Ericsson-STMicro venture creates serious new contender for Qualcomm and TI
Published: 28 August, 2008
The balance of power:
In April, STMicro and NXP formed a $3bn joint venture, the originally named ST-NXP Wireless, but ST is now set to buy out its partner's 20% stake before the EMP deal is concluded. The new alliance will have pro forma 2007 revenues of $3.6bn, so tops ST-NXP in scale terms, though still far away from Qualcomm and TI (and of course Intel) in revenue terms. However, more worrying for the US majors will be the range of innovative technologies that the partners can now draw upon, putting them further into Qualcomm's league in advanced, next generation multimedia platforms; and their impressive customer list, which includes four of the top five handset makers (and a realistic chance to bid for a share of the business of the fifth, Motorola, which is diversifying its supply chain following the end of its tie to its own former chip unit Freescale, and already works with both Qualcomm and TI).
Ericsson brings 3G and LTE platform and reference designs; expertise in low power modems and notebook connectivity; a stable model protocol stack and proven RF technology; plus IPR in many other wireless areas. It has recently been putting new fire under its handset reference design activities, with the parent group moving its once-obscure EMP unit further towards the center of its growth strategy. It has ridden on the back of the rise in interest in complete reference designs - among tier one phonemakers, not just low end ODMs - to enable vendors to bring advanced devices to market more quickly and cheaply, and to customize them more easily for different operators' requirements.
ST-NXP Wireless, meanwhile, brings multimedia and connectivity solutions as well as a GSM/EDGE platform plus products for WCDMA/ HSPA (including some under development with Nokia), TD-SCDMA, Wi-Fi, UltraWideBand, and location/GPS technology. "We've got the industry's strongest solution, including 2G/3G, HSPA, LTE and a whole range of multimedia applications from ST," said Ericsson CEO Carl-Henric Svanberg, announcing the new JV. "We also have the strongest customer base in the industry."
"It's a bold move, but we decided to go for leadership," said Carlo Bozotti, CEO of STMicro, who during his tenure has certainly scored a reputation for being bold, and is undergoing radical review of his group's activities. The new venture will have a cash position of $400m. Ericsson will contribute $1.1bn net to the joint venture, out of which the JV will pay $700m to STMicro. The company will be equally owned, and will employ 5,000 people from ST-NXP and 3,000 from EMP. The venture will be fabless and use silicon technologies and manufacturing from STMicro as well as other providers. It will be headquartered in Geneva, Switzerland, where STMicro is based. Svanberg will be chairman of the board and Bozotti will be vice chairman.