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December 10, 2012

STMicroelectronics NV Announces Exit from ST-Ericsson Joint Venture

By Colleen Lynch, TMCnet Contributor

On Monday STMicroelectronics (News - Alert) NV announced its plans to exit its joint venture with ST-Ericsson (News - Alert).

As Europe’s largest chipmaker, STMicroelectronics NV has seen significant losses in profits since jointing with ST-Ericsson, in addition to an overall global demand in its business.

The Swiss-based semiconductor manufacturer reported it is currently undergoing “exit options” with the Swedish telecommunications company ST-Ericsson.

The move is expected to be completed by the third quarter of 2013, but the details have yet to be hashed out.

Leaving the joint venture, although already underway, is only one part of the company’s bigger strategic plan to revive its business and combat its falling sales.

President and CEO of STMicroelectronics NV Carlo Bozotti reported that his company would “continue to support ST-Ericsson,” so the exit is expected to be good-natured, and simply a necessary step for the struggling company to take.

Ericsson has seen this same type of issue before, as one of its joint ventures also fell apart last year. Ericsson’s business struggled at that time when the company left the mobile handset operations it shared with Japan’s Sony.

Ericsson has stated that it stands by its business plan despite this, however.

“Ericsson continues to believe that the modern technology, which it originally contributed to the joint venture, has a strategic value for the wireless industry,” the company stated in a response to ST-Microelectronics NV’s announcement.

The company cited its introduction of new LTE (News - Alert) modems as one of its key priorities, which it believes “is certain [to] be very competitive and needed in the market.”

Additionally, the Stockholm-based Ericsson stated it would remain tight-lipped about its operations and the complications the company is currently facing.

For the time being, Ericsson plans “not [to] speculate on the possible outcomes, timelines, and future ownership structures of ST-Ericsson.”

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Edited by Rich Steeves
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