Motorola May Sell Its Semiconductor Business To French/Italian Firm

by , 11:30 AM EDT, October 16th, 2002

In case speculation about whether or not Apple will be adopting IBM's new PowerPC 970 for the Mac product line wasn't interesting enough, Observer Sanjay Samani tipped us off to a news report out of Europe that Motorola may be selling its semiconductor business. The report comes to us from the Financial Times (FT), who is reporting that STMicroelectronics, the world's 3rd largest semiconductor firm, is reportedly in talks to buy Apple's chip maker's semiconductor division. From that story:

STMicroelectronics, Europe's largest semiconductor company, is in talks to buy Motorola's semiconductor operations in a deal that would create the world's second largest chip manufacturer after Intel of the US.

A deal would represent the most dramatic consolidation in the semiconductor industry to date and one of the biggest foreign acquisitions of a US technology company.

ST, part owned by the French and Italian governments, on Tuesday denied it had held merger conversations with Motorola or any other competitor. But senior French and Italian officials said the two companies were discussing a deal that would create a chip business with annual sales of more than $11bn (€11.1bn).

One said a deal could come as early as next year if the talks, backed by both the French and Italian governments, succeeded.

There is additional information in the full article at FT.com's Web site.

The Mac Observer Spin:

The relevance to Apple in this is that Apple may be less than sanguine about having its processors controlled by a non-US company. With the fights that develop between the EU and the US over protectionism by both parties, the last thing Apple needs is to find itself unable to get its supply of PowerPC chips due to some political tiff over beef imports/exports. Also, Apple's business would be all that much less important to a new and improved STMicroelectronics, as it would be an even smaller percentage of its overall semiconductor revenue than it is with Motorola. That could result in Apple's concerns and needs being given shorter shrift than would make the company happy.

Enter the speculation that Apple will be moving to IBM's PowerPC 970, and we might have a very compelling reason behind this story that has nothing to do with data pathways and clock speeds. It certainly bears watching.

To play the other side of this coin, STMicroelectronics might be even more focused on Apple's needs than is Motorola. Motorola is a huge company with fingers all over the manufacturing map, revenues higher than Microsoft's, and layoffs of 45,000 people in the last couple of years that still leaves it with a couple of small cities on the payroll; semiconductors are only one part of the company's operations. While Apple's PowerPC business is a smaller part of the combined STMicroelectronics' semiconductor business, it is actually a larger part of the company's total business, as all STMicroelectronics does is make chips. STMicroelectronics may well be wanting to be a player in the PC market, and acquiring Apple's business would certainly make it one.

FT.com Article