STMicroelectronics to leave the ST-Ericsson joint venture next year

December 10, 2012
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ST-Ericsson, who you might have heard of thanks to the NovaThor platform in several of Sony’s midrange smartphones, was founded in February 2009 as a join venture between STMicroelectronics and Ericsson. According to Bloomberg, STMicroelectronics wants out. The plan is to sell their half of the company by the third quarter of next year. This news shouldn’t surprise any of you. We’ve been forecasting ST-Ericsson’s decline for months. Back in October, we published a list of the top five semiconductor companies in the mobile industry. ST-Ericsson wasn’t on that list. We’re not saying ST-Ericsson didn’t have the talent, because that’s just plain not true, the company was just too slow compared to the likes of Qualcomm and Samsung.

Who will buy STMicroelectronics half of ST-Ericsson? That’s a great question. We can think of several companies, but the one that stands out the most is AMD. They’ve already committed to making ARM chips for the server market, so why not team up with Ericsson to also battle it out in the smartphone arena? We’ll have to wait a few months to see how this all shakes out.

Are we going to hear more bad news about chipset companies in the future? We hate to say it, but the answer is definitely. Look at the PC industry. There are just two companies, with Intel holding over 80% market share. How do you expect Qualcomm, Broadcom, ST-Ericsson, Samsung, NVIDIA, and others to stay alive when there’s this much competition? It’s called consolidation and it’s inevitable. Texas Instruments, who made the chip inside the Galaxy Nexus, decided to leave the mobile industry. Others will soon follow.

Is there any good news coming out of this announcement? We like to think that the folks who are about to lose their jobs at ST-Ericsson are going to go to healthier companies. There are a limited number of people who have the ability to design chips. Apple picked up a lot of Texas Instruments talent, so we’re confident in saying that someone is going to poach these soon to be unemployed engineers.

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