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Summary:

Ericsson will contribute $1.1 billion to the proposed joint venture as well as its platform technology used in cell phones and modems. STMicro will fund the venture with $1.2 billion in assets. It will compete with Qualcomm’s Gobi.

Updated Looking at the proposed joint venture between European wireless chipmaker STMicroelectronics and equipment maker Ericsson this morning, all you need to know is that making wireless chips is no longer enough. Chip firms are shifting their emphasis from the individual radios on a chip to a platform that contains as many of the silicon-related radios as a phone or laptop needs. The platform is a neat package, ready for OEMS to use in a handset or on a 3G modem. It’s the difference between buying the individual tomatoes, onions and basil for a pasta sauce and buying a jar of the stuff. Today’s OEMs want jars.

The trend toward integrating multiple radios onto a single platform is tied to increasing wireless broadband adoption and more networks from EDGE to LTE. As smartphones become more common for housewives and teenagers, their prices and time-to-market need to shrink. Integrated radio platforms help make this possible, because they require less pre-certification of radios on a specific network and to a particular device. The same trend is evident in 3G modems, which even moms are using nowadays.

As part of the joint venture, Ericsson will contribute $1.1 billion as well as its platform technology, which is currently used in cell phones and modems. STMicro will fund the venture with $1.2 billion in assets. The combined entity brings together the company making the raw chips and a company that combines those chips into platforms. Also in today’s announcement, STMicro said it would buy out the remaining 20 percent stake it holds in its recent joint venture with NXP, which threatened the top two wireless chip makers Qualcomm and Texas Instruments. The new deal represents more direct competition with Qualcomm’s Gobi platform.

While such deals signify the growth of faster, cheaper cell phone production, connoisseurs can rest assured that the folks at Apple (or others making high-end devices) will still pick and choose their chips rather than settling for a jar of Ragu.

  1. A deal like this was inevitable in many ways. People have long spoken of consolidation within the semiconductor industry. That said, who’d have pictured Ericsson, STM and Philips Semis (now called NXP and joint with STM) coming together like so 3 years ago.

    The jar of Ragu, as you call it, is also inevitable as mobile device and the essence of mobile becomes ubiquitous. First it becomes common to have mobile phones, then more common to have laptops, then more common to have PDAs – the next logical consumer push is for a device that incorporates and improves on all three. Particularly given the explosion in consumer electronics (due in part in Apple) and laterly convergent devices – thinking SE Walkman phones and the like.

    I think we look set to have a number of chipmaking powerhouses – Qualcomm, TI and this newly formed entity leading the way.

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  2. [...] of multiple chips. It’s also one of the motivations behind the proposed joint venture between STMicroelectronics and Ericsson’s mobile platform group announced this [...]

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