ST-Ericsson is a joint venture between STMicroelectronics and Ericsson. The two companies announced on March 18 that the joint venture would be dissolved over time due to a significant drop in sales. The divestiture of its GNSS business to Intel is another step in that pursuit. The company reported an operating loss of $158 million on sales of $256 million in the first quarter of 2013.
Terms of the sale were not disclosed, but ST-Ericsson said that the transaction will reduce its cash needs by about $90 million, thanks to proceeds from the sale combined with the avoidance of certain restructuring costs.
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In addition to the company's assets, Intel will also acquire 130 employees across several locations, including Daventry in the U.K., Singapore, and Bangalore. The group will become part of the mobile chip unit at Intel that is run by Herman Eul.
Intel needs acquisitions like this one in order to become more competitive with mobile chip players like Qualcomm, Broadcom and ARM. Both Qualcomm and Broadcom have large processor and baseband businesses that supply chips to smartphone, tablet and laptop makers. Many of them use ARM's processor architectures. Adding GPS and other location services to its still-growing mobile chip business is a necessity for Intel at this point, because Qualcomm and Broadcom are packaging integrated systems-on-a-chip that are able to deliver cost savings to smartphone makers. Not only do the SoCs offer cost savings, but they often offer power management benefits and boost raw performance by operating as a cohesive unit.
Intel has not detailed how it will integrate ST-Ericsson's GNSS business into its own, but the needs are clear. Intel has already tipped a range of new processors that will debut later this year. For example, its Haswell and Silvermont ranges are expected to arrive next week during the Computex trade show in Taiwan. Though the Haswell chips will most likely focus on devices such as laptops, the Silvermont range will aim to topple ARM's dominance in smartphones and tablets.
Intel has also revealed that it plans to offer chips that include LTE and other cellular radios. If it can incorporate ST-Ericsson's geo-location features into its processor-baseband combo chips, it might be able to get itself into a better position to fight its rivals.