PARIS - STMicroelectronics will cut about 1,400 jobs and close its loss-making set-top box business, the Franco-Italian chipmaker said on Wednesday.
The decision drew criticism from the French government, which together with the Italian state owns a 27.5 per cent stake in STMicro and can block strategic decisions. "We want a new strategy put in place to allow this company to create value and recover," French government spokesman Stephane Le Foll said at media briefing following a weekly government cabinet meeting.
French President Francois Hollande is under pressure to safeguard jobs, having pledged to reduce unemployment before the end of his mandate in 2017.
STMicro said the job losses would include about 430 positions in France, 670 in Asia - mostly in India - and 120 in the United States. It will redeploy about 600 employees within the company.
The changes will generate annualised savings of US$170 million (S$243 million), it said, with total restructuring costs also estimated at US$170 million.
STMicro's set-top box business is part of its digital products division, which also makes smartphone sensors and has been struggling for several years.
Chief Executive Officer Carlo Bozotti said last May the business needed "to be fixed".
The Geneva-based company had since repeatedly delayed saying whether it would restructure or sell the division. "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," Bozotti said.
The set-top box business alone lost about US$500 million (S$714.6 million) over the last two years, STMicro said during a conference call with analysts. This represents about twice the combined operating income generated by company in 2014 and 2015.
STMicro also announced its fourth-quarter gross margin stood at 33.5 per cent, in line with its target. Net revenue fell to US$1.67 billion from US$1.76 billion in the third quarter.
Its midpoint gross margin target for the first quarter is about 33 per cent, it said. First-quarter revenue is expected to fall 3 per cent from the fourth quarter, according to the midpoint of its target range.
At 1330 GMT, STMicro shares were up 3.1 per cent at 6.199 euros.