STMicroelectronics N.V.

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

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

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

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

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

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

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

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

.

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

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

,

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

.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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-

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%

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

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

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

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%

Women in senior manage

ment (%)

14%

13%

12%

Women in executive manage

ment (%)

10%

9%

Total women in m

anagement position (%)

18%

17%

16%

Women in the Supervis

ory Board

44%

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

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

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

,

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

Yann Delabri

è

re

(3)

$

111,566

107,963

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

Lucia Morselli

$

117,796

130,660

113,484

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

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

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

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

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

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%

o

Execute strategy

implementation

0%

5%

10%

o

Sustainab

ility/CSR Index

0%

10%

20%

Sub-total for no

n-financial perfor

mance conditions

0%

3

0%

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%

33,33%

Sustainability/CSR index

0%

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

Evolution of Oper

ating Income

33.33%

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

$29.97

32,000

36,000

68,000

2019 USAs

Grant

July 24,

2019

May 23,

2022

100,000

66,672

$19.45

21,335

24,002

2018 USAs

Grant

July 24,

2018

31

-May-

21

100,000

$23.64

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

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

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

a

relevant

year is pa

id in the

subsequent ye

ar, i.e. the bonus

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

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

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

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

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

61

Orio Bellezza

President, Technology, Man

ufacturing a

nd Quality

38

62

Marco Cassis

President,

Sales,

Marketing,

C

ommunications &

Strategy Development

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

60

Marco Monti

President, Automotive &

Discrete Group

35

60

Steven Rose

President, Legal Couns

el

30

59

Rajita D'Souza

President, Human Res

ources, Corporate Social

Responsibility

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

67

Stefano Cant

ù

Executive Vice President

Automotive Discrete Group

Smart Power Solutions

Macro-Divis

ion General

Manager

Automotive Business

Deputy

27

53

Alberto Della Chiesa

Executive Vice President,

Supply Chain

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

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

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

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

,

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

,

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

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.

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.”

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

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

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

.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

,

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

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

Technologies and

licenses

108

Technologies in p

rogress

10

Other intangible ass

ets

2

Deferred tax assets

5

Deferred tax liabilities

(18)

Net working capital

(4)

(1)

(5)

Goodwill

(1)

135

1

136

Total net assets at fair va

lue

239

Purchase cons

ideration

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

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

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

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

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

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

Quoted equity s

ecurities at FVPL

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

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

:

$

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

, 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

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)

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

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

,

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

,

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

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

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

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

—

Other trading finan

cial assets at FVPL

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

—

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

—

Other trading finan

cial assets at FVPL

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

—

Unquoted equ

ity securities measured

at FVOCI

10

—

10

Short-term

deposits

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

,

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

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

.

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

fun

ding

and

receivables

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

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

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

: $

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

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

.

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

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

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

.

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

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

.

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

,

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

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

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

.

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

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

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

Employee contribution

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

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

—

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

—

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

Plan amendment

–

past serv

ice cost

–

non vested benefits

—

Actuarial (gain) loss

–

Exp

erience

(1

)

(2

)

Actuarial (gain) loss

–

Demograp

hic assumptio

ns

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

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

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

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

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

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

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

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

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

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

,

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

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

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

—

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

,

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

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

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

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

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

Austria, Vienna

STMicroelectronics Aus

tria GmbH

100

Belgium, Diegem

Proton World In

ternational N.V.

100

Brazil, Sao Paulo

South America Com

é

rcio

de Cart

õ

es

Inteligentes Ltda

100

Brazil, Sao Paulo

STMicroelectronics Ltd

a

100

Canada, Ottawa

STMicroelectronics (Canad

a), Inc.

100

China, Beijing

STMicroelectronics (Beijin

g) R&D Co. Ltd

100

China, Shangh

ai

STMicroelectronics (China)

Investment

Co. Ltd

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

China, Shenzhen

STMicroelectronics (Shenzh

en) R&D Co.

Ltd

100

Czech Republic, Prague

STMicroelectronics Design

and

Application s.r.o

.

100

Denmark, Aarhus

STMicroelectronics A/S

100

Egypt, Cairo

STMicroelectronics E

gypt SSC

100

Finland, Nummela

STMicroelectronics Finlan

d OY

100

France, Crolles

STMicroelectronics (Croll

es 2) SAS

100

France, Grenoble

STMicroelectronics (Alps

) SAS

100

France, Grenoble

Exagan SAS

80

France, Grenoble

STMicroelectronics (Gr

enoble 2) SAS

100

France, Le Mans

STMicroelectronics (Grand

Ouest) SAS

100

France, Montrouge

STMicroelectronics S.A.

100

France, Le Bourget-

du

-

Lac

BeSpoon SAS

100

France, Rousset

STMicroelectronics (Rous

set) SAS

100

France, Tours

STMicroelectronics (Tours

) SAS

100

Germany, Aschh

eim-

Dornach

STMicroelectronics GmbH

100

Germany, Aschh

eim-

Dornach

STMicroelectronics App

lication GmbH

100

Hong Kong, Kowloon

STMicroelectronics Ltd

100

India, New Delhi

ST

-Ericsson I

ndia Pvt Ltd

100

India, Noida

STMicroelectronics Pv

t Ltd

100

Israel, Netanya

STMicroelectronics Limit

ed

100

Italy, Agrate Brianza

STMicroelectronics S.r.l.

100

Italy, Naples

STMicroelectronics Servic

es S.r.l.

100

Japan, Toky

o

STMicroelectronics KK

100

Malaysia, Kuala

Lumpur

STMicroelectronics Marketin

g SDN BHD

100

Malaysia, Muar

STMicroelectronics SDN BH

D

100

Malta, Kirkop

STMicroelectronics (Malta) Lt

d

100

Mexico, Guadalajara

STMicroelectronics Marketin

g, S. de R.L.

de C.V.

100

Morocco, Casablan

ca

Electronic Holding S.A.

100

Morocco, Casablan

ca

STMicroelectronics S.A.S. (

Maroc)

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, In

c.

100

Philippines, Calamba

Mountain Drive Pro

perty, Inc.

40

Singapore, Ang Mo Kio

STMicroelectronics As

ia Pacific Pte Ltd

100

Singapore, Ang Mo Kio

STMicroelectronics Pte Lt

d

100

Slovenia, Ljublja

na

STMicroelectronics d

.o.o.

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

Sweden, J

ö

nk

ö

ping

STMicroelectronics Soft

ware AB

100

Sweden, Kista

STMicroelectronics A.B.

100

Sweden, Norrko

ping

STMicroelectronics Silicon Car

bide A.B.

100

Switzerland, Geneva

STMicroelectronics S.A.

100

Taiwan, Tapei City

Exagan Taiwan Ltd

.

80

Thailand, Bangkok

STMicroelectronics (Thailan

d) Ltd

100

United Kingdom, Bristol

STMicroelectronics (Resear

ch &

Development) Limited

100

United Kingdom, Marlo

w

STMicroelectronics Limit

ed

100

United Kingdom, Marlo

w

Synad Technologies Limit

ed

100

United States, Coppell

STMicroelectronics Soft

ware Inc.

100

United States, Coppell

STMicroelectronics In

c.

100

United States, Coppell

STMicroelectronics (No

rth America)

Holding, Inc.

100

Goodwill

In millions of USD

Automotive

and

Discrete

Group

(ADG)

Total

As at January 1, 2021

64

Foreign currency trans

lation

—

As at December 31, 2021

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

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

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

,

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

, 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

Other non-current liab

ilities

2

Total

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

STMicroelectro

nics

Finan

ce

B.V.’s

ob

ligation

un

der

the

€500

million

EIB

credit

facilities

sig

ned

in

2017

and

€

138

million

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

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

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

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

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

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