ST-Ericsson deal births mobile chip powerhouse

STMicroelectronics and Ericsson have agreed to merge Ericsson Mobile Platforms and ST-NXP Wireless into a joint venture. The 50/50 JV will carry product offering in semiconductors and platforms for mobile applications and will be a supplier to Nokia, Samsung, Sony Ericsson, LG and Sharp. The fabless JV will employ almost 8,000 people with pro-forma 2007 sales of $3.6 billion. ST is expected to exercise its option to buy NXP's 20 percent of ST-NXP Wireless before the closing of this transaction.

In the JV, ST brings its multimedia and connectivity solutions as well as a complete 2G/EDGE platform and 3G offering, including customer relationships with Nokia, Samsung, and Sony Ericsson. Ericsson contributes its 3G and LTE platform technology as well as customer relationships with Sony Ericsson, LG and Sharp.

"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," said Carl-Henric Svanberg, president and CEO of Ericsson in a statement. "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."

"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," said Carlo Bozotti, president and CEO of ST. "In April, we announced a plan to join wireless resources with NXP to strengthen our wireless business and enhance our leadership position in a sector which we have targeted for strong organic and external growth and substantial expansion of financial returns. Now, we've expanded our ambitions and will be even better positioned to meet our opportunities."

The joint venture will be headquartered in Geneva, Switzerland and governance will be balanced. Each parent will appoint four directors to the board and Ericsson will designate Carl-Henric Svanberg as the chairman of the board while ST will appoint Carlo Bozotti as the vice chairman. In addition, ST will designate the CEO and Ericsson will appoint the executive VP to the company.

An integration management team, led by Alain Dutheil, has already been selected.