ST-Ericsson venture broken, 1,600 jobs axed

Ericsson and STMicroelectronics have decided to split their unprofitable joint venture after failing to find a buyer.

Announced on Monday, the chip venture ST-Ericsson will be split between the two 50-50 shareholders. Ericsson plans to take on the design, development and sales of LTE products -- including 2G, 3G and 4G -- whereas STMicroelectronics will assume existing products and business from the JV except those related to LTE multimode thin modems.

After the split is concluded, Ericsson says that it will take on approximately 1,800 employees and contractors, mainly based in Sweden, Germany, India and China. ST, on the other hand, will assume roughly 950 members of staff in France and Italy to work on ST rather than ST-Ericsson products. As a result, dividing assets will mean that 1,600 jobs are expected to be cut. 

The wind-down of the JV is taking place as the three-month hunt for a prospective buyer failed, despite approaches made to a number of investors including Samsung. Launched in 2009, the wireless chip business has accumulated $2.7 billion in net losses, although Ericsson holds the belief that the JV has "strategic importance" within the wireless industry.

Hans Vestberg, CEO of Ericsson, said in prepared remarks:

"Ericsson continues to believe that the thin modems hold a strategic value to the wireless industry. With this move Ericsson will create a highly focused "thin modem only" operation -- an area in which both parents have invested significant amounts to establish industry leading technology and Intellectual Property."

The formal transfer and split of the joint venture's assets is expected to be finalized in Q3 2013, subject to regulatory approval. Effective April 1, Carlo Ferro, who is currently Chief Operating Officer of ST-Ericsson, will take the place of Didier Lamouche as CEO.