Wireless handset market leader Nokia is to transfer part of its chipset development operation for an undisclosed sum to STMicroelectronics, in a far reaching shake-up of its semiconductor supply chain, designed to secure lower prices and boost its own license revenue from other handset vendors.
Around 200 of its employees in Finland and the UK will move over to STMicro in the fourth quarter of this year as part of a deal that will see the Franco-Italian chipmaker design and manufacture 3G chipsets for the first time based on Nokia’s modem technologies, energy management and RF technology.
Apart from supplying the chipsets to Nokia, STMicro would be free to offer the 3G high-speed packet access chipsets to open market.
Nokia will retain the development of its modem technology, for WCDMA/GSM and its evolution. But again it will license this technology to its chipset manufacturers, not only for its own use but also for the open market.
The Espoo, Finland-based company said its new strategy would allow it to broaden its pool of chipset suppliers and leverage external innovation to support its wide range of products.
Nokia would then focus on its core competence in modem technology and invest in other R&D areas, such as in software to power internet services.
Niklas Savander, EVO of Nokia Technology Platforms said that companies in the industry needed to focus on areas where they can add value and partner with others where it makes sense.
Under the new arrangements, Nokia will work with four chipset suppliers. Texas Instruments continues as a broad scope supplier across all protocols, Broadcom has been chosen for EDGE, Infineon Technologies for GSM, and STMicro in 3G.
Apart from being negative for Texas Instruments, which has been Nokia’s major supplier, the move will add to the competitive pressures on Qualcomm, which has ambitions to be a big supplier of WCDMA chipsets.