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Opinion: ST, NXP ready JV for market setbacks

Posted: 11 Nov 2008 ?? ?Print Version ?Bookmark and Share

Keywords:wireless? market downturn?

Reality or as they would have it as the new market realities have claimed 500 jobs at the STMicroelectronics-NXP Semiconductors joint venture (JV), with the ink hardly dry on the deal that integrated the bulk of the wireless activities on ST and NXP.

This is even before the operation is due to combine forces with Ericsson Mobile Platforms in a 50:50 JV that would take on the mighty Qualcomm Inc. and Texas Instruments Inc. in mobile handset chips and platforms.

As someone remarked recently, the proverbial scrap-heap of history is replete with mergers, JVs, and consortia that claim to establish a new industry leader to be reckoned with.

The new entity could, indeed, become a major player in the wireless chip market, but this is not an auspicious start. As ST-NXP Wireless tried very hard to stress in its announcement, an auspicious time to be doing this, with the market now looking significantly more challenging than it did a few months ago when the grand plans were devised.

Thus the need to be lean and efficient while chasing the coveted third spot and the, hopefully in the long run, increasing number of sockets.

Better future ahead
There were always going to be redundancies, especially in R&D, where the JV is hugely oversubscribed. But the "rationalization" of the product portfolio and development efforts were constantly ruled out at conference calls with senior ST and NXP executives back in April when the deal was showed, although, to be fair, they did stress the opportunities the integrated group would have for synergies.

Still playing the devil's advocate, the JV is not the only one to be confronting the new realities in the wireless handsets chip market's mighty TI is planning to either sell off its 2G and 2.5G baseband chip business, or close the operation if a buyer is not found. That will still leave TI with a strong portfolio in 3G basebands, and strong emphasis on its successful OMAP platform and applications processors.

Freescale Semiconductor has also put its entire mobile handset chips business on the block, and has recently showed that its former parent, Motorola, will only buy GSM and Edge chips, not those for 3G phones. The UMTS business is destined for Qualcomm and TI, with Qualcomm taking the lead for CDMA handsets.

The missing link
What the ST-NXP announcement lacked was any indication of what activities would be sacrificed for the greater efficiencies now seen as vital going forward.

The portfolio currently covers most of the wireless bases, using its parents and foundries for fabrication. When launched, the company said it would track developments in W-CDMA, TD-SCDMA, Wi-Fi, Bluetooth, GPS, FM radio, USB and UWB. The venture also partners Silicon Laboratories and the GloNav GPS chips business.

Which of these activities are likely to be sidelined? One good place to start may be UWB, given the recent cooling of Intel Corp., TI and others on the short-range standard.

But we will not know until the deal with electromagnetic pulse is finalized, and some grand strategies emerge to play big in a market where, probably, too many players are still chasing too low profits.

- John Walko
EE Times Europe

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