European silicon vendors NXP and STMicroelectronics are to spin out their respective mobile chip businesses to create a new joint venture company worth US$3 billion.
The companies say combining operations will create a top three industry player that will have strong relationships with all the major handset manufacturers and able to exploit economies of scale at the R&D level.
The new organization will combine key design, sales and marketing, and back-end manufacturing assets from both companies into a streamlined worldwide joint venture that will rely on its parent companies and foundries for wafer fabrication services. The JV will also integrate the Silicon Laboratories’ wireless and GloNav’s GPS operations recently acquired by NXP. Under the terms of the agreement, STMicroelectronics will pay NXP US$1.55 billion to hold a 80% stake in the new company with NXP having the option to divest its 20% stake in three years time.
Incorporated in the Netherlands and headquartered in Switzerland, the JV will have a workforce of approximately 9,000 employees worldwide. The parent companies expect over US$250 million in annual cost synergies from the JV by 2011. The deal is expected to close in the third quarter of this year subject to regulatory approvals.