Peter Clarke Courtesy of EE Times Europe (04/11/2008 7:38 AM EST)

LONDON — The move by STMicroelectronics NV and NXP BV, two of Europe's leading semiconductor companies, to merge their wireless businesses, giving ST an 80 percent ownership of the resulting JV while NXP — left with 20 percent stake — is enriched to the tune of $1.55 billion, is a radical step (see April 10 story).

But it is likely not be the last. Creating fine-grained, fabless, niche-market champions has become the name of the semiconductor game.

But the move begs many questions about the way forward for European semiconductor companies and for integrated device manufacturers (IDMs) in general. We could be witnessing the next stage in the triumph of the fabless over the fabbed.

Some of those questions have already been raised by Joseph Borel, a former executive vice president in central research and development at ST, who recently sent a 12-page proposal to the French government calling for the consolidation of Infineon Technologies, NXP and ST into a European champion chip company (see March 18 story).

One can argue that Borel is old school. Borel's call for the creation of a champion that aggregates everything that moves in semiconductors in Europe and holds on tight to manufacturing and manufacturing R&D was criticized by analysts for overvaluing size and seeing economies of scale where they no longer exist.

In contrast, the proposed plan from ST and NXP sees the semiconductor industry in terms of individual application sectors. But does that view also mean we are seeing the break-up of what are top ten IDMs? Carlo Bozotti, president and CEO of ST, gave a hint of what is on his mind in a conference call when he said: "We said we are determined to improve return."

It was put to Bozotti that with the creation of flash memory company Numonyx BV and an as yet unnamed wireless and fabless JV — taking billions of dollars of revenue and thousands of jobs out of ST — he is presiding over the break-up of the fifth largest company in the semiconductor market. As another part of ST's love affair with partnership, the company has a significant automotive alliance with Freescale Semiconductor Inc. dating back to February 2006.

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