STMicroelectronics announced plans to exit the market for chips used in set-top boxes and home gateways, following a review of its activities. The company said the slower-than-expected market adoption of leading-edge products and increasing competition on low-end boxes, combined with the required high level of R&D investment, has led the business to generate significant losses in recent years. This is no longer sustainable for the group.
The decision to exit the business will lead to around 600 employees redeployed to different activities, principally ST’s target growth areas of digital automotive and microcontrollers, and a voluntary redundancy plan for around 1,400 employees. The latter will affect about 430 employees in France, 670 in Asia and 120 in the US. The restructuring will cost an estimated USD 170 million in one-time charges and lead to annual cost savings of the same amount.
The announcement came alongside fourth-quarter results showing net revenues down 5.5 percent sequentially and 8.8 percent lower year-on-year at USD 1.67 billion, in line with the company's guidance. Lower capacity utilisation and price pressure led to a drop in the gross margin to 33.5 percent, and net profit fell to USD 2 million from USD 43 million a year earlier. For the first quarter, ST forecast a sequential decline in revenues of around 3 percent and a gross margin around 33.0 percent, again affected by low capacity utilisation for its digital products.
Going forward, the company will work around three product groups: Automotive and Discrete Group (ADG), led by Marco Monti; Microcontrollers and Digital IC’s Group, led by Claude Dardanne, and Analog and MEMS Group, led by Benedetto Vigna. Carmelo Papa has decided to retire from the company.
