Date: 25/04/2012
ST-Ericsson transfers application processor development to ST Micro
ST-Ericsson - the 50/50 joint venture of Ericsson and STMicroelectronics have announced the guidelines of its new strategic direction. Ericsson has signed an agreement to transfer its stand-alone application processor R&D activities to STMicroelectronics, and shall take additional measures to accelerate time-to-market and lower the breakeven point.
"ST-Ericsson's strategic shift is a key step in ensuring that the company can reach sustainable profitability and cash generation. With the focus on ModAps for smartphones and tablets it will allow device manufacturers to rapidly bring best-of-breed devices to the market," said Hans Vestberg, president and CEO of Ericsson and chairman of ST-Ericsson board of directors.
The new strategic direction announced by ST-Ericsson is intended to build on four blocks:
1. Strategic focus
The company is to focus on delivering complete solutions for smartphones and tablets. The integrated modem plus application processor solutions (ModAp) would play an important role to differentiate offerings.
The complete solution comprises of application processors, modems, connectivity as well as power, RF, analog and mixed signal. The company is to limit and optimize the R&D efforts directly or through partnerships and alliances. Development of modem IP, selling thin modems and licensing modem IP to 3rd parties would still continue.
2. Partnership already signed: application processor
The future application processors development would be the first step of this new strategy because of the combined skills and strengths.
According to the agreement, ST-Ericsson, at closing date, will transfer its application processor R&D activity and employees to STMicroelectronics and will then integrate the application processor in ModAp platforms for smartphones and tablets under a license agreement from ST.
The two companies shall jointly promote and offer stand-alone processors and thin modems.
3. Accelerate time-to-market
The R&D execution and accelerating time-to-market will be focused by the company and reduce the overall operating expenses.
To avail delivery efficiency and optimize time-to-market, the activities will be consolidated into a significantly smaller number of sites "centers of excellence". The company aims at reducing its SG&A expenses by about 25% versus 2011 by streamlining the general and administrative activities.
4. Lower the breakeven point
The Company foresees a global workforce reduction of 1,700 employees worldwide which is subject to negotiation with work councils and employee representatives.
At the end of 2013, upon completion of the strategic plans, the company is expected an annual savings of about $320 million. Total restructuring costs are estimated to be approximately $130 to 150 million through completion.
For more information, visit http://www.stericsson.com