FORM 20-F THOMSON multimedia - Technicolor

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and deflection yokes. Glass can account for up to half of the cost of a tube and is an important quality factor, particularly for larger displays. This vertical integration in glass allows us to control the production of the higher value-added parts of the tubes and the overall quality of our finished products. Since 1999, we have focused on producing higher-end large and very large tube sizes (greater than approximately 22 inches) and expect to benefit from the expanding market for digital and large format television sets. Internal estimates show that large and very large tubes, which are the highest margin and fastest growing part of the tube market, accounted for approximately two-thirds in value of the total tube market and 70% of our overall tube unit production in 2001. We estimate that at the end of 2001 we held approximately 19% of the large and very large size tube market, with LG/Philips holding approximately 26%, Sony approximately 14% and Matsushita approximately 11%. In 2001, the global market for television tubes experienced a marked slowdown in demand, particularly for smaller tube sizes, which led to overcapacity. This resulted in industry consolidation, which reduced the number of major producers to four: LG/Philips, Samsung, Thomson and Matsushita. In order to improve our asset base and to reorganize our production facilities towards very-large size tubes, we undertook a number of initiatives in 2001. These initiatives are part of our TIGER program (Tubes Initiative for Growth, Efficiency and Repositioning), which aims to improve the profitability of our tubes business. In July, we closed our large tube manufacturing facility in Scranton, Pennsylvania and in October 2001, we discontinued mid-size tube production at our Marion, Indiana facility. Also, in December 2001, we closed our Mexico City production facility in order to discontinue our remaining mid-size tube production as well as optimize electron gun production at our other sites. At the same time, we completed the construction of our very large size tube production plant in Mexicali, Mexico, which started production in January 2002. In September 2001, we announced a three-year partnership with Matsushita to supply it with glass, large and very large tubes and components. This Memorandum of Understanding (‘‘MOU’’) will allow us to optimize our capacity while providing Matsushita with a competitive source of tubes for their TV operations. We expect to participate in further such arrangements with others in the future as opportunities arise. In 2001 we introduced six new ‘‘True Flat’’ tubes in order to participate in the rapidly growing demand for flat panel televisions. We intend to introduce a second-generation product line in 2002 and expand our current focus on European markets to North America and China. ) Other Displays The market for television sets, particularly very large color sets, presents opportunities for new screen technologies such as the plasma display panel. Plasma is a screen technology based on a mixture of rare gases which can be transformed into bright color images. We estimate that the worldwide market for plasma display panels in 2001 was approximately 360,000 units, most of which were used in applications other than television. We believe that plasma display technology will become important in the high-end television market in the mid-term due to continued improved design combined with incremental capacity, which has begun to drive down prices and increase consumer demand. In March 2001, we announced with NEC our intention to expand our strategic relationship in plasma technology, which began in 1998, and established a program for joint research, development and co-ownership of existing plasma display related patents and know-how. We had also agreed with NEC to form a 50/50 joint venture for manufacturing, research and development and sales of plasma display panels, modules and monitors; however, in January 2002, NEC informed us that it was not in a position to proceed with that joint venture, and we are in the process of discussing with NEC our relationship in the plasma display field, including the related patents and know-how. We continue to carry out research into alternative display technologies. 22
) Digital Optical Components We produce optical modules that interpret and transmit data encoded in DVDs, DVD-ROM and CDs. In 2001, we held a significant market share in such optical modules. We also expanded our optical components offering by successfully commencing our preferred supplier agreement with Microsoft to provide DVD-ROM drives and DVD and video compression technology for Microsoft’s Xbox game console, which was launched in November 2001. The market for optical components is highly competitive, with annual price reductions averaging more than 15% in recent years, and some segments of this market were impacted by excess capacity in 2001. Nevertheless, we believe that because of our cost-effective production capabilities (with production located in China), our extensive portfolio of optical module patents and our strategic partnerships (particularly with Microsoft), we are well positioned to compete effectively in this market, which we believe holds significant growth opportunities. ) Other Components We also produce television and VCR components both for our Consumer Products needs and for sale to OEMs. These components include tuners and remote control systems. In 2001, we elected to discontinue our printed circuits business located in Villingen (Germany), and we expect production to wind down in the first quarter of 2002. We continue to pursue the development of digital storage components which enable advanced features such as recording, search and interactivity within consumer video electronics products, including set-top boxes, personal video recorders, DVD players and television sets. In December 2001, we agreed with Seagate to discontinue our digital storage joint venture, CacheVision, and continue cooperation with Seagate directly. ) Integrated Circuits We have an in-house integrated circuit design team, which designs many of the essential integrated circuit components used in our products, from professional to consumer equipment, generally in partnership with selected semi-conductor vendors and foundries. Integrated circuits are a key component of digital products. Our integrated circuit design team employs approximately 100 engineers with specialized skills in digital, analog, mixed digital-analog, and radio frequency signal processing. We operate out of three facilities located in Indianapolis (U.S.), Rennes (France) and Villingen (Germany). This team co-develops, with companies like STMicroelectronics and NEC, the new specific integrated circuits required in many of our products. In January 2001 we extended our co-development agreement with STMicroelectronics for an additional five years, with an emphasis on chip designs for digital consumer electronics, including digital televisions, digital set-top boxes and DVD players. We derive value from this agreement by sharing in the revenues resulting from the sale of integrated circuits containing patented technologies jointly developed by us and STMicroelectronics. In addition, we continue to develop our in-house competencies in virtual components areas and have reinforced our support for the integrated circuit components production through a fabless business model which will combine our offering to network operators. Consumer Products In 2001, the Consumer Products division generated 0 6,582 million in consolidated net sales, or 62.7% of our net sales, and 0 134 million in operating income. At December 31, 2001, this division employed approximately 24,660 employees. Through our Consumer Products division, we market two categories of products: retail consumer electronics (including television sets, DVD players, VCRs, camcorders, accessories, audio and 23
Page 1 and 2: As filed with the Securities and Ex
Page 3 and 4: INTRODUCTION In this Annual Report
Page 5 and 6: PART I ITEM 1 — IDENTITY OF DIREC
Page 7 and 8: 1997 1998 1999 2000 2001 (1) 2001 1
Page 9 and 10: B — Exchange Rate Information Our
Page 11 and 12: we have limited operating history,
Page 13 and 14: projects that such shareholder may
Page 15 and 16: publishers, network operators and e
Page 17 and 18: division. Our relative decrease in
Page 19 and 20: we initiated at the end of 2001 our
Page 21: approval. Nextream combines busines
Page 25 and 26: our presence with global retailers
Page 27 and 28: product. Through Nextream, we will
Page 29 and 30: ) Within personal media services, w
Page 31 and 32: We have obtained significant price
Page 33 and 34: Location Division Products Asia: Ba
Page 35 and 36: ITEM 5 — OPERATING AND FINANCIAL
Page 37 and 38: and 10% in 1999. The acquisition of
Page 39 and 40: Accordingly, under U.S. GAAP, the g
Page 41 and 42: effect of the events of September 1
Page 43 and 44: labor costs resulting from the impl
Page 45 and 46: Our operating income under U.S. GAA
Page 47 and 48: offerings, the accounting treatment
Page 49 and 50: GROWL in the United States. These p
Page 51 and 52: Other income and expense Other inco
Page 53 and 54: In evaluating our cash flow perform
Page 55 and 56: Guarantees given by subsidiaries of
Page 57 and 58: ITEM 6 — DIRECTORS, SENIOR MANAGE
Page 59 and 60: Initially Other business Principal
Page 61 and 62: Charles Dehelly was appointed Chief
Page 63 and 64: The following table, sets forth the
Page 65 and 66: French subsidiaries will pay bonuse
Page 67 and 68: our shares and have a nominal value
Page 69 and 70: exclusive right to grant licenses t
Page 71 and 72: In connection with the investigatio
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consumers who acquired certain tele
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are also permitted to offer investo
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The tables below set forth, for the
Page 79 and 80:
ITEM 10 — ADDITIONAL INFORMATION
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general meeting affecting these rig
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oth for a period of up to five year
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an ordinary general meeting, or by
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that Euroclear France provide us at
Page 89 and 90:
The shareholders, at an extraordina
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This discussion is intended only as
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) a tax-exempt organization, ) a li
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A simplified certificate must state
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ITEM 11 — QUANTITATIVE AND QUALIT
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Sensitivity To Exchange Rate Fluctu
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December 31, 2000 December 31, 2001
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ITEM 17 — FINANCIAL STATEMENTS No
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FORM 20-F THOMSON multimedia - Technicolor

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