European chip comapny STMicroelectronics on Monday announced its intention to exit from its mobile digital joint venture ST-Ericsson by the end of the third quarter of 2013.
The move is part of the company's new strategic plan - the outcome of a strategic review started more than a year ago, as the company saw major changes in the dynamics of the wireless market.
"Today we are announcing the new ST, aligned with the new market environment," said Carlo Bozotti, President and CEO of ST. "Based on that, we have made the decision to exit ST-Ericsson after a transition period. We will continue to support ST-Ericsson as their supply-chain partner, advanced process-technology partner and application-processor IP provider."
"Our new strategy is centered on leadership in sense and power and automotive products, and in embedded-processing solutions," continued Bozotti. "Our specific focus is on five product areas: MEMS and sensors, smart power, automotive products, microcontrollers, and application processors including digital consumer."
Bozotti expects these families to experience solid growth rates driven by secular trends and fit well with the company's positions and competitive advantages.
"The new ST will be more focused, leaner and better positioned to deliver value to our customers and our shareholders, targeting to rapidly achieve operating margins of 10 percent," he added.
The company's new strategy is based on two product-segment organizations: Sense & Power and Automotive Products; and Embedded Processing Solutions.
ST will build on its position in Sense & Power, which includes MEMS and sensors, power discrete and advanced analog products, and in Automotive Products, from powertrain to safety, and from body to infotainment.
In Embedded Processing Solutions the company will focus on the core of the electronics systems rather than on wireless broadband access. The Embedded Processing Solutions segment includes microcontrollers, imaging products, digital consumer products, application processors and digital ASICs.
In line with the new financial model, the company expects both product segments to be profitable and to generate cash. In particular, Embedded Processing Solutions will turn to profitability leveraging on a stronger product and technology focus, expanded customer base and manufacturing synergies between microcontrollers and digital products.
ST will address an estimated $140 billion market in 2013 and has significant potential to grow and gain market share.
As a consequence of the major changes that occurred in the dynamics of the wireless market, ST has taken the decision to exit ST-Ericsson after a transition period and is currently in negotiations on exit options. The transition expected to end during the third quarter of 2013. However, Bozotti and ST declined to comment on the current value of the ST-Ericsson joint venture or what sort of costs disposal of ST-Ericsson would incur if it could not achieve a sale of the business.
ST said it would continue to support ST-Ericsson as its supply-chain partner, advanced process-technology partner (FD-SOI) and application-processor IP provider.
ST is targeting an operating margin of 10 percent or more. In order to achieve the new financial model, ST expects to reduce quarterly net operating expenses to an average quarterly rate in the range of $600 million to $650 million by the beginning of 2014.