Wireless chip consolidation continues

STMicroelectronics and Ericsson are merging their wireless chip and software businesses to create a 50:50 joint venture that will supply four of the world's top five cellphone makers.

The new company will combine the Mobile Platforms unit of Ericsson, the world's biggest mobile telecoms equipment maker, and ST-NXP wireless, the world's third-largest maker of wireless chips.

The move follows ST's recent acquisition of Dutch chipmaker NXP's wireless unit.

The new company will have combined 2007 revenues of $3.6bn, making it a stronger competitor to wireless chip market leader Qualcomm and number two Texas Instruments.

As part of the deal, Sweden's Ericsson will pay STMicro $700m, and will inject a further $400m into the joint company. STMicro will buy out NXP's remaining 20 per cent stake in the ST-NXP venture.

The new unit will be based in Geneva, where STMicro is headquartered.

Carl-Henric Svanberg (pictured), chief executive of Ericsson, will be chairman of the board. Carlo Bozotti, ST's chief executive officer, will be vice-chairman.

The new company will work on technologies for second-, third- and future fourth-generation LTE mobile telecoms standards.

"This is an interesting merger in that the new company will be a supplier to all the big mobile companies except Motorola," Redeye analyst Greger Johansson said.

ST currently has Nokia, Samsung and Sony Ericsson as customers. Ericsson serves LG Electronics, Sharp and Sony Ericsson.

The new company will employ almost 8,000 people; about 5,000 from ST-NXP Wireless and roughly 3,000 from Ericsson.

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