LONDON – ST-Ericsson NV, the loss making mobile chip joint venture between STMicroelectronics and Ericsson, has announced guidelines for a new strategic direction and plans to cut up to 1,700 staff to lower its breakeven point.
The company plans to transfer its stand-alone application processor activities to STMicroelectronics but at the same time said it wants to re-affirm plans to be a leader in smartphone and tablet computer platforms.
The plan will be based on ST-Ericsson being able to deliver complete system solutions for smartphones and tablets; competitive integrated modem plus application processor solutions.
The building blocks for complete systems solutions include application processors, modems, connectivity as well as power, RF, analog and mixed signal will be developed either by ST-Ericsson or by partners to improve time to market and lower the breakeven point.
Meanwhile ST-Ericsson will continue to develop modem IP, sell thin modems and possibly license modem IP to third parties, the company said.
ST-Ericsson has already agreed to transfer its application processor business and employees to ST. It will then create application processor plus modem platforms under a license agreement from ST.
The company said the ST-Ericsson application processor R&D team will continue, under a transitional cost sharing model, the development of the current product generation.
Remaining ST-Ericsson acitivities will be consolidated into a "significantly smaller number" of sites, the company said. The company is aiming to reduce its 2012 sales, general and administrative costs by 25 percent compared with 2011.
ST-Ericsson said it foresees a global workforce reduction of 1,700 employees worldwide, including the employees that would be transferred to ST. This, plus existing restructuring plans would result in annual cost savings of $320 million. Total restructuring costs are estimated to be approximately $130 to 150 million through completion.
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