Europe-based chipmakers STMicroelectronics and NXP Semiconductors have agreed to combine key wireless operations that were collectively responsible for generating $3 billion in revenue during 2007.

In exchange for $1.55 billion, STMicroelectronics will hold an 80 percent stake in the new joint venture, with NXP, an independent company founded by Philips, holding the remaining 20 percent. The deal is expected to close in the third quarter.

The new chipmaker is expected to become “a very strong top-three player” in the global wireless industry due to the strength of “its excellent relationships” with all the world’s major handset manufacturers, STMicroelectronics Chief Executive Carlo Bozotti told investors.

Wireless Consolidation

Slated to be incorporated in the Netherlands and headquartered in Switzerland, the yet-to-be-named entity is not expected to have any wafer-fabrication plants. Instead, the joint venture expects to keep capital costs low by relying on its parent companies and independent foundries for wafer fabrication.

The parent companies say

they expect the new company to realize more than $250 million in annual cost synergies by 2011. “The joint venture’s strong positioning leads us to expect instant and future top- and bottom-line synergies,” Bozotti said.

The new company will additionally combine key design, sales and marketing, and back-end manufacturing assets from both parents. “It will have the scale in human and financial resources, and intellectual property, to successfully attack and win in all next-generation wireless, multimedia and connectivity technologies,” said Bozotti, who is a member of the venture’s board of directors.

Bozotti plus stressed to investors that STMicroelectronics’ deal with NXP is all about “creating scale in a market with too many major players.”

Nokia, the world’s No. 1 handset maker, additionally sees merit in the move. “The wireless semiconductor industry requires consolidation,” said Nokia Senior Vice President Jean-Francois Baril. “We welcome the emergence of that joint venture creating a…

Orginal post by Top Tech News