EE Times
(10/02/2008 4:28 PM EDT)
PHILADELPHIA — Freescale Semiconductor has confirmed speculation that it plans to eventually exit the wireless handset chip set business and is weighing several options for the unit. They include selling or merging the unit with a rival operation as part of plans to increase its focus on other core markets, including automotive and networking ICs where it has a dominant position.
To achieve its objective, Freescale said it has updated a previous arrangement with Motorola Inc. (Schaumburg, Ill.) under which the communications equipment company would "provide certain considerations in exchange for eliminating their remaining minimum purchase commitments" with Freescale.
Freescale's move comes on the heels of similar actions by rivals like STMicroelectronics and NXP Semiconductor, both of which recently teamed up to form a wireless handset IC joint venture in response to changing market conditions and the need to pool R&D as well as manufacturing resources to secure or gain market share.
Freescale (Austin, Texas) said it would prefer to pour its resources into other market areas while seeking strategic alternatives for the wireless IC business, which represents approximately 20 percent of the company's annual revenue, according to chairman and CEO Rich Beyer.
"We really believe our other market units are stronger and very healthy," Beyer said in an interview. "The cellular business is quite different and it's changing. There's a smaller number of customers and they want fewer suppliers. We are at the point where we have to invest more in order to create scale in the handset IC business. We cannot do this through internal development."
"We feel the investment required to achieve that scale by Freescale will be better served extending our product portfolios where we are the leader and expanding our application expertise in sensors, analog, power and multimedia processing," Beyer added in a statement.
Beyer joined Freescale about six months ago and has been conducting a strategic review of the company's operations with a view toward strengthening its position in markets where the company is a leading supplier to leverage its available resources.
"As the semiconductor market continues to consolidate, it is essential that we maximize our investment on growth opportunities that enable us to extend our market leadership and to ultimately create shareholder value," Beyer said.
Beyer said the company is not considering spinning off the wireless handset division because of the huge investments needed to make it competitive. He also noted that Freescale's decision was not part of plans to raise additional funds for the company's operation. "Our cash situation is strong," Beyer said. "This is not a function of the need for cash. It's not merely that wireless is leaving. It's that we are doing well in other businesses and we need to invest more in those areas."
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