STMicroelectronics and Ericsson are to merge their mobile phone chip businesses - Ericsson Mobile Platforms and ST-NXP Wireless - creating a business with sales of over $3.5bn. 

ST is expected to exercise its option to buy NXP’s 20% of ST-NXP Wireless before the closing of this transaction.

"The 50/50 joint venture will have the industry’s strongest product offering in semiconductors and platforms for mobile applications and will be an important supplier to Nokia, Samsung, Sony Ericsson, LG and Sharp," said Ericsson. "The fabless joint venture will employ almost 8,000 people with pro-forma 2007 sales of $3.6bn."

In the joint venture, ST contributes multimedia, 2G and EDGE technology as well as its customer relationships with Nokia, Samsung, and Sony Ericsson. Ericsson brings its 3G and LTE technology, plus customer relationships with Sony Ericsson, LG and Sharp.

"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 Ericsson president and CEO Carl-Henric Svanberg. "This partnership secures a complete offering, as well as the necessary scale for technology leadership."

In April, ST announced a plan to join wireless resources with NXP.

"We understand the desire of ST to call our 20% stake in order to expand the ST-NXP Wireless joint venture with Ericsson," said NXP CEO Frans van Houten. "To help ensure the success of the joint venture going forward all NXP’s supply and support agreements will continue as planned."

Van Houten said: "The additional proceeds of the 20% stake will enable NXP to further build leadership positions through innovation and investment in NXP’s core businesses."

The ST-Ericsson joint venture have chips and designs for data and multimedia over links including: 2G, EDGE, 3G, HSPA and LTE.

"It will also include all appropriate hardware, software and support to enable handset manufacturers to develop mass-market products," said Ericsson. "We have state-of-the-art mobile modem design and mobile terminal architecture expertise and ST-NXP Wireless brings vast experience in wireless semiconductor development, including an industry-leading ASIC, ASSP, application processor and connectivity portfolio and hardware assembly and testing."

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 8,000 people, almost 5,000 will be from ST-NXP Wireless and 3,000 from Ericsson Mobile Platforms.

"The new company will be fabless and will use silicon technologies and manufacturing capabilities from ST and other external providers," said Ericsson.

The joint venture will acquire relevant assets from the parent companies.

After these acquisitions the joint venture will have a cash position of about $400m. Ericsson will contribute $1.1bn net to the joint venture, out of which $700m will be paid by the joint venture to ST.

ST-NXP Wireless was launched as an 80-20 venture between STMicroelectronics and NXP and began operations on August 2. ST will acquire the remaining shares under the terms already agreed with NXP.