STMicroelectronics and Ericsson to Merge Mobile Chip, Applications Units

STMicroelectronics and Ericsson have announced an agreement to merge Ericsson Mobile Platforms and ST-NXP Wireless into a joint venture. The 50:50 fabless joint venture will employ almost 8,000 people with pro-forma 2007 sales of US$3.6 billion.

As ST-NXP Wireless was launched as an 80-20 venture between STMicroelectronics and NXP, ST will acquire the remaining shares under the terms already agreed with NXP.

Frans van Houten, CEO of NXP, said: "We understand the desire of ST to call our 20 percent stake in order to expand the ST-NXP Wireless joint venture with Ericsson. We support this next step that Ericsson and ST are taking to create the global leader in wireless semiconductors. To help ensure the success of the joint venture going forward all NXP's supply and support agreements will continue as planned. The additional proceeds of the 20 percent stake will enable NXP to further build leadership positions through innovation and investment in NXP's core businesses."

In a business where scale matters, the company's say that their complementary product portfolios contributed by the parent companies will deliver significant scale and synergies by leveraging and expanding the existing strategic cooperation between Ericsson Mobile Platforms and ST-NXP Wireless.

"By combining the complementary strengths and product offerings of Ericsson and ST in platforms and semiconductors the joint venture is well positioned to become a world leader," said Carl-Henric Svanberg, President and CEO of Ericsson. "The industry continues to develop at a swift pace and customers see benefits from our broad offering. This partnership is a perfect fit and secures a complete offering, as well as the necessary scale for technology leadership."

The businesses being combined are major suppliers to four of the industry's top five handset manufacturers, who together represent almost 80 percent of handset shipments, as well as to other exciting industry leaders.

The business in the 50/50 joint venture will be led by a development and marketing company with approximately 7,000 people employed. This company will be consolidated by ST and Ericsson will account for it using the equity method. A separate platform design company, with approximately 1,000 people employed, will provide platform designs to the development and marketing company. Ericsson will consolidate this company and ST will account for it using the equity method. Of the almost 8,000 people employed, almost 5,000 will be from ST-NXP Wireless and roughly 3,000 will be from Ericsson Mobile Platforms. The new company will be fabless and will use silicon technologies and manufacturing capabilities from ST and other external providers.

The joint venture will acquire relevant assets from the parent companies. After these acquisitions the joint venture will have a cash position of about US$400 million. Ericsson will contribute US$1.1 billion net to the joint venture, out of which US$700 million will be paid by the joint venture to ST.

Posted to the site on 20th August 2008