Ericsson says it will write down the value of its investment in ST-Ericsson by $1.2 billion, and that its third quarter earnings will be off by the same amount due to the charge. The news comes less than two weeks after Ericsson’s partner in the chipmaking venture announced plans to bail out. STMicroelectronics is exiting the joint venture as part of a reorganization.
The dissolution of the joint venture led to speculation that Ericsson would sell the 50% it does not own, but Ericsson says it has no plans to do that. So the future of ST-Ericsson is up in the air. Ericsson could try to sell it, either as a unit or in pieces. The venture’s applications processor unit is already being absorbed by STMicroelectronics.
ST-Ericsson is currently focused on designing solutions that integrate cellular modems with application processors. These are in high demand by manufacturers of entry-level and mid-range mobile devices.
Geography may be one of ST-Ericsson’s liabilities. Like Ericsson the company is based in Stockholm, Sweden, while a lot of the world’s semiconductor design talent is in North America and Asia, as are a lot of potential customers. ST-Ericsson initially counted Finland’s Nokia as one of its biggest customers. But ST-Ericsson supplied chipsets for smartphones running the Symbian operating system, which Nokia has abandoned in favor of Windows.
ST-Ericsson is not a major supplier for Apple or Samsung, the two giants of the smartphone industry. Samsung has its own semiconductor business, and Apple has been named a possible buyer of ST-Ericsson.
