Ericsson announced it will stop developing modems and shift part of its resources to investments in radio network R&D, Telecompaper.com reported on Sept 18, 2014. The company announced earlier it was reviewing the modem activities and has now decided to exit the business. Ericsson said it needs to devote more R&D resources to radio networks, especially within small cells, energy efficiency and M2M. The company sees an immediate need for around 500 new staff in this area, and parts of the modem organization will be able to support this expansion.

Ericsson took over the LTE thin modem operations as part of the breakup of the joint venture with STMicroelectronics in August 2013. Since then, the modem organization has focused on bringing the first devices integrating an Ericsson modem onto the market. This was achieved in August 2014 with the M7450, which Ericsson continues to deliver to its customers.

Since the takeover, the market for thin modems has shrunk, while strong competition, price erosion and an accelerating pace of technology innovation make it difficult to maintain the business without significant R&D investments. As a consequence, Ericsson has decided to shift away from modem development to increase focus on opportunities in radio networks.

The modem business is still expected to account for SEK 2.6 billion in R&D costs this year. The discontinuation of the business, including letting go of staff, will start in Q4, and Ericsson expects to have ended the activities by the second half of 2015. The modems business counts 1,582 employees distributed across the sites in Sweden (689), India (235), Germany (216), China (206), and Finland (122).