ST-Ericsson cuts 1,700 jobs in turnaround attempt

Facing deepening losses, ST-Ericsson is cutting 1,700 jobs and hiving off its application processor business to its co-owner STMicroelectronics.

Semiconductor maker ST-Ericsson has announced job cuts and restructuring in a bid to reverse deepening losses. Image credit: ST-Ericsson

ST-Ericsson's first-quarter results, published on Monday, showed a net loss of $312m (£193m) for the first three months of 2012. This reflects a downward trend for the mobile semiconductor manufacturer, which has seen a knock-on effect from plummeting sales at key customer Nokia.

"The company's ambition so far to directly develop too broad a portfolio of [intellectual property] required for complete platforms has not delivered the results I want to see," ST-Ericsson chief executive Didier Lamouche said in a statement.

In an attempt to turn things around, ST-Ericsson said it will trim down its portfolio and concentrate on its NovaThor designs. These bundle modems with application processors to give handset manufacturers a relatively complete package called 'ModAp'.

NovaThor is found in Sony's Xperia P, U and Sola phones, and Samsung's Galaxy S, as well as in Nokia's Windows Phone-based handsets. However, the Microsoft OS-based phones are not doing nearly well enough to offset the dramatic fall-off in Nokia Symbian device sales.

"The key building blocks of the complete system solution — application processors, modems, connectivity as well as power, RF, analogue and mixed signal — will be developed either directly or through partnerships and alliances to limit and optimise the R&D effort," ST-Ericsson said.

The Geneva-based joint venture explained it will continue to develop its own modem technology, which it might license to third parties.

Restructuring

However, all of ST-Ericsson's application processor business will be transferred over to STMicro, which is the joint owner of the venture along with Ericsson. STMicro will then license the technology to ST-Ericsson so that the joint venture can integrate it into its ModAp packages.

This transfer, which will include all the employees working in the application processor division, accounts for some of the 1,700 job losses at ST-Ericsson. The rest will result from the company consolidating its research and development activities "into a significantly smaller number of sites", and cuts to management and its administrative departments.

All these cuts and transfers will, ST-Ericsson hopes, lead to $320m (£198m) in annual savings, with the cost of the restructuring estimated at $130m to $150m.

"By concentrating our efforts on our differentiators and partnering where appropriate, ST-Ericsson can deliver the products our customers want, while ensuring full continuity of our existing roadmap," Lamouche said.

ST-Ericsson expects the restructuring to be complete by the end of 2013. It did not respond to a query as to how many jobs will be lost and how many will simply be transferred to STMicro.