Nokia is selling off its wireless modem business to Renesas Electronics, a move that could help the mobile giant better focus on phone competition and get rid of a business that may have been struggling.
Renesas has agreed to buy the business for $US200 million and will get some Nokia patents as well as 1,100 research and development people. The workers are based in Finland, India, the U.K. and Denmark.
Renesas had been licensing Nokia's modem technology since 2009 and the companies had already been working together on an HSPA+/LTE (High-Speed Packet Access Plus/Long Term Evolution) platform.
As part of the deal, the companies also plan to form a joint research initiative for future radio technologies.
The agreement effectively lets Nokia outsource a component required for its phones that has become increasingly commoditized, wrote Caroline Gabriel, an analyst with Rethink Research, in a note about the announcement.
In addition, while Nokia has been in the lead in coming out with new technology for standalone wireless modems like dongles, other companies have cornered the bulk of that market, she said. Huawei has 53 percent of the global market for standalone wireless modems and ZTE has 30 percent share, according to research from Berg Insight, Gabriel wrote.
The extent to which such companies have cornered the market is evidence in the complaint that Belgium modem maker Option filed last week at the European Commission. Option alleges that Chinese companies are dumping wireless modems into the European Union at unfairly cheap prices.
The agreement could help Renesas Electronics, a company formed earlier this year after the merger of NEC and Renesas Technology, improve its standing among mobile semiconductor makers, Gabriel said. The Nokia technology fills a gap in Renesas' wireless portfolio, offering it the possibility of competing with giants like Qualcomm, she said.
Nokia expects the deal to close in the fourth quarter this year.
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