The micro-chip giant STMicroelectronics will be partnering with Swedish wireless equipment maker Ericsson to create a 50-50 joint venture that will produce wireless chipsets for mobile handsets.
The merger company will employ around 8,000 and will supply four of the industry's top five handset manufacturers: Nokia, Samsung, Sony Ericsson, LG and Sharp.
News comes a few months after STMicroelectronics bosses had indicated that they planned downsizing their European operations.
Locally, The Sunday Times had revealed early in June that the group had asked the government for a financial support package running into tens of millions of dollars in order to stay.
The news followed comments made by the chipmaker's CEO Carlo Bozotti, who had told the Financial Times that he had plans to close or sell 10 to 15 per cent of the group's operations, in an exchange which suggested that some of that pruning would take place in Europe.
The government then made a counter offer but there had been no response so far. Then, early in June, the company's operating officer Alain Dutheil was reported by Forbes.com saying that the company had no plans to shut down any more European plants.
He still highlighted the group's concern with the strengthening euro.
"We have taken many measures in the past year but the euro-dollar exchange rate is a real challenge," he said, pointing out that, while the company's sales were all in dollars, 40 per cent of its manufacturing costs and two-thirds of the research and development spend are in Euros.
Now, the group has announced that it will be strengthening its presence in Europe with the merger with Ericsson.
"By combining the complementary strengths and product offerings of Ericsson and ST in platforms and semiconductors, the joint venture is well positioned to become a world leader," Ericsson Chief Executive Carl-Henric Svanberg was reported saying by the Associated Press.
The Kirkop plant, which employs some 2,200 workers and is Malta's biggest exporter, is said to be facing losses that could reach €58 million (Lm24.9 million) a year, primarily as a result of labour cost and exchange rate pressures.