Ericsson and STMicro agree to carve up ST-Ericsson chipmaking venture, cutting 1,600 jobs

Ericsson and STMicroelectronics were unsuccessful with their efforts to sell chip making business ST-Ericsson to Samsung and other chip makers, and now they have agreed to carve up the joint venture, terminating 1,600 jobs.

The joint venture was set up in 2009 to help develop competitively priced mobile broadband chips, but it has not been successful one. Unable to compete with Qualcomm in the US and the rise of ‘fabless’ semiconductor makers in Asia, it has accumulated $2.7 billion in total net losses, posting a loss of $749 million last year alone.

Sweden-headquartered Ericsson has agreed to take on the design, development and sales aspects of its LTE chips (including 2G, 3G and 4G multimode), while ST will handle all other existing products and a number of the assembly and test facilities. All other remaining parts of the struggling joint venture will be closed down.

The main steps agreed upon to split up the JV are the following:

• Ericsson will take on the design, development and sales of the LTE multimode thin modem products, including 2G, 3G and 4G multimode
• ST will take on the existing ST-Ericsson products, other than LTE multimode thin modems, and related business as well as certain assembly and test facilities
• Starting the close down of the remaining parts of ST-Ericsson

A further announcement explains the proposed lay-offs:

In connection with the transfer of the majority of its workforce to the parent companies, ST-Ericsson will carry out restructuring of its current operations which could impact some 1,600 employees worldwide, out of which in a range of 500-700 are in Europe, including 400 to 600 positions in Sweden and 50 to 80 positions in Germany.

In terms of those being kept, Ericsson is said to be assuming control of 1,800 employees — from across Sweden, Germany, India and China — with ST scooping up 950 staff, primarily in France and Italy. However, those two figures combined are less than 3,000, which would — on paper — suggest that more than 2,000 of its 5,000 work force will be made redundant — we’ve contacted STMicroelectronics and Ericsson for clarification.

Reuters claimed that a number of European governments that the French and Italian governments — which own 27.5 percent of ST — are aiming to minimize job loses, and that goes some way to explaining the split.

The transition is expected to go through during the third quarter of 2013. COO Carlo Ferro has been appointed President and Chief Executive Officer of ST-Ericsson to oversee the process. Ferro will take up the new position on April 1, replacing outgoing Didier Lamouche who is leaving the company.

Headline image via Thinkstock