LONDON — ST-Ericsson NV, the loss-making mobile chip joint venture between STMicroelectronics and Ericsson, has announced guidelines for a new strategic direction and plans to cut up to 1,700 staffers to lower its breakeven point.
The company said it would transfer its standalone application processor activities to STMicroelectronics but reaffirmed its intention to be a leader in smartphone and tablet computer platforms. The latter plans will hinge on ST-Ericsson's ability to deliver complete system solutions for smartphones and tablet computers—specifically, competitive integrated modems plus application processors.
The list of electronics building blocks for mobile devices includes application processors, modems and wireless connectivity as well as power management, RF, analog and mixed-signal functionality. Those blocks will be developed either by ST-Ericsson or by partners and then assembled by ST-Ericsson to improve time-to-market. Meanwhile, ST-Ericsson said it would continue to develop modem intellectual property, sell thin modems and possibly license modem IP to third parties.
ST-Ericsson has already agreed to transfer its application processor business and employees to ST. It will then create app processor-plus-modem platforms under a licensing agreement with ST. The company said the ST-Ericsson application processor R&D team would continue development of the current product generation under a transitional cost sharing model.
Remaining ST-Ericsson activities will be consolidated into a "significantly smaller number" of sites, with an eye toward reducing 2012 general sales and administrative costs by 25 percent compared with 2011, the company said.
ST-Ericsson said it foresees a global workforce reduction of 1,700 employees worldwide, including the employees who would be transferred to ST. Those cuts plus existing restructuring plans would result in annual cost savings of $320 million. Total restructuring costs are estimated to be approximately $130 million to $150 million through completion.
“ST-Ericsson has a unique ability to develop and integrate complete mobile platforms for mainstream smartphones and tablets. This will be our strategic focus moving forward, while continuing to master leading-edge modem IP. We believe this is the best way to deliver those world-class technologies and services that our customers are expecting in order to shape tomorrow’s mobility and connected world," Didier Lamouche, president and CEO of ST-Ericsson, said in a statement.
Carlo Bozotti, CEO of STMicroelectronics, said in the same statement, "Through this partnership, we can expand our offerings beyond our traditional product families and reach a wider customer base in multiple digital segments, further boosting ST’s multimedia convergence business toward leadership and improved financial return. We welcome ST-Ericsson’s new strategy."
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