Partners decide to shut down loss-making joint-venture
STMicro and Ericsson are to close their loss-making chip joint-venture ST-Ericsson, with 1,600 of its 4,450 workforce made redundant.
Franco-Italian chip manufacturer STMicro had reportedly been keen to exit the partnership, which has never made a profit since it was formed in 2008, but Swedish telecoms network equipment maker Ericsson had been unwilling to take over on its own. Instead the two companies will each take on some of ST-Ericsson’s business, with the rest of its operations shut down.
ST-Ericsson has struggled from increasing competition from Asian manufacturers, who are able to outsource production to react quickly to changing demands, as well as a new trend for smartphone makers to produce their own chips. The firm’s biggest customer was Nokia, whose market share has been declining, as it struggles to compete with the likes of Apple and Samsung.
Ericsson will keep 1,800 employees, mainly in Sweden, Denmark, India and China, as well as a product line of thin 4G ‘multimode’ modem chips, according to reports on Reuters.
STMicro will retain 950 workers, mostly in France and Italy, as well as some other existing product lines and assembly and test facilities. Between 500 and 700 jobs will be lost in Europe, including 400-600 positions in Sweden and 50-80 in Germany, but no factories will be closed.
STMicro said that all available options had been considered and that it promised to continue manufacturing ST-Ericsson products as long as there was demand for them. It estimates that its share of costs for the shutdown and restructuring will be between $350 and $450 million, lower than previous estimates.
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