After what looked like a joint venture which would have been a formidable competitor in the space when fist announced in 2009, STMicroelectronics and Ericsson have formally decided to end the ST-Ericsson mobile chip joint venture this morning after years of losses and no signs that the venture would be profitable in either the short or long-term and no buyers presented themselves after putting the venture up for sale in the past few weeks before the announcement.
The ST-Ericsson mobile chip joint venture was meant as the first step in a long-term plan which would have seen both companies benefit from the growing demand for smartphones in the wake of the popularity of such devices as the iPhone and then still popular Symbian platform, of which Nokia was then the biggest customer for ST-Ericsson.
However, shortly after the first year, ST-Ericsson began losing money as the largest mobile chip vendor in Qualcomm began to dominate the smartphone sector with the rollout of its Scorpion and Snapdragon series of mobile chips, landing agreements with new manufacturers just as Android began to take hold in the mainstream and Windows Mobile was showcasing what the Snapdragon chipsets were capable of in terms of performance before the transition to Windows Phone 7.
To compound the losses, additional mobile chip competition also surfaced with Texas Instruments and its OMAP chipsets as well as additional competition from first time entrants Nvidia with its Tegra line, all the while ST-Ericsson’s largest customer in Nokia was struggling against the growing threat of Android and the iPhone with its quickly aging Symbian platform, which was finally abandoned in 2011, only to adopt Windows Phone 7.
With Nokia adopting Windows Phone 7, ST-Ericsson was initially inline to support Nokia’s attempt to recover against the Android and iOS juggernaut by announcing an agreement where ST-Ericsson would supply Nokia with chips for Windows Phone 7 devices in 2011, only to have the deal nixed due to Nokia’s new agreement with Qualcomm after years of acrimonious legal battles concerning licensing and patents. The deal was to have helped ST-Ericsson more than Nokia, as the chipmaker’s volume fell drastically following Nokia’s nixing of Symbian devices, adding to its losses which now total $2.7 billion since 2009.
The joint venture will end during the third quarter, and under the new arrangement both companies will split assets with Ericsson taking on the design, development and sales of the former joint venture’s current LTE modem products, including 2G, 3G and 4G multimode modems, and will hire around 1,800 workers. STMicroelectronics will take on existing ST-Ericsson products other than LTE modems, along with related businesses and certain assembly and test facilities, and will separately hire 950 workers.
However, the end of the joint venture still means that job losses will result despite the split, as 1,600 jobs related directly to the joint venture will be cut. Current ST-Ericsson CEO Didier Lamouche will step down at the end of the month with the joint venture’s COO Carlo Ferro moving into the CEO position to oversee the end of the joint venture and subsequent split.
