1,600 laid off as Ericsson and ST agree to split ST-Ericsson

Ericsson interested in saving LTE modem business and ST will take over application processors

Chip maker ST-Ericsson will be wound down as parents STMicroelectronics and Ericsson have decided to take over some parts of the company, including LTE modems and application processors, and close or sell the rest.

The news comes about three months after ST announced it wanted to exit the three-year-old joint venture.

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ST-Ericsson was formed from ST's wireless semiconductor division and Ericsson's mobile platform. As the company is split up, Ericsson will take on the design, development and sales of the LTE multimode modems, according to a joint statement. STMicroelectronics, on the other hand, will take over application processors and some other parts, which are yet to be decided.

"It is a bit too early to say what we will keep and what we won't. But we will honor existing contracts," said Alexis Breton, manager for international media relations at ST.

In addition to modems and application processors, ST-Ericsson's product portfolio also includes components for power management. The company is trying to find a buyer for its connectivity business, which includes Wi-Fi chipsets and employs around 200 worldwide, the company said.

The deal also calls for the two companies to take over some ST-Ericsson's staff. About 1,800 employees and contractors -- most based in Sweden, Germany, India, and China -- will move to Ericsson, while ST will take over 950 employees, primarily in France and in Italy.

That leaves some 1,600 employees worldwide that will be laid off, including up to 600 in Sweden and up to 80 in Germany.

The companies expect to complete the transfer of ST-Ericsson's products and employees during the third quarter, subject to regulatory approvals.

The dismantling will be led by Carlo Ferro, who will serve as President and Chief Executive Officer of ST-Ericsson from April 1. Ferro is currently Chief Operating Officer of ST-Ericsson and succeeds Didier Lamouche who said last week he was leaving.

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