Major New Mobile Venture

A new partnership between Ericsson and STMicroelectronics, announced on Wednesday, sees the two giants join forces to supply technology such as semiconductors to mobile phone manufacturers.

The agreement brings together the world leader in mobile phone infrastructure manufacture – Ericcsson – with STMicro, who are ranked fifth in the semiconductor industry. The venture is intended to lead the market with projected annual sales of $3.6 billion.

As a result of the announcement, shares in both companies saw immediate rises, with STMicroelectronics up by 1.9 percent and Ericcsson by 0.5 percent by the middle of Wednesday morning.

Strong Customer Base

With the partnership naming as future customers such as Nokia, Samsung, LG, Sharp and Sony Ericcsson – all major players in the mobile phone market – the deal is further prove of the changing face of the telecommunications industry, and outlines the need for companies to work together as usage of mobiles, particularly in connection with the internet, escalates without boundary.

It is understood that Ericcsson will contribute expertise in handset design and operation, and market leading modem technology, while STMicroelectronics will concentrate on developing wireless semiconductors, as overseen by its subsidiary ST-NXP Wireless, a young company formed by the amalgamation of STMicroelectronics and former rival NXP.

STMicroelectronics is to take advantage of an option allowing it to purchase the 20 percent share that NXP still holds in ST-NXP Wireless, hence taking complete control of that company on order to smoothly facilitate the formation of the new venture.

Chief executive of NXP, Frans van Houten, said they supported the new venture and would be using the new capital to invest in their core business.

All mobiles that support the internet will be targeted, highlighting again the importance of this market in the telecom industry.

World Market Leader

Carl-Henric Svanberg, Ericsson’s chief executive, explained his belief that the new venture would lead the market:

“By combining the complementary strengths and product offerings of Ericsson and ST in platforms and semiconductors, the joint venture is well positioned to become a world leader.”

“The industry continues to develop at a swift pace and customers see benefits from our broad offering.”

To be based at headquarters in Geneva, the new venture will have a proposed 8,000 employees, with 3,000 to come from Ericcsson and the remaining 5,000 from STMicroelectronics.

It will be divided into two companies, the first a 7,000-employee research and marketing company, and the second – with 1,000 employees – concentrating on design.