More developments on the grim story of ST-Ericsson, the unprofitable JV between Ericsson and STMicroelectronics that tried to kickstart a semiconductor business in Europe. Failing to find a buyer for the full operation, they will commence splitting up the assets instead, laying off 1,600 employees in the process.
The story goes back to last year, when the two companies decided to call time on the JV, first founded in 2009, and explore strategic options, taking multi-billion-dollar hits in the process, after Ericsson and STMicro both confirmed neither wanted to subsume the entire loss-making business themselves. That followed a review that first started in April 2012, amid reports that Qualcomm might buy the business. ST-Ericsson in Q4 2012 reported net sales of $358 million, but an operating loss of $133 million, after the joint owners waived a credit line of $1.5 billion. The story took a further turn a couple of days ago when it was reported that there were takers for the complete assets.
Then, this morning, the two owners laid out a formal plan for how they planned to split up the assets in a divorce. Ericsson is taking on take on the “design, development and sales of the LTE multimode thin modem products, including 2G, 3G and 4G multimode.” ST, meanwhile, will assume all other products, including some assembly and test facilities. The remaining parts would get closed down. Those transfers are expected to be completed by Q3 2013, the company says.
As part of this, for the time being ST-Ericsson is also getting a new president/CEO, Carlo Ferro, who will take over on April 1, 2013. Ferro had been COO, and he will replace Didier Lamouche, who is leaving the company.
The 1,600 people getting laid off today are worldwide, the company says, with just over one-third in Europe. In addition to this, Ericsson will be taking on 1,800 employees and contractors, mainly in Sweden, Germany, India and China. STMicro will take 950 workers in France and Italy. They are still looking for a buyer for its connectivity business, employing 200 people — and the fact that they’ve kept that on the table seems to imply that there may be an offer on the table at least.
Once the dust settles on today’s news, it may be likely that the workers transferred to STMicro and Ericsson will also be under review, as those businesses get integrated into their new parents’ operations.
But there are still areas that ST-Ericsson has been developing amid all the doom and gloom for the bigger business. The 4G multimode business is one area where ST-Ericsson has been hoping for progress, on the back of the growing number of LTE networks worldwide. One recent product, demoed at Mobile World Congress, featured its new Thor chipset and “the world’s first” dual-mode high-definition voice over LTE connection between two different LTE standards, LTE FDD and LTE TDD (TD-LTE), which it showed off with China Mobile.
The story of the JV is the mobile infrastructure leitmotif to the bigger decline of the European mobile manufacturing industry over the last several years. While the region remains a very important market in terms of consumers of mobile services, the center of gravity for production and R&D in mobile has moved to China and companies like Samsung, Qualcomm, Google and Apple. Meanwhile, in Europe, once-global leaders like Finland’s Nokia (significantly, once one of ST-Ericsson’s biggest customers) are now on their knees, with others like Siemens exiting handset making years ago, and Ericsson following slowly in Siemens’ path.