Advanced mobile phone solutions provider STMicroelectronics and NXP, an independent semiconductor company founded by Philips, will combine key wireless operations to form a $3 billion joint-venture company with strong relationships with all major handset manufacturers.

STMicro said it would pay NXP $1.55 billion to own 80 per cent of the venture - a first sign of consolidation that had been expected in order to combat falling prices and spread high industry research and development costs.

The merger combines the world's third- and fourth-biggest wireless chipmakers, which combined had about 10 per cent of the global market in 2007, according to iSuppli. Qualcomm had about 18 per cent and Texas Instruments had roughly 16 per cent.

''The new company will have the scale to better meet customer needs in 2G, 2.5G, 3G, multimedia, connectivity and all future wireless technologies,'' the companies said in a joint statement, adding, ''The combined venture will own thousands of important communication and multimedia patents.''

The new company will be a top industry player and among the few companies with the scale and expertise to pursue the R&D investments necessary to establish itself as a leading player in the wireless and mobile-multimedia market, it added.

The companies plan to combine key design, sales and marketing, and back-end manufacturing assets into a streamlined worldwide joint venture that will rely on its parent companies and foundries for wafer fabrication services. The new venture will be positioned with all of the vital technologies for UMTS (Universal Mobile Telecommunication System); for the emerging 3G Chinese standard; as well as other cellular, multimedia and connectivity capabilities, including WiFi, Bluetooth, GPS, FM Radio, USB, and UWB (Ultra-wideband), to effectively serve its global customers with complete wireless and mobile solutions across the spectrum of applications. The JV will also integrate the Silicon Laboratories' wireless and GloNav's GPS operations recently acquired by NXP, the statement added.

Nokia, STMicro's biggest customer, said the deal was a good thing for the handset industry.

"We welcome the emergence of this joint venture creating a strong player serving the top mobile phone manufacturers, understanding the needs of these customers and providing the required speed of innovation," Nokia's head of sourcing and procurement, Jean-Francois Baril, said in a statement.

The new company will be incorporated in the Netherlands and headquartered in Switzerland with approximately 9,000 employees worldwide. The joint venture is designed with low capital intensity, while having access to secure leading-edge manufacturing capacity from both parent companies and foundries; and will operate its own very competitive assembly and test facilities in Calamba, the Philippines and Muar, Malaysia.

NXP's Calamba site as a whole will be transferred to the JV. In addition, part of ST's back-end operations in Muar will be separated from the parent company's existing facility in the area and transferred to the JV. The new company will also benefit from a dedicated worldwide sales and customer support team.