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Chipmaking venture ST-Ericcson to close, cut 1,600 jobs

Formed in 2009, the joint partnership of STMicro and Ericsson was never profitable as top customer Nokia lost market share to Apple and Samsung.

ST-Ericsson, the chipmaking joint venture between STMicro and Ericsson, announced today it will dissolve its partnership, dividing up the parts of the business between the two.

Market share for ST-Ericsson in the mobile space has shrunk as rival chipmakers Nvidia, Intel, and Texas Instruments succeeded in getting their components into popular mobile devices. As top customer Nokia lost market share to Apple and Samsung, orders for ST-Ericcson's chips have dwindled. Since the partnership's formation in 2009, Ericcson's share of the losses alone was $2.8 billion.

"All possible scenarios were considered but the option announced today was always a real possibility," STMicro Chief Executive Officer Carlo Bozotti said in a conference call today, according to a Reuters account of the call.

About 1,600 jobs will be lost from portions of the partnership that neither company wants. Ericcson plans to retain 1,800 employees, mostly in Sweden, Germany, India and China, while STMicro plans to assume about 950 employees, primarily in France and Italy.

STMicro said it expects the closing and restructuring to cost $350 million to $450 million, less than the $500 million it estimated in January. Ericsson said it had reserved $516 million in 2012 to pay for the moves.

Ericsson Chief Executive Hans Vestberg said the partnership's dissolution is a step toward profitability.

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