STMicroelectronics is to withdraw from its unprofitable mobile chip-making joint venture with Ericsson, ST-Ericsson.
According to an STMicro statement on Monday, the exit will be part of a "new strategic plan" that would see the company focus on the areas of smart power, application processors, microcontrollers, automotive products and microelectromechanical systems (MEMS) and sensors.
"Today we are announcing the new ST, aligned with the new market environment," STMicro chief Carlo Bozotti said in a statement. "Based on that, we have made the decision to exit ST-Ericsson after a transition period. We will continue to support ST-Ericsson as their supply-chain partner, advanced process-technology partner and application-processor IP provider."
Ericsson issued its own statement on the matter, saying it would not "speculate" on what might happen to the joint venture as a result of STMicro's withdrawal.
"Ericsson continues to believe that the modem technology, which it originally contributed to the joint venture, has a strategic value for the wireless industry," the Swedish company said. "For Ericsson, a key priority in this process is a successful market introduction of the new LTE modems that it is certain will be very competitive and needed in the market."
According to STMicro's statement, the 'disengagement' with Ericsson should end sometime in the third quarter of 2013. The company said it had taken its decision "as a consequence of the major changes that occurred in the dynamics of the wireless market".
This may be a reference to the relative success of other chip firms that outsource their manufacturing and consequently enjoy higher margins than ST-Ericsson, which makes its own products.
ST-Ericsson came into being in 2009. It never once turned a quarterly profit, and its mounting losses — which were partly down to poor sales at key customers such as Nokia — led it to cut 1,700 jobs earlier this year. It has around 5,000 left, for now.
The current ST-Ericsson flagship is its NovaThor line, which includes integrated system-on-chips (SoCs) and modems that are used in devices such as the Galaxy S III Mini and mid-range Sony Android phones.