ST-Ericsson transfers processor business to ST, cuts 1,700 jobs
ST-Ericsson has agreed to transfer its stand-alone application processor activities to STMicroelectronics as part of a restructuring of the mobile phone semiconductor company aimed at a “lower the breakeven point”.
The company is also planning to cut 1,700 jobs worldwide by the end of next year.
The company’s main market remains silicon platforms for smartphones and tablets. This includes application processors, modems, connectivity as well as power, RF, analog and mixed signal. But as well as in-house development it will use partnerships and alliances to “limit the R&D effort” necessary.
The company will continue to develop modem IP, a key competitive enabler, sell thin modems and possibly license modem IP to third parties.
As part of the restructure plan ST-Ericsson will partner with STMicroelectronics in the development of application processors.
As a result ST-Ericsson has agreed to transfer its application processor R&D activity and employees to STMicroelectronics and will then integrate the application processor in combined modem/applications processor platforms for smartphones and tablets under a license agreement from ST.
In addition to this, the two companies have entered into a commercial agreement to jointly promote and offer stand-alone processors and thin modems, respectively.
“Through this partnership, we can expand our offer beyond our traditional product families and reach a wider customer base in multiple digital segments, further boosting ST’s multimedia convergence business towards leadership and improved financial return,” said Carlo Bozotti, president and CEO of STMicroelectronics
ST-Ericsson said it will reduce its expenses by about 25% by streamlining the general and administrative activities and substantially reducing positions within the top paid management.
As a result of all the above initiatives, the company expects a global workforce reduction of 1,700 employees worldwide, including the employees that would be transferred to ST as part of the partnership announced today.
Annual savings of about $320m are expected from the new and from the on-going restructuring plans, upon completion by the end of 2013.
Total restructuring costs are estimated to be approximately $130m to 150m through completion.
Specific impact on country or site level related to the plan will depend on local negotiations based on applicable legislation.
“ST-Ericsson has a unique ability to develop and integrate complete mobile platforms for mainstream smartphones and tablets. This will be our strategic focus moving forward, while continuing to master leading-edge modem IPs,” said Didier Lamouche, president and CEO of ST-Ericsson.