The move may lead to 1,600 job cuts.
STMicroelectronics and Ericsson have agreed to split their struggling mobile chip joint venture, which was formed in 2008.
Both firms failed to seek a buyer for JV, dubbed ST-Ericsson, and decided to split up the venture.
Ericsson will assume activities employing about 1,800 people with most based in Sweden, Germany, India and China, while STMicro will take 950 employees, who will be primarily employed in France and in Italy.
The rest of JV's assets not taken over by STMicro and Ericsson may lead to 1,600 job cuts.
Ericsson will take on design, development and sales responsibilities of LTE multimode thin modem products, including 2G, 3G and 4G multimode.
STMicro said it expects to incur cash costs in the range of $350m to $450m, as the result of the deal.
Both companies have named Carlo Ferro as president and CEO of ST-Ericsson, effective from 1 April 2013.
Ferro, who will oversee the transition, is currently chief operating officer of JV and succeeds Didier Lamouche.
Ericsson president and CEO and ST-Ericsson chairman of the board of directors, Hans Vestberg, said the company continues to believe that the thin modems hold a strategic value to the wireless industry.
"With this move Ericsson will create a highly focused "thin modem only" operation - an area in which both parents have invested significant amounts to establish industry leading technology and Intellectual Property," Vestberg said.