ST-Ericsson says it will transfer its stand-alone applications processor business to STMicroelectronics (STM) and eliminate up to 1,700 jobs as part of a restructuring. The Swiss company was created in 2009 as a 50/50 joint venture owned by Ericsson, the world’s leading supplier of telecom networking equipment, and STMicroelectronics, one of the world’s largest semiconductor companies.
Going forward, ST-Ericsson says it will focus on delivering integrated modem plus application processor (ModAp) solutions for smartphones and tablets. The company says it will implement a “combined approach of development and alliances” to bring these solutions to market.
IDC analyst Flint Pulskamp believes semiconductor companies that can integrate mobile device modems with applications processors will be well positioned in the years ahead, but he says a stand-alone applications processor offering is also important. “I actually think that those companies that offer BOTH solutions will dominate,” Pulskamp told RCR. “Both means being able to offer a discrete AP solution for high end smartphones, media tablets, and (for) other consumer applications that do not require a cellular modem, and an integrated AP-Basband solution primarily to address the entry and mid-range smartphone market at a competitive price.”
ST-Ericsson says it will transfer many of its application processor R&D employees to STMicroelectronics and that the team will continue the development of the current product generation. ST-Ericsson will then license the application processors designed by this team for its ModAp platforms. STMicroelectronics and ST-Ericsson have agreed to jointly offer stand-alone processors and thin modems, respectively, to customers.
Some of the ST-Ericsson employees who work in applications processor research and development will lose their jobs. The company says it plans to reduce the number of R&D sites, and the number of workers. ST-Ericsson says it will also streamline general and administrative activities and reduce the number of top management positions, in an effort to cut 2012 SG&A expenses by about 25% versus 2011.
ST-Ericsson says if foresees a global workforce reduction of 1,700 employees, including those that will be transferred. Workforce reductions are subject to negotiations with work councils and employee representatives. ST-Ericsson expects the total cost savings from its restructuring efforts to approach $320 million a year.
