ST Microelectronics and Ericsson are to close their lossmaking chip manufacturing joint venture at a cost of 1,600 jobs after failing to find a buyer for the Switzerland-based business.
ST-Ericsson has struggled in a fiercely competitive market that includes low-cost rivals from Asia and more innovative European technology groups.
Handset makers such as Samsung and Huawei have also begun to make their own chips for the latest smartphones, while one of its largest customers, Nokia, has been hit by a drop in sales that has been passed on to its component suppliers.
STMicroelectronics and Ericsson will be forced to cover about $1bn of shutdown and restructuring costs between them. Ericsson will retain about 1,800 of the joint venture’s total workforce of 4,450, with most based in Sweden, Germany, India and China, as well as a product line of 4G modem chips used in smartphones. STMicroelectronics will take on 950 employees, mostly in France and Italy, and walk away with ownership of the rest of the product line as well as some assembly and test facilities.
STMicroelectronics and Ericsson have tried to find a buyer since revealing a strategic review in 2012.