The mobile chip company ST-Ericsson, which was a joint venture between STMicroelectronics and Ericsson, is to close. The troubled mobile technology company has never made a profit, since it was created in 2008, and finally the two parent companies have said enough is enough.
The closure isn’t coming as a complete surprise and ends several months of speculation about the company. Its troubles seem to reflect the general changes in the mobile industry with the company losing big orders from Nokia, which is fighting a battle for market share with Apple and Samsung.
Even though it was a fabless based business, meaning the actual manufacturing was outsourced, the European based company has found it difficult to compete with more agile chip makers in Asia. This was compounded by the rising trend among mobile makers to make their own chips, something that Apple and Samsung do.
STMicro has said it will keep making products for ST-Ericsson customers as long as they needed them and to that end it will keep some 950 of ST-Ericsson’s 4,450 employees.
Likewise, Ericsson will keep around 1,800 employees and continue working on ST-Ericsson’s range of thin 4G “multimode” modem chips.
Although Ericsson estimates that the LTE chips will still make a loss in the near future, the company aims to make the LTE thin multimode chips business a global player. Having a slimmer organization gives it a greater chance of success.
Unfortunately the rest of ST-Ericsson will be shut down, meaning some 1,600 employees will lose their jobs.