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STMicroelectronics Announces New Business Strategy

STMicroelectronics has announced a strategic plan for the company that includes ending its mobile chip joint venture with Ericsson and focusing its business on sensors, application processors, smart power chips, and microcontrollers.

“We have made the decision to exit ST-Ericsson after a transition period,” said Carlo Bozotti, president and CEO of ST. "We will continue to support ST-Ericsson as their supply-chain partner, advanced process-technology partner, and application-processor IP provider.”

ST-Ericsson was formed in 2009 when Ericsson mobile platforms merged with ST-NXP Wireless in a 50/50 joint venture. ST contributed its multimedia and connectivity solutions and its 2G/EDGE platform and 3G offering. Ericsson contributed its 3G and 3GPP Long Term Evolution (LTE) platform technology.

However, the venture, which employs about 5000 people, proved to be unprofitable. ST said it was exiting ST Ericsson, but its disengagement would not be complete until the third quarter of 2013.

Bozotti said the new ST would focus MEMS and sensors, smart power, automotive products, microcontrollers, and application processors including digital consumer.

He added that ST will be “leaner and better positioned to deliver value to our customers and our shareholders, targeting to rapidly achieve operating margins of 10 percent.”

The company’s new strategy is based on two product-segment organizations: Sense & Power and Automotive Products; and Embedded Processing Solutions.

Sense & Power includes MEMS and sensors, power discrete and advanced analog products. Automotive Products includes components for powertrain, safety, body and infotainment applications, among others.

Embedded Processing Solutions includes microcontrollers, imaging products, digital consumer products, application processors and digital ASICs.

The company expects both product segments to be profitable and to generate cash.

ST is targeting an operating margin of 10 percent or more and expects to reduce quarterly net operating expenses in the range of $600-$650 million by the beginning of 2014. It did not specify how it would cut expenses. The company employs about 50,000 people worldwide.