India has the second highest number of employees after its headquarters in Sweden.
    
At present, Ericsson employs 1,582 employees at its modem division, with 689 in Sweden, India (235), Germany (216), China (206) and Finland (122).
     
Ericsson in a statement said: "It will discontinue future development of modems and shift parts of resources in modems to radio network R&D to better capture growth opportunities in this area."
     
The change in strategy for modems comes as the company completes its previously communicated evaluation of the future of the modems business, the NASDAQ-listed firm added.
     
"Discontinues development of LTE thin modems with the intent to reduce or redeploy workforce. Now entering into local co-determination negotiations with employee representatives to determine next steps," it said.
 
Ericsson's LTE multi-mode modems targets smartphones, tablets and other connected devices.
     
Modem enables a computer or a smart device to transmit data over telephone, cable lines, optic fibres, etc.
     
"In order to capture opportunities in radio networks, especially within small cells, energy efficiency and M2M, Ericsson has an immediate need to increase its R&D resources by approximately 500 people," the firm said.
     
Parts of the Modems organization have a relevant R&D competence base to support this growth, it added.
     
On the impact, Ericsson said: "The execution of the announced change in strategic direction will commence during the fourth quarter 2014 and we still estimate the R&D cost for Modems to amount to approximately Swedish Krona 2.6 billion for the full year 2014."
     
The announcement will lead to a significant reduction in costs related to the modem business in the first half of 2015 and modems will have no impact on Group P&L from the second half of 2015, it added.
     
Ericsson took over the LTE thin modem operations as part of the break-up of the joint venture with ST Microelectronics in August 2013.