Swiss chip maker STMicroelectronics is shutting down its set-top box business and will axe or redeploy around 2,000 jobs after failing to find a buyer for the assets. The business has generated significant losses in recent years amid increasing competition from low-end rivals, slower market adoption of its products, and high R&D investment needs.
Swiss chip maker STMicroelectronics (NYSE:STM) is shutting down its set-top box business and will axe or redeploy around 2,000 jobs after failing to find a buyer for the assets.
The business, part of STMicro’s digital unit, has generated significant losses in recent years amid increasing competition from low-end rivals, slower market adoption of its products, and high R&D investment needs.
The group announced its decision as it revealed Q4 net revenues fell 5.5% sequentially to US$1.67bn. Net income fell to US$2m, compared with US$90m for Q3.
STMicro’s digital business has a portfolio that also includes general purpose and secure microcontrollers, digital automotive products, ASICs and specialised imaging sensors.
Around 600 set-top box employees will be redeployed to support growth ambitions in the digital automotive and microcontrollers units.
The group’s ‘global workforce re-alignment’ plan could affect around 430 more jobs in France, 670 in Asia and about 120 in the US.
STMicro expects to make annualised savings in excess of US$170m from the move.
Carlo Bozotti, STMicro’s CEO, said: “This difficult decision is consistent with our strategy to only participate in sustainable businesses and is due to the significant losses posted by our set-top box business over the past years in an increasingly challenging market.”
Liberum analyst Janardan Menon described the company’s cost reduction plans as “clearly positive”, although execution and returning to overall revenue growth remains key.
ABI Research analyst Sam Rosen said he was not so surprised to see STMicro wrapping down its investment, but it was more surprising that the group did not find a buyer from the likes of technology firms Marvell, Maxlinear/Entropic or Intel.
STMicro had been reviewing options for its digital business for around eight months, amid a wider restructuring process that has seen it reduce other product lines to cut costs.
In 2013, STMicro scrapped a loss-making joint venture with Sweden’s Ericsson, after selling assets associated with the JV’s mobile connectivity Global Navigation Satellite System (GNSS) business to Intel for an undisclosed sum.
According to ABI Research, the set-top box semiconductor market as a whole declined from about US$4bn in 2010 to US$3.7bn in 2015.
Rosen said STMicro’s share of the market slid from around 21% in 2010 to 15% in 2014, as rivals such as Broadcom (now Avago) invest heavily in building relationships directly with operators, bypassing the influence of the set-top box OEMs. There has also been a market shift of high value units to US markets.
“This has been an intense period of consolidation and failure in the set-top box market,” Rosen said.
“STMicro stumbled in part because of its inability to invest on two parallel design teams meeting the cadence of feature increases the market demanded, as well as strategic failures on not aggressively driving integration of some functions or driving cost through derivative chips.”
