STMicroelectronics to acquire NXP's stake in joint venture and strike new JV with Ericsson
22 August 2008
Swedish telecom wireless equipment maker Ericsson plans to take a 50-per cent stake in the exisitng joint venture between European chip makers STMicroelectronics the independent semiconductor company founded by Philips, NXB.
Earlier in April this year, STMicroelectronics NV and NXP BV announced their plans to merge their wireless businesses, into a new entity, TS-NXB, with ST owning 80 per cent in the venture and NXP the balance plus $1.55 billion in cash from STMicroelectronics, which had the option to buy out NXP's 20 per cent, which it will now exercise before embarking on the venture with Ericson.
As part of the deal between Ericsson and STMicrosystems, Ericsson will merge its Ericsson mobile platforms with ST-NXP Wireless into an equal joint venture, that the companies say would have the industry's strongest product offering in semiconductors and platforms for mobile applications and will be an important supplier to Nokia, Samsung, Sony Ericsson, LG and Sharp.
After it acquires the assets of the two promoting companies, the new venture will will have a cash of about $400 million. Ericsson will contribute $1.1 billion net to the venture, out of which $700 million will be paid by the new joint venture to ST.
After selling its stake in the ST-NXP venture, NXP will stay on as a supplier to the new venture
ST will bring to the new venture its multimedia and connectivity solutions as well as a complete 2G / EDGE platform and 3G offering, including customer relationships with Nokia, Samsung, and Sony Ericsson, while the Swedish giant will contribute its 3G and LTE platform technology as well as customer relationships with Sony Ericsson, LG and Sharp.
"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," said Carl-Henric Svanberg, president and CEO of Ericsson.
"In April, we announced a plan to join wireless resources with NXP to strengthen our wireless business and enhance our leadership position in a sector which we have targeted for strong organic and external growth and substantial expansion of financial returns. Now, we've expanded our ambitions and will be even better positioned to meet our opportunities," said ST president and CEO Carlo Bozotti
Frans van Houten, CEO of NXP, said, "We understand the desire of ST to call our 20-per cent stake in order to expand the ST-NXP Wireless joint venture with Ericsson. We support this next step that Ericsson and ST are taking to create the global leader in wireless semiconductors. To help ensure the success of the joint venture going forward all NXP's supply and support agreements will continue as planned.
The additional proceeds of the 20 per cent stake will enable NXP to further build leadership positions through innovation and investment in NXP's core businesses."
The joint venture will rely on its complete platform offering, which will include modems, multimedia and connectivity solutions for 2G/EDGE, 3G, HSPA and LTE technologies.
It will also include all appropriate hardware, software and support to enable handset manufacturers to develop mass-market products. Ericsson mobile platforms has state-of-the-art mobile modem design and mobile terminal architecture expertise and ST-NXP Wireless brings vast experience in wireless semiconductor development, including an industry-leading ASIC, ASSP, Application Processor and connectivity portfolio and hardware assembly and testing.
The business in the 50-50 JV will be led by a development and marketing company with approximately 7,000 people, which will be consolidated by ST and Ericsson will account for it using the equity method. A separate platform design company, with approximately 1,000 people employed, will provide platform designs to the development and marketing company. Ericsson will consolidate this company and ST will account for it using the equity method. Of the almost 8,000 people employed, almost 5,000 will be from ST-NXP Wireless and roughly 3,000 will be from Ericsson mobile platforms. The new company will be fabless and will use silicon technologies and manufacturing capabilities from ST and other external providers.
The new company will be headquartered in Geneva, with each company appointing four directors to the board. Ericsson CEO Svanberg will be the chairman of the board while ST will appoint its CEO Bozotti as the vice chairman. In addition, ST will designate the CEO and Ericsson will appoint the executive vice president to the company.