September 18, 2014 / 7:11 AM / 3 years ago

Ericsson to shut modem business, expects savings

STOCKHOLM, Sept 18 (Reuters) - Ericsson, the world's top mobile network equipment market, will stop developing modems, it said on Thursday, shutting a loss-making unit it took on after joint venture partner STMicroelectronics pulled out a year ago.

Europe's semiconductor firms are struggling to compete with bigger U.S. and Asian rivals, which have largely outsourced chip manufacturing to cope with volatility in demand and prices.

"Since integration, the modems market has developed in a direction that has reduced the addressable market for thin modems," Ericsson said in a statement.

"In addition, there is strong competition, price erosion and an accelerating pace of technology innovation. Success in this evolved market requires significant R&D investments."

The unit lost 456 million Swedish crowns ($63.7 million) in the second quarter.

The Swedish company said the decision to end the development of modems would mean it could shift resources to developing radio networks. It said it expected the move to lead to significant cost savings.

"Modems will have no impact on Group P&L from the second half of 2015," it said in a statement.

1 US dollar = 7.1589 Swedish crown Reporting by Simon Johnson; Editing by Pravin Char

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