The division was taken in-house to Ericsson after the company took sole ownership from the joint venture it held with STMicroelectronics about a year ago.
But in the last three fiscal quarters after the joint venture ended, the loss-making division had racked up about $240 million in operating losses, Reuters reports.
Just over 1,500 people work in the division, out of an approximate 115,000 global workforce, the company said.
The company said in a statement the move was in part to "capture opportunities in radio networks," but some 500 people from the unit could be transferred to its research and development unit.
Ericsson chief executive Hans Vestberg said in remarks: "Given the modem market dynamics and the development in small cells and indoor coverage markets, we believe resource re-allocation is more beneficial for the Ericsson Group and our customers overall."
Ericsson said it expects a bump in cost savings, but did not detail exactly what they would be.