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Ericsson, STMicro to form mobile chip venture

Ericsson and STMicroelectronics will form a joint venture to build semiconductors and platforms for mobile devices, the companies said Wednesday.

The 50/50 joint venture will build the guts of mobile devices for current 2G (second-generation) and 3G mobile networks, as well as faster, emerging technologies, namely LTE (Long-Term Evolution). The companies formed it to achieve scale, combining what they called complementary product lines, as well as supplier relationships with Nokia, Samsung Electronics, LG, Sharp and Sony Ericsson Mobile Communications. It will supply those device makers with hardware, software and support for delivering mass-market products.

Ericsson is one of the world's largest providers of mobile network infrastructure. Its Ericsson Mobile Platforms division, created in 2001, supplies platforms for handsets and other mobile connectivity products, including data cards for PCs. Several years ago, Ericsson shifted its actual branded handset business to Sony Ericsson.

The planned company, as yet unnamed, would combine Ericsson Mobile Platforms with ST-NXP Wireless, which itself is a joint venture between STMicroelectronics and NXP Semiconductors. ST-NXP Wireless began operations on Aug. 2. In addition to developing chips and platforms for devices using everything from 2G to LTE networks, ST-NXP boasts a strong position in TD-SCDMA (Time-Division Synchronous Code-Division Multiple Access), a 3G technology developed in China that is being tested by China Mobile.

Ericsson President and CEO Carl-Henric Svanberg will be chairman of the new joint venture, while STMicroelectronics President and CEO Carlo Bozotti will be vice chairman. Each company will have four board seats. It will be based in Geneva and have approximately 8,000 employees. The deal is subject to standard regulatory approvals, the companies said.

Ericsson sees laptop PCs and other devices like them as increasingly important to the mobile networks business, so much so that it moved Svanberg's senior technology adviser to Silicon Valley. The adviser, Jan Uddenfeldt, who is also a senior vice president, said in an interview at Intel Developer Forum this week that he had recently relocated from Stockholm to San Jose, California.

"The laptop industry and the mobile phone industry is kind of melting together," Uddenfeldt said. "Therefore, it's very important to have a strong presence in this area."

As networks get faster, mobile wireless use is being driven by laptops and similar smaller devices rather than by cellular handsets, Uddenfeldt said. Emerging mobile data devices come with an alphabet soup of names, such as MID and Ultra-Mobile PC, and are prominently on display at IDF.

Ericsson expects the earliest client chips for LTE to go on sale next year in laptops and consumer products such as Sony's Playstation Portable. The faster technology eventually will make its way into handsets, but phone calls are not the point of LTE, he said.

Phones will take a back seat to more data-oriented devices with larger screens, if only because it's harder to take full advantage of a very fast network with a phone, said In-Stat analyst Allen Nogee. LTE technology should offer about 150M bps (bits per second) downstream and 50M bps upstream, according to Ericsson. Mobile operators could divide up that bandwidth among subscribers as they choose.

But even for business users on laptops, carriers will be taking a risk by investing in LTE, Nogee said.

"The market for high data rates to laptops isn't a great one as of yet," he said. Among other things, after paying for fast wired Internet access, many users don't want to pay a high price -- typically more than US$50 in the U.S. -- for a high-speed mobile service that frequently isn't available where they are trying to work, he said.

At IDF, Ericsson was pushing LTE while surrounded by one of the biggest backers of rival WiMax technology, Intel. Mobile WiMax deployments have already begun in some countries, and Sprint Nextel expects to launch commercial service next month in Baltimore, the first market of a planned national WiMax service. Ericsson expects widespread commercial availability of LTE in 2010.

Uddenfeldt downplayed the importance of WiMax even as he acknowledged Sprint Nextel will use Ericsson microwave gear for some of the backhaul from its WiMax network. The "gravity" of the mobile industry is with LTE, which is formally a successor to GSM (Global System for Mobile Communications), the most widely used cellular system in the world, he said.