Ericsson closes down ill-fated STMicro venture

ERICSSON and STMicroelectronics have announced they plan to close their loss-making microchip manufacturing joint venture, having failed to find a buyer for the business.

ST-Ericsson was set up by the two companies in 2008 in a bid to capitalise on the growing market in chips for smartphones, but the venture has failed to make a profit since it was formed. It has racked up $2.7bn (£1.8bn) in losses since it was incorporated.

Ericsson, Sweden’s telecoms equipment giant and STMicroelectronics, the French-Italian semiconductor maker, said they would take the majority of the 4,450 ST-Ericsson employees between them but 1,600 jobs are set to go. Parts of the group’s operations will now be split between the two partners. ST-Ericsson has around 100 staff in the UK but the companies did not comment on job losses by geography.

The joint venture began with high hopes but has suffered in line with one of its major customers Nokia, which has been squeezed out of the market by the dominant Samsung and Apple.

Closing the businesses will cost the two firms around $1bn between them. Ericsson shares fell yesterday, although STMicroelectronics’ rallied. Shares in ARM Holdings, which ST-Ericsson buys licences for chip designs from, rose on the notion that the company would have two customers where it before had one, but shares fell back later in the day.

The venture has been a source of constant sale speculation but prospects of an exit have become longer as losses have continued.