New chip firm ST Ericsson to cut 1200

Just two months after it began operations, wireless chipmaker ST Ericsson has posted a loss and embarked on a fresh cost-cutting plan.

Blaming weak consumer demand for mobile devices, it announced Wednesday it would lay off 1200 staff.

The company, a joint venture between ST Microelectronics and Ericsson, reported a net loss of $89 million on sales of $391 million in its first two months.

CEO Alain Dutheil said the company had been hit by poor demand, “especially in Europe, mainly in the feature phones segment, reinforced by overall inventory reduction in the handset supply chain.”

He said that while there were no signs of a recovery in demand, the company believed the “destocking phase” was substantially over.

Its new cost-cutting plan was aimed at saving $230 million by the second quarter of 2010, he said. This was separate to a $250 million program announced by ST-NXP Wireless in November 2008.

Dutheil said the company was revamping to create a sustainable cost structure and a more integrated product strategy covering 2G/EDGE, 3G and next-generation technologies.