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STMicro Looks To Exit ST-Ericsson Partnership

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STMicro wants to compete better with rival semiconductor firms in Asia and US

STMicro is reportedly planning to exit the loss-making ST-Ericsson mobile chip joint venture so that it can better compete with rival semiconductor firms in the US and Asia. Its competitors largely outsource chip manufacturing, protecting themselves from volatile changes in demand and prices.

The Franco-Italian firm believes that the move would allow it to focus on its other, more profitable, business and help reduce quarterly net operating expenses from around $900 million to $600-650 million by early 2014.

However a quick divorce might not be as simple as the company as hopes as Ericsson is unlikely to want to take over on its own.

ST-Ericsson woes

ST-Ericsson makes mobile chips, but has struggled in recent years as its once-biggest customer, Nokia, has been overtaken in the smartphone market by rivals Apple and Android. The venture lost £523 million last year and it has been suggested that ST-Ericsson could be shut down entirely or parts sold to competitors such as Intel and Samsung, with Ericsson taking the rest.

STMicro’s plan is to concentrate on its more analogue business, which makes chips for motion sensors, power management and the automotive sector, as well as its digital business which makes ‘embedded processing solutions’ for consumer electronics.

Reuters reports that in a conference call, the company did not reveal how washing its hands of ST-Ericsson would result in the expected operating cost reductions and did not reveal whether there would be any job losses. The French and Italian governments own 27.5 percent of STMicro, so any redundancies would be politically sensitive.

Ericsson, the world’s biggest manufacturer of mobile phone networks, sold its stake in the Sony Ericsson joint venture last year in order to focus on its main business, however it was recently forced to cut 1,500 jobs in Sweden as part of a cost-cutting operation.

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