Nokia is to outsource most of its chip development to other manufacturers in order to reduce its R&D spend and concentrate on developing core chipset technologies. The Finnish firm, which is the world's largest mobile maker, said the new licensing and multi-sourcing model would allow it to broaden its pool of chip suppliers, while enabling the firm to focus on its core competencies in chipset development.

It also said the new strategy would free up resources to invest in the research and development of software to power internet services, which it sees as a key growth area.

"This is a pragmatic move in the face of an increasingly complex technology environment," said Niklas Savander, executive vice president, Nokia Technology Platforms.

"Companies in this industry need to focus on areas where they can add value and partner with others where it makes sense. We believe that our renewed strategy will allow us to concentrate on developing core chipset technologies, while increasing our R&D efficiencies and improving our agility in a fast-moving marketplace."

The main beneficiary of Nokia's revised chipset strategy is the semiconductor firm STMicroelectronics, which has been selected to design and build third generation (3G) chips for Nokia. The two companies are also negotiating a plan relating to transferring a part of Nokia's Integrated Circuit (IC) operations to STMicroelectronics.

STMicroelectronics was created in 1987 by the merger of SGS Microelettronica of Italy and Thomson Semiconducteurs of France. The company has grown to become one of the world's largest semiconductor companies, with net revenues of $9.85bn in 2006.

As part of the new arrangement with STMicroelectronics, Nokia is planning on transferring some of its chipset development and around 200 workers in Finland and Britain to STM.

"We are excited about the possibilities that the intended IC technology transfer will bring us," said Tommi Uhari, executive vice president and general manager of STM's Mobile, Multimedia & Communications Group.

"The intended IC technology transfer, with the world-class engineering skills and licensing of Nokia's world-leading 3G modem technologies, will enhance our relationship with Nokia and will improve our competitive position."

Based on its renewed strategy, Nokia will also work more closely with Texas Instruments, Broadcom, and Infineon Technologies. Texas will continue to supply the Finnish firm with chipsets across all protocols while Broadcom is to provide EDGE chipsets, and Infineon, GSM technologies.

© 2007 ENN