ST-Ericsson To Lose 1,600 jobs

Closed Sign

ST Ericsson, the mobile chip joint venture, is to close with the loss of 1,600 jobs in Sweden, Germany, India and China, having been crushed by competition from Asian chipmakers and the collapse of Finnish phonemaker Nokia's smartphone business.

The company, with 4,450 employees has never made a profit and had been offered for sale but no buyer could be found, said STMicro's chief executive Carlo Bozotti.

The two companies that formed the business in 2008, French-Italian corporation STMicroelectronics and Sweden's Ericsson, will split it between them. Some facilities will be closed.

About 100 British jobs at the Connectivity Solutions side of the business are affected, but a spokesperson was unable to say whether they will be absorbed back into one of the partners. The move may also affect 27 jobs in Daventry, Northamptonshire.

STMicro shares rose about 5% after the news. Ericsson shares were up 2%.

STMicro will keep making products for ST-Ericsson customers who want them, Bozotti said. Among those using its chips besides Nokia is Samsung, which has four phones -– though none of its flagships -– using them. The joint venture has looked vulnerable for months, with STMicro warning in December that it would pull out because the business was losing market share and showed no signs of breaking even. In January management warned of a "significant sequential decline" in sales during this first quarter because of the decline in smartphone shipments running the Symbian software from Nokia. Total sales in 2012 fell 19% to $1.35bn (£1.16bn), while losses eased slightly to $749m from $841m in 2011.

Total revenues had fallen every year from 2009, while losses widened. In all the company generated $7.82bn in revenue and lost $2.72bn from the first quarter of 2009.

Nokia is reckoned to have comprised about 30% of ST-Ericsson's sales, but the Symbian line is now effectively dead.

Ericsson will take back about 1,800 of the staff, and will keep a loss-making business making a 4G chip used in smartphones. That is expected to lose about 500m Swedish krona (£52m) in the latest quarter, due to R&D costs, but Ericsson chief executive Hans Vestberg said it aimed to make the product line a top-three global player.

"We obviously have the ambition of making this profitable … and with a slimmer organisation I believe we have a much greater chance of getting there," he said.

But some analysts were sceptical. "I doubt that unit will be profitable," a Stockholm-based analyst who declined to be named told the Reuters news agency. "My understanding is that it has no sales today and just one design win. Either it is a success or it is not, and then you are stuck with all the losses."

STMicro will keep a number of ST-Ericsson products, as well as certain assembly and test facilities. It will take about 950 employees, mostly in France and Italy.

The rest will be shut down, losing between 500 and 700 jobs in Europe, with 400-600 in Sweden and 50-80 in Germany. No factories will be closed, STMicro said.

STMicro expects the closures and restructuring to cost $350m to $450m, less than the $500m it predicted at the end of January.

Ericsson made a provision of 3.3bn Swedish krona in 2012 to pay for the moves.

Powered by article was written by Charles Arthur and agencies, for on Monday 18th March 2013 15.59 Europe/London © Guardian News and Media Limited 2010


image: © Torpe