STMicroelectronics should persuade Ericsson that they sell off their mobile chip joint venture ST-Ericsson, but probably to some aspiring Chinese company. That is likely to produce the quickest and most profitable - or least loss-making - exit for the two parent companies from what has become a failed project.
Compare ST's plight with that of Infineon, which got out of communications through the spin-off of its wired chips into Lantiq Deutschland GmbH and the sale of its wireless business unit to Intel. In the later part of the last decade Infineon's CEO Peter Bauer decided to focus on some of the less glamorous but higher margin parts of the chip industry: power, automotive, industrial and security. How smart does that look now?
NXP has a similarly focused strategy with CEO Rick Clemmer taking the company out of a number of consumer markets and now pursuing similar markets to Infineon with high-performance mixed-signal ICs. NXP of course got out of mobile wireless by selling its business to create the joint venture.
Meanwhile ST's CEO Carlo Bozotti, wanted to compete in digital mobile multimedia and tried win through creating a repository of European critical mass. It is perhaps bad luck for Bozotti that the ST-Ericsson's existence has coincided with major upheavals in the global economy and in major changes in the mobile device market.
But it is time for ST to accept that the plan has not worked and to focus on the things that it continues to be good at and that earn good margins, which include such things as MEMS, where it is a world leader, automotive electronics, microcontrollers and embedded applications.
While it is possible that a western company might want to acquire ST-Ericsson and access to patents I think greater interest might come from further east. I don't think Texas Instruments wants to get back into the world of razor-thin margins in smartphones and the while the likes of AMD or Intel may have the appetite but are they going to sit on the sidelines too long waiting for the cuts have their effect.
Nvidia Corp. defnitely want to compete in this area but it has its own line of ARM-based Tegra application processors and is pursuing a modem strategy based on its purchase of Icera Inc. (Bristol England) for nearly $400 million in May 2011. Surely any deal for ST-Ericsson would undermine the value of what Nvidia has already paid.