Ericsson, STMicro form semiconductor joint venture

The two manufacturers have merged their mobile semiconductor and platforms businesses

Ericsson and STMicroelectronics have formed a joint venture to sell semiconductors and platforms to mobile manufacturers.

The deal, announced on Wednesday, will see Ericsson Mobile Platforms and ST-NXP Wireless combine into a 50/50 joint venture, which will employ around 8,000 people — 7,000 or so in development and marketing, and around 1,000 in a separate platform design company. According to a statement, ST will also buy out NXP's 20 percent stake in ST-NXP Wireless — itself a joint venture that only began operations at the start of this month.

ST and Ericsson have already had a relationship for some time, and they claim the tie-in is a response to customer demand. The new joint venture's creation is subject to regulatory approval.

The purported purpose of the tie-in is scale: the joint venture aims to offer hardware, software and support across a comprehensive range of technologies. ST's big contribution will come in the form of its multimedia and connectivity products, as well as its 2G and 3G technology and its established supply deals with Nokia, Samsung and Sony Ericsson. Ericsson will provide its 3G, HSPA (super-3G) and LTE (the next generation in mobile broadband connectivity) platform technology, plus deals with Sony Ericsson, LG and Sharp.

Ericsson president and chief executive Carl-Henric Svanberg will be chairman of the joint venture's board, and ST's president and chief executive Carlo Bozotti will be vice president. Ericsson is putting $1.1bn (£593m) into the joint venture, of which $700m will go straight to ST, leaving the joint venture itself with a cash position of around $400m. Ericsson's intellectual property rights (IPR), however, are not part of the deal, Svanberg said in a conference call on Wednesday, so mobile handset manufacturers using Ericsson's IPR will still need to pay Ericsson for that usage.

"By combining the complementary strengths and product offerings of Ericsson and ST in platforms and semiconductors, the joint venture is well positioned to become a world leader," said Svanberg in the statement. "The industry continues to develop at a swift pace and customers see benefits from our broad offering. This partnership is a perfect fit and secures a complete offering, as well as the necessary scale for technology leadership."

Frans van Houten, NXP's chief executive, said in the statement that the proceeds of the sale of NXP's 20 percent stake in ST-NXP Wireless would help his company "to further build leadership positions through innovation and investment in NXP's core businesses".