The French Government’s plans to merge troubled companies Thomson Consumer Electronics SA and SGS-Thomson Microelectronics NV with the profitable nuclear energy group CEA-Industrie are under review following the acrimonious departure of Prime Minister Edith Cresson, whose influence is seen to linger on with the ousting of Groupe Bull SA chief Francis Lorentz, who bested her and her acolytes by succeeding in winning IBM Corp as a partner where the establishment wanted Hewlett-Packard Co. The proposed conglomeration of nuclear power with consumer goods was inspired by the profiles of the Japanese Toshiba Corp and the German Siemens AG – although the latter is not exactly renowned for its fun-and-games products. Restructuring was originally time-tabled for completion by the end of the first quarter, and the merger itself for the first half of the year. The schedule was stalled by politics and by objections from CEA-Industrie and the scheme itself criticised for intending to dodge European Community rules against countries subsidising their faltering industries and for going against the current trend for more focussed electronics manufacturing. A revised plan suggesting that CEA-Industrie should take minority stakes in Thomson Consumer Electronics and SGS Thomson was tabled in April. An outline will be published when negotiations with the new administration of Prime Minister Pierre Beregovoy are complete. The reduced plan could still provide important capital for investment in high-definition television and semiconductor production capacity. Like the original version, it will also seek to separate Thomson-CSF SA, the profitable French defence unit, from the burdensome SGS Thomson which it has been supporting. It has been estimated that SGS Thomson needs an extra $500m in order to gain critical mass in the world market by doubling its market share. Last month, the company entered into a technology alliance in 0.5 micron CMOS logic with Philips Semiconductors International. The two have also discussed establishing high volume 8 wafer fabrication research at Crolles. SGS-Thomson is likely to seek European Community funding for Crolles, as well as European partners to encourage production of 5,000 wafers per week. Changes in the French government’s plans for the structure of its industry could have implications for final negotiations though, especially given speculation about possible changes in SGS-Thomson’s ownership it is currently 50%-owned by the Italian state, where the political climate is even more turbulent than in France.
