Complementary customers, technologies fuse STMicro-Ericsson tie-up

The pressures of the mobile chip business, plus a fit in products and customers, has driven Ericsson Mobile Platforms and ST Microelectronics-NXP Wireless to join forces, the two companies said today.
The joint venture, subject to regulatory approvals, combines ST-NXP’s 2G/EDGE and 3G offerings with Ericsson’s 3G and LTE platforms, the companies said.
ST-NXP brings critical customer relationships with Nokia Corp., which holds 40% of the global handset market, Samsung Electronics Co. Ltd., the No. 2 handset maker, and Sony Ericsson Mobile Communications, which is ranked No. 5. Ericsson brings LG Electronics Co. Ltd., the No. 4 global handset maker, plus SEMC and Sharp to the deal.
The JV, if approved by regulators, will have 8,000 employees and be headquartered in Geneva, Switzerland. The two companies’ revenue last year combined was about $3.6 billion. Ericsson is set to contribute $1.1 billion to the JV, of which $700,000 goes to STMicro.
Not only is global growth in handset sales slowing, but macroeconomic conditions are hurting high-end sales in Europe, further pressuring chip companies and driving such tie-ups. STMicroelectronics recently absorbed NXP Semiconductor, the former chip unit of Philips Electronics.
The announced tie-up could hurt Texas Instruments Inc. and smaller chip rivals, according to analysts. Nokia has been TI’s largest customer and, last year, Nokia announced that it would diversify its chip vendors.
TI’s stock was down as much as 2% this morning on the news.
Ericsson’s stock, on the Stockholm exchange, rose less than 1% today before dropping to $65.80, below its opening price. STMicroelectronics stock on the New York exchange climbed nearly 2.5% on the news.