Silicon vendor Freescale Semiconductor has announced it is to exit the mobile chip market, claiming it lacks the scale to compete successfully in the sector. In a statement, the company said it intends to complete a sale, joint-venture or “other transformation” of its mobile handset chipset business in the coming months in order to focus on other areas such as automotive semiconductors, where it is a market leader. “In the cellular handset chipset market, it has become evident that this business needs considerably greater scale in order to achieve a position of market leadership and long-term success,” admitted Freescale’s chairman and chief executive Rich Beyer, who joined the firm earlier this year. The company said it had also altered its agreement with Motorola, one of its key mobile customers and its former parent company. In the statement, Freescale says that Motorola has agreed to provide “certain consideration” in exchange for dropping its minimum purchase commitments.

In its analysis of the developments, the Financial Times says that Freescale has been affected by ongoing consolidation in the mobile handset market and Motorola’s shrinking market share. It adds that the increasingly complex chipsets demanded by vendors has benefited larger rivals such as Qualcomm as smaller vendors have been unable to make the level of investment required to remain competitive. Even Motorola has begun buying more chips from Qualcomm, the report says. According to figures from research firm iSuppli, Freescale fell from fourth to eighth position in the global mobile chip market last year and has a market share of 3.6 percent (by sales) compared to 16.7 percent for Texas Instruments and 19.1 percent for Qualcomm, the market leader.