With STMicroelectronics being a major supplier to Nokia and with Nokia on the verge of being sold to Microsoft, the company is eyeing the staggering €5.4 billion acquisition with confidence instead of trepidation over the possibility of oozing one its main clients.

Contacted by this newspaper, a spokesperson for ST said, “The company has a long standing relationship with Microsoft and looks forward to further strengthening this relationship going forward thanks to its broad portfolio of products for mobile applications”.

But Nokia told The Malta Independent on Sunday that it “does not typically comment on supplier relationships and it cannot speculate on what might happen after the transaction with Microsoft closes”.

The Italo-French chip producer has for the last few years been developing and producing mobile phone microchips for the Finnish Nokia, but the future of that relationship is uncertain as Nokia’s devices and services branch will be acquired by Microsoft in the first quarter of next year.

It was announced recently that the mobile phone section of Nokia will be acquired by Microsoft for €5.4 billion. Nokia has been trying to increase its share of the smart phone market with its Microsoft Windows-based Lumia phones. However, the production of smart phones, as well as traditional phones, will be transferred under Microsoft’s umbrella.

According to the deal, “approximately 32,000 people are expected to transfer to Microsoft, including 4,700 people in Finland and 18,300 employees directly involved in manufacturing, assembly and packaging of products worldwide”.

But it is yet unclear if third party companies that supply Nokia, such as STMicroelectronics, will be affected or not. In 2011 it was announced that the new Lumia phones would feature ST-Ericsson chips, but the partnership between ST and Ericsson has broken up and it is not clear whether ST will continue to manufacture chips for Nokia under the new Microsoft structure.

Sources close to the industry said that Microsoft could very well start producing its own chips. Despite being a software company, Microsoft recently started producing its own hardware such as tablets and gaming consoles.

Another option for the company could be to build the chips closer to home. One of the possibilities is Intel, with which Microsoft has a long-standing history. Intel is “the world’s largest and highest valued semiconductor” chip maker, based on revenue”.

And recently, it has been trying to tap into the smart phone market. Such a move could lead to a drop in demand for ST with the possibility of one or more of its global plants being affected.

But others might argue that the move could actually strengthen ST’s position, as there could be an increase in the demand for its microchips.

When the news of the Nokia-Microsoft deal broke, the microelectronics company’s shares actually jumped by almost three per cent.

ST Malta employees on forced leave because of ‘operational adjustments'

The ST Malta plant was again in the news this week after it was revealed that some of its workers were on forced leave. The workers in question work in the PBGA section that produces microchips for export. According to the Economy, Investment and Small Businesses Ministry, this was “because of operational adjustments as per customer demands”.

The ministry said that the government is constantly in contact with ST management to monitor such fluctuations that are dictated by the global market of semiconductors. It also said that the PBGA assembly and testing line in Malta is one of the most successful in the ST global system.

Prime Minister Joseph Muscat insisted in Parliament that media reports on ST’s situation were “premature and caused a lot of undue worry”. He said that the government has been in contact with the management at ST, who reassured that “normal cyclical factors” were at play.

“I also want to deny reports that I am going to speak to the Italian Prime Minister and French President on the matter. There is no issue at ST, therefore talks with the two are definitely not on the agenda,” Dr Muscat said.

ST employs around 1,500 people in Malta, making it the largest private sector employer and the largest exporter. In 2008 it had asked the government for financial assistance after it was reportedly registering losses of around €60 million a year because of labour costs and exchange rate pressures. The company slid further into trouble in 2010 when it experienced a drop in demand for exports and had to resort to austerity measures, such as a reduction in salaries. Sources said that the company was “on the verge of closing the Malta plant.” The previous administration had reached an agreement with the firm and gave it a “substantial sum” in financial assistance. ST was also obliged to invest in new technology in Malta and since then has reported a steady growth.