STMicro to quit ST-Ericsson mobile chip venture

Mon Dec 10, 2012 9:37am EST
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By Leila Abboud

PARIS (Reuters) - STMicroelectronics plans to quit its loss-making mobile chip joint venture with Ericsson in a drive to cut costs and catch-up with larger, more profitable U.S. rivals.

However, some analysts said on Monday it would not be easy or cheap for the Franco-Italian group to back out of a venture which lost $841 million last year and which its Swedish partner was unlikely to want to take over on its own.

Europe's semiconductor firms are struggling to compete with bigger U.S. and Asian rivals, which have largely outsourced chip manufacturing to cope with volatility in demand and prices.

STMicro still makes its own chips, has been losing market share, and earns lower margins than larger rivals like Texas Instruments and Qualcomm despite leadership in so-called analog motion-sensing chips that go in cars or video game consoles.

Its mobile chip joint venture, ST-Ericsson, has had a particularly tough few years as its once-biggest customer Nokia has been trounced in the lucrative smartphone market by the likes of Apple and Google.

Analysts said ST-Ericsson, which has around 5,000 employees, could be shut down entirely, or parts could be sold to competitors such as Intel, Broadcom or Samsung, with Ericsson taking some others and the rest closed.

"I think it is going to be a complex deal including some reallocation of employees to Ericsson, and the sale of the wireless modem business to a competitor, and some layoffs," said Jerome Ramel, semiconductor industry analyst at Exane BNP Paribas in London.

However, he added that leaving the business would be good news for STMicro, even if it can't get any cash.   Continued...