STMicro, Ericsson in tie-up for semi-conductors, mobile platforms

STOCKHOLM: French-Italian group STMicroelectronics and Sweden's Ericsson announced Wednesday a 50-50 joint venture merging their semi-conductor and mobile telephone platform activities.

The operations generated, as separate entities, sales of 3.6 billion dollars in 2007. The new group, which will be based in Geneva, will employ 8,000 people.

The tie-up of Ericsson Mobile Platforms and ST-NXP Wireless "will have the strongest product offering in semiconductors and platforms for mobile applications," the companies said in a joint statement.

It will be "an important supplier to Nokia, Samsung, Sony Ericsson, LG and Sharp," they added.

They said the new merged group will not make its own silicon wafer electronic components.

ST-NXP, the world's third-biggest wireless technology group, was created in April by the Dutch group NXP and STMicroelectronics.

The French-Italian group held 80 percent of the capital and NXP 20 percent. ST also had the option to acquire NXP's stake.

"ST is expected to exercise its option to buy NXP's 20 percent of ST-NXP Wireless before the closing of this transaction," the statement said.

ST is expected to contribute its know-how in the field of multimedia and connectivity solutions, a 2G/EDGE platform and 3G technology, plus customer relationships with Nokia, Samsung and Sony Ericsson, it said.

Ericsson will meanwhile bring to the merged group its 3G and LTE platform technology as well as customer relations with Sony Ericsson, LG and Sharp.

The Swedish group is a world leader in networks, and spun off its mobile phone making division in 2001 into a joint venture with Sony, creating Sony Ericsson.

But Ericsson has continued to manufacture mobile phone platforms, made up of hardware such as circuit cards and electronic components, and software such as operating systems.

The platforms are sold to handset manufacturers around the world, who are thus freed up to focus on design, graphics, and services.

Analysts said the new joint venture was a logical next step for Ericsson, which needs to grow its core network business as Sony Ericsson faced tough competition from mobile phone goliath Nokia.

"The mobile phone industry is very much controlled by Nokia (Ericsson) has to do something to compete," Evli Bank analyst Michael Andersson told AFP.

"Ericsson is becoming more and more a pure network company. The first step was the (spinning off of the) Sony Ericsson mobile phone part, and now they are doing the same thing with the mobile phone platform part," he added.

Ericsson and STMicroelectronics said: "In a business where scale matters, the complementary product portfolios contributed by the parent companies will deliver significant scale and synergies by leveraging and expanding the existing strategic cooperation."

Of the 8,000 employees, some 5,000 will come from ST-NXP Wireless and some 3,000 from Ericsson Mobile Platforms. About 7,000 will work in the marketing and development company and some 1,000 in a separate platform design company.