expect strengthening of the cash flow for the second part of the year, and we are confident that the free cash flow in the second part of the year, overall, all-inclusive, will exceed certainly the dividend we'll distribute, and we'll exit the year with a net financial position improved in respect to the one at the end of June. Gianmarco Bonacina - Equita SIM SpA: Thank you. Tait Sorensen - STMicroelectronics NV: Thank you, Gianmarco. We'll go ahead and take our last question just given the time.

The last question is another follow-up question from Günther Hollfelder. Please go ahead. Günther Hollfelder - Baader Bank AG (Broker): Yeah. Thanks. Just one follow-up on silicon carbide. I think you recently said that you build up in-house substrate supply for silicon carbide. So I was just wondering whether today you're still using third parties here for substrate supply, and when you target to have like 100% in-house supply. Carlo Bozotti - STMicroelectronics NV: We, of course, work on for our own program internally but we also have more than one external supplier. This is (01:10:08) and we have, of course, all the flexibility to address these important requirements. And we are, let's say, not unprepared to recent moves. And for us, it's important. So we will focus on three suppliers outside and on our internal activity. Günther Hollfelder - Baader Bank AG (Broker): Okay. Thank. Carlo Ferro - STMicroelectronics NV: If I can add, Carlo, having said that and having our own flexibility, we do expect each supplier to honor commitment, whomever is the owner of this business. Carlo Bozotti - STMicroelectronics NV: Thank you, Carlo. Günther Hollfelder - Baader Bank AG (Broker): Okay. Tait Sorensen - STMicroelectronics NV: Thank you, Günther. At this point, we'll go ahead and close our Q2 financial results conference call. Thank you again for your participation. Carlo Bozotti - STMicroelectronics NV: Thank you.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Good-bye.