Full-featured, integrated chips and tough competition have forced telecom vendor Ericsson to halt all future development of its LTE modems.
The move comes just over a year after Ericsson took over the LTE modem operations of its joint venture with STMicroelectronics as that relationship broke up. Since then, modems have moved from being a separate component to becoming integrated with the main processor on smartphones and tablets, a development that signals the end of making a living by selling separate chipsets.
In addition, strong competition and an accelerating pace of development has made the modem business unsustainable, according to Ericsson. The company will still deliver the M7450 to customers. The multi-mode modem supports speeds at up to 150Mbps and more than 20 radio bands.
The integration trend may be bad for Ericsson's modem unit, but is good for consumers because it means cheaper LTE smartphones. For example, Qualcomm announced the Snapdragon 210 processor with LTE last week, which will power low-cost smartphones and tablets starting in the first half of next year.
Qualcomm didn't reveal how much devices based on the new processor will cost. However, looking at the cost of devices powered by current Snapdragon 200 processors, prices around US$100 without a contract are possible.
Instead of investing in developing new modems, Ericsson wants to spend a larger chunk of its R&D budget on areas such as small cells and machine-to-machine services, the company said. It estimates the R&D cost for modems will total approximately 2.6 billion Swedish kronor ($363 million) for the full year.
The modem unit has 1,582 employees in Sweden, India, Germany, China and Finland. Some of them will be able to stay on as Ericsson has an immediate need to hire 500 people for its R&D department, but many will also lose their jobs. How many still hasn't been decided, according to Ericsson.
Send news tips and comments to mikael_ricknas@idg.com
Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.