Ericsson and STMicroelectronics have announced an agreement on the way forward for the joint venture (JV) ST-Ericsson. As communicated by the parent companies in December 2012, both have been working together toward a strategic solution for the JV. After months of intensive joint work, the parent companies have selected the strategic option which maximizes their respective future prospects and growth plans.
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. Other parts of ST-Ericsson will be closed down. The formal transfer of the relevant parts of ST-Ericsson to the parent companies is expected to be completed during the third quarter of 2013, subject to regulatory approvals.
After the split up it is proposed that Ericsson will assume approximately 1800 employees and contractors, with the largest concentrations in Sweden, Germany, India and China. It is also proposed that ST will assume approximately 950 employees, primarily in France and in Italy, to support ongoing business and new products development within ST.
Carlo Ferro is appointed president and chief executive officer of ST-Ericsson, effective April 1, 2013. Ferro is currently chief operating officer of ST-Ericsson and succeeds Didier Lamouche who, as previously announced, will pursue opportunities outside the company. Ferro will lead the work in securing both business continuity of ST-Ericsson and effective completion of the transition phase.
"I welcome Carlo Ferro as the new president and CEO of ST-Ericsson. Carlo has over twenty years of experience in the semiconductor industry and a strong track record in driving and managing complex transformation projects. He has been a contributor to the solid progress ST-Ericsson has made the past year in terms of strategy execution and significantly lowering the breakeven point," said Hans Vestberg, president and CEO, Ericsson and chairman of the board of directors at ST-Ericsson
Ericsson has made provisions of SEK -3.3 billion in 2012 which will cover costs related to the implementation of the strategic option. Once the multimode thin modem business has been fully integrated into Ericsson in Q4 the operation will be reported as a standalone segment. Ericsson believed that the division will generate operating losses of approximately SEK 0.5 billion in Q4, 2013, primarily related to R&D expenses.
"Ericsson continues to believe that the thin modems hold a strategic value to the wireless industry. With this move Ericsson will create a highly focused "thin modem only" operation - an area in which both parents have invested significant amounts to establish industry leading technology and Intellectual Property. Initial customer contacts give support to the belief that our modems will meet the requirements of the manufacturers in the rapidly growing smartphone and tablet market,” said Hans Vestberg.
The thin modem technology developed within ST-Ericsson has evolved into a unique architecture for low power, highly integrated multimode multi-band modems covering GSM/GPRS/EDGE, TD-SCDMA, HSPA+, LTE (TDD/FDD), LTE-Advanced, the widest array of frequency bands and a feature set that includes Single RF chip carrier aggregation, VoLTE and IMS.
An LTE/HSPA+/3G/2G modem based on this evolved architecture was recently demonstrated at Mobile World Congress in Barcelona and has received its first global operator certification.