Manufacturing partners Ericsson and STMicroelectronics will be shuttering ST-Ericsson, its poorly-performing mobile chip joint venture, and will divide parts of the business between the two companies. The venture had been suffering from a large drop in orders from its largest customer, Nokia, as market share of the companies handsets plummeted against competition from Apple and Samsung. ST-Ericsson had not turned a profit since it was formed in 2008, despite one in four smartphones sold in 2011 having some form of its technology integrated.
"All possible scenarios were considered, but the option announced today was always a real possibility," STMicro chief executive Carlo Bozotti said today. STMicro will retain assembly and test facilities, and 950 jobs. Ericsson keeps 1,800 employees in Sweden, Germany, China, and India.
The remainder of ST-Ericsson will be shuttered, with 1,600 employees receiving pink slips. ST Micro expects between $350 million and $450 million in costs from the shutdown. Ericsson has banked $515 million over the course of 2012 to pay for the closure.
"We obviously have the ambition of making this profitable ... and with a slimmer organization I believe we have a much greater chance of getting there," said Ericsson Chief Executive Hans Vestberg.