* STMicro, Ericsson couldn't find a buyer for the JV
* Partners will split up products and some staff
* STMicro says its cost for plan slightly less than expected
* Ericsson to take on loss-making 4G chip product line
* STMicro shares up 5.2 pct, Ericsson slips 1.4 pct
By Leila Abboud and Niklas Pollard
PARIS/STOCKHOLM, March 18 STMicroelectronics
and Ericsson will end their loss-making
mobile chip joint venture ST-Ericsson by splitting parts of the
business between them and closing the rest with the loss of
about 1,600 jobs.
The announcement follows months of speculation about the
future of ST-Ericsson, which has been hit by a big drop in
orders from top customer Nokia as the phone maker
lost market share to Apple and Samsung.
ST-Ericsson has also struggled to compete with more nimble
chip makers in Asia, which outsource most of their production
and so can react quickly to demand changes, and with the trend
among some phone makers like Samsung to make their own chips.
Sweden's Ericsson, which makes telecom network gear, and
Franco-Italian chip maker STMicro, had sought a buyer for
ST-Ericsson but found no takers. JP Morgan advised the companies
on options for the venture, which had not made a profit since it
was formed in 2008.
"All possible scenarios were considered but the option
announced today was always a real possibility," STMicro chief
executive Carlo Bozotti told a conference call on Monday.
He added that STMicro had committed to keep making products
for ST-Ericsson customers as long as they needed them.
Some European chip specialists, like ARM which is a
major supplier for Apple, have prospered by focusing on research
and development rather than manufacturing, while Germany's
Infineon exited the competitive mobile chip space by
selling to Intel in 2010.
But ST-Ericsson lacked either top technology or a low enough
cost base to compete with U.S. and Asian rivals.
SPLITTING UP, CLOSING DOWN
Under the plan, Ericsson will keep around 1,800 employees of
ST-Ericsson's total workforce of 4,450 total. Those jobs will
mostly be in Sweden, Germany, India and China.
It will also keep a product line of so-called thin 4G
"multimode" modem chips which are used in smartphones, but said
it was too early to say when that would break even.
STMicro will keep other existing ST-Ericsson products, as
well as certain assembly and test facilities. It will take some
950 employees, mostly in France and Italy.
The rest of ST-Ericsson will be shut down, hitting some
1,600 employees globally. Around 500-700 of those jobs will go
in Europe, including 400-600 positions in Sweden and 50-80 in
Germany. No factories will be closed, STMicro said.
STMicro said it expected $350 million-$450 million in cash
costs from the shutdowns and restructuring, which is lower than
the $500 million it predicted at the end of January.
Ericsson said it had made a provision of 3.3 billion Swedish
crowns ($516 million) in 2012 to pay for the moves.
At 1124 GMT, STMicro shares were up 5.2 percent at 6.12
Max Kamir, broker at Louis Capital Markets, said investors
welcomed the fact that STMicro's restructuring costs were lower
than previously predicted and pointed out that the chip maker
would get a revenue boost from bringing back products in-house.
"The return of the ST-Ericsson businesses to STMicro may
also revive the idea of splitting the group up - into digital
and analogue units - that the board decided against late in
2012," he added.
Ericsson's shares, however, slipped 1.4 percent to 84.25
The company estimated the 4G chip product line would
generate operating losses of approximately 500 million crowns in
the fourth quarter of its financial year, largely due to
research and development costs.
Ericsson Chief Executive Hans Vestberg said it aimed to make
the product line a top three global player.
"We obviously have the ambition of making this profitable
... and with a slimmer organisation I believe we have a much
greater chance of getting there," he said.
But some analysts were sceptical.
"I doubt that unit will profitable," said a Stockholm-based
analyst who declined to be named. "My understanding is that it
has no sales today and just one design win. Either it is a
success or it is not, and then you are stuck with all the