Stmicro, Ericsson Lay Out Plan To Close Mobile Chip Unit

STMicroelectronics and Ericsson said they will close down their mobile chip joint venture ST-Ericsson by dividing up certain product lines and employees and shutting others.

Sweden’s Ericsson, which manufactures telecom network gear, will keep some 1,800 employees from the venture mostly in Sweden, Germany, India and China and a product line of thin 4G mobile chips.

Franco-Italian chip maker STMicro will keep other existing ST-Ericsson products, it said on Monday, without providing details, as well as certain assembly and test facilities.

It will take on some 950 employees mostly in France and Italy.

The rest of the business, which had 4,450 employees globally before these moves, will be shut down.

The announcement puts an end to months of speculation about the future of the loss-making mobile chip business, which was unable to turn a profit since it was formed in 2008.

It remained handicapped in large part because of the woes of its biggest customer, phone maker Nokia, as well tough competition from Asia.

STMicro and Ericsson had earlier sought a buyer for ST-Ericsson, but found no takers.

STMicro said it expected $350 million-$450 million in cash costs from the shutdowns and restructuring, which is lower than the $500 million it predicted at the end-January.

Ericsson said it had made a provision of 3.3 billion Swedish crowns ($515.74 million) in 2012 to pay for the moves.

It estimates that the LTE chip product line will generate operating losses of approximately 0.5 billion crowns in the fourth quarter, largely because of research and development costs.