New Ericsson & STMicroelectronics venture poses threat

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Ericsson has announced a huge 50:50 joint venture with STMicroelectronics — an acknowledged biggest consolidation in the chipset market since records began.

It will mean that Ericsson’s Mobile Platforms will be merged with ST-NXP Wireless amid claims the new joint venture will have the industry’s strongest product offering in semiconductors and will be supplying components to Samsung, Nokia, Ericsson, Sharp and LG. This follows STMicroelectronics’ acquisition in April this year of semiconductor company NXP wherein STMicro will acquire the remaining 20 percent that it didn’t already own in the NXP joint venture.

This new operation will pose a serious threat to established chipset providers such as Qualcomm, Texas Instruments and Freescale.

Each company will bring a wealth of experience and skill to the venture through ST providing 2G/EDGE and 3G knowledge and multimedia products with Ericsson bringing 3G and LTE technology and equipment. Currently, ST has relationships with Nokia, Samsung, and Sony Ericsson, whilst at the same time Ericsson is a business bedfellow with LG, Sharp and naturally, Sony Ericsson. Ericsson has a deep understanding of radio access and its wealth of wireless IPRs could well make the new group a very strong chipset manufacturer on a global scale.

Speaking at the announcement, Carl-Henric Svanberg, the president and CEO of Ericsson, said, “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. The industry continues to develop at a swift pace and customers see benefits from our broad offering. This partnership is a perfect fit and secures a complete offering, as well as the necessary scale for technology leadership.”

Commenting for ST, president and CEO Carlo Bozotti said, “ST is taking another bold step. By combining two industry-leading operations, we will create a world leader in mobile platforms and semiconductor solutions with even stronger capabilities to create customer value and continue to deliver rapid innovation.”

This new joint venture will have its headquarters in Geneva, Switzerland and each parent company will provide four directors to the board. Carl-Henric Svanberg is to be the chairman of the board of the new entity with Carlo Bozotti acting as vice chairman. The venture will also get assets from both parent companies. Subject to the necessary regulatory approval, the integration will be as immediate as possible, giving the new company the opportunity of climbing up the chipset league table very quickly indeed.

How the other established chipset combatants react should be an interesting spectacle. Chip vendor Freescale (spun off from Motorola four years ago) has joined the LiMo Foundation, the open standard collective for mobile Linux.

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