Ericsson is to stop developing modems, marking the end of an activity it had previously spun-out into the failed ST-Ericsson joint venture.
In a statement, the company said that it will “shift part of [the] resources in modems to radio network R&D in order to better capture growth opportunities in this area”.
It said that in order to “capture opportunities in radio networks, especially within small cells, energy efficiency and M2M”, it needs 500 more R&D staff in these areas, and parts of the modem team have a “relevant R&D competence base” to support this.
The modem unit has more than 1,500 employees, with 689 in Sweden and others split across India, Germany, China and Finland.
Ericsson took over LTE thin modem operation as part of the breakup with STMicroelectonics, its partner in ST-Ericsson, in August 2013.
Since then, “the modems market has developed in a direction that has reduced the addressable market for thin modems”, alongside a strong competitive environment and an “accelerating pace of technology innovation”.
Ericsson will start shifting the deckchairs in the fourth quarter of 2014. It said the closure will lead to “a significant reduction in costs related to the modem business in the first half of 2015, and Modems will have no impact on Group P&L from the second half of 2015”.
Ericson and STMicro had looked for a buyer for ST-Ericsson, but decided to split its assets between them after such a deal failed to come to fruition.