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
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.
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
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
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,"
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.
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