ST ends Ericsson partnership to focus on embedded
As part of its realignment, ST confirmed plans to exit its mobile chip joint venture with Ericsson but will remain as supply chain partner and application-processor IP provider. Major changes in the wireless market such as the polarisation of mobile device market and vertical integration at leading phone manufacturers had a "harsh impact on ST," said CEO and President Carlo Bozotti. (See ST's wireless slump continues, losses piling on .)
ST will build on its position in the MEMS and sensors market, power discrete and advanced analogue products as well as automotive products, from powertrain to safety and body to infotainment.
In embedded processing solutions, which include microcontrollers, imaging products, digital consumer products, application processors and digital ASICs, ST will focus on the core of the electronics systems rather than on wireless broadband access.
"The opportunities in this industry are extremely exciting. As semiconductors continue to be more pervasive, we see a world where ST products are everywhere microelectronics make a positive contribution to people's lives," Botti emphasized.
ST is targeting an operating margin of 10 per cent or more. In order to achieve the new financial model, ST expects to reduce quarterly net operating expenses to an average quarterly rate in the range of $600 million to $650 million by the beginning of 2014.
Ericsson said in separate announcement that it would work with ST to find a suitable strategic solution but did not announce an intention to sell its stake in the joint venture. "Ericsson continues to believe that the modem technology, which it originally contributed to the joint venture, has a strategic value for the wireless industry. For Ericsson, a key priority in this process is a successful market introduction of the new LTE modems that it is certain will be very competitive and needed in the market," the company said in a brief statement.
Last week, Forward Concepts principal analyst Will Strauss pointed out that the recent news about Samsung developing an internal LTE/3G capability, which it has deployed alongside a quad-core Exynos application processor, should be a source of concern for Apple. The iPhone maker should then consider acquiring either ST-Ericsson or Renesas Mobile to bolster its own LTE/3G/2G modem technologies. (See Apple should look into buying ST-E or Renesas Mobile .)