A $3 billion-plus valued new business will be formed with the spin-off of the wireless operations of both NXP and STMicroelectronics. The intention is to enable the new company to better serve the wireless market that requires high levels of investment, according to the companies. The new unnamed company will be fabless, relying on both parent companies and foundries for semiconductor manufacturing. The deal is expected to close in the third quarter of 2008. 

“The strength of this venture is its excellent relationships with key customers, as well as the complementary IP and product portfolios transferred from ST and NXP that create a rich and broad offering with the capability to deliver leading-edge innovations to the market,” said Carlo Bozotti, President and CEO of STMicroelectronics. “The JV's strong positioning leads us to expect immediate and future top- and bottom-line synergies for the exciting new enterprise and establishes a powerful foundation to build on its parents' 2G, 2.5G, 3G, multimedia and connectivity efforts. This combination will form the basis of the success of the new venture.”

“The wireless semiconductor industry requires huge investments in new technology and innovative product roadmaps. This move will see two strong players propelling themselves into a leadership position,” commented Frans van Houten, President and CEO of NXP. “By creating this joint venture, we put most of the competitors at a distance. Together we will accelerate innovation which we anticipate will contribute to market share gains and improved financial performance.”

In order to create a clear ownership structure, STMicroelectronics will take an 80 percent stake in the joint venture. NXP will receive $1.55 billion from ST, including a control premium, to be funded from outstanding cash (cash and cash equivalents balance for ST at year-end 2007 were $3.5 billion). The parent companies expect over $250 million in annual cost synergies from the JV by 2011.

The new fabless company will use both parent companies and foundries for semiconductor manufacturing but will operate its own assembly and test facilities in Calamba, Philippines and Muar, Malaysia. ST's back-end operations in Muar will be separated from the parent company's existing facility transferred to the JV.

Picture caption: The two CEOs, Carlo Bozotti of STMicroelectronics (right) and Frans van Houten of NXP, sign the deal and celebrate the new joint venture.