Loss-making chip maker ST-Ericsson will cut 1,700 jobs and shift a key part of its product to parent STMicro as it expands cost-cutting to offset declining business from feature-phone makers.
ST-Ericsson -a 50-50 joint venture of Swedish group Ericsson and French company STMicroelectronics- has lost $2 billion in its three years of operation as revenues from key clients Nokia and Sony Ericsson have shrunk 70 percent.
The venture said the new and old restructuring measures in total would bring savings of about $320 million when they were completed at the end of 2013. Restructuring costs will total $130-150 million.
Chief executive Didier Lamouche said the company would need revenue to start growing to return to profit. “We need both, cost reduction, but also revenue increase,” he told journalists.
ST-Ericsson said it would partner with parent STMicro in the development of future application processors – after discussing also with four other companies – transferring its research and development activity and employees in the field to STMicro.
In addition to modems, ST-Ericsson’s strength, today’s smartphones use application processors that function in the same manner as a central processing unit (CPU) on a computer, running software and graphics.
ST-Ericsson has been seen as a “strategic asset” for potential buyers such as Nvidia, Intel and Texas Instruments, as Reuters stated.
ST-Ericsson releases its first-quarter results later in the day, after markets in the United States close.