NXP, a company with reported revenues of $6.1 billion in 2015 and with approximately 45,000 employees in over 35 countries and including 11,200 engineers, will be a good addition to Qualcomm's portfolio.
Qualcomm is buying all of NXP for $110.00 a share, representing a total enterprise value of approximately $47 billion. The main aspiration according to Qualcomm is to create a semiconductor engine for the connected world, and get a better portfolio. Two companies combined in one entity will be a strong player in automotive, Internet of Things, security and networking.
NXP recently merged with its competitor Freescale Semiconductor, a company that was doing a great job in automotive business. NXP, a Dutch company, reported revenues of $6.1 billion in 2015.
NXP is a leader in high-performance, mixed-signal semiconductor electronics, with innovative products and solutions and leadership positions in automotive, broad-based microcontrollers, secure identification, network processing and RF power.
The deal has a automotive twist as a NXP also has a good market share in automotive infotainment, networking and safety systems, with solutions designed into 14 of the top 15 infotainment customers in 2016. The complete customer portfolio includes 25,000 customers that will be added to Qualcomm's existing list.
Qualcomm is no stranger to acquisition. Back in 2011, the company bought Atheros Communications for $3.1 billion making its wireless portfolio stronger than ever.
Steve Mollenkopf, CEO of Qualcomm Incorporated said:
“With innovation and invention at our core, Qualcomm has played a critical role in driving the evolution of the mobile industry. The NXP acquisition accelerates our strategy to extend our leading mobile technology into robust new opportunities, where we will be well positioned to lead by delivering integrated semiconductor solutions at scale,” “By joining Qualcomm’s leading SoC capabilities and technology roadmap with NXP’s leading industry sales channels and positions in automotive, security and IoT, we will be even better positioned to empower customers and consumers to realize all the benefits of the intelligently connected world.”
The combined company is expected to have annual revenues of more than $30 billion, serviceable addressable markets of $138 billion in 2020 and leadership positions across mobile, automotive, IoT, security, RF and networking.
The deal is supposed to provide Qualcomm a great position in automotive industry, security, automotive safety sensors and RF enabling one stop solution for many automotive customers.
Qualcomm with its Snapdragon/Adreno Graphics capabilities can fight Nvidia well in the automotive market and can also add a 4G / 5G modem to a connected car platform. Qualcomm is definitely spending a lot of time in working on a self-driving car platform and combined with the help of NXP and Freescale it will stand a far better chance.
Even the announcement focuses on the hope that the new company will become a leader in in global automotive semiconductors, including ADAS, infotainment, safety systems, body and networking, powertrain and chassis, secure access, telematics and connectivity.
Apart from mobile / network 3G/4G and eventually 5G strengths, the new company will try to play a big role in IoT and security. There is a big market for broad-based microcontrollers, secure identification, mobile transactions, payment cards and transit, strength in application processors and connectivity systems and NXP plays a big role in this market.
The combined companies will have good network processors for wired and wireless communications and RF sub-segments, Wave-2 11ac/11ad, RF power and BTS systems.
The new company hopes to have better go-to-market capabilities to serve our customers in mobile, automotive, IoT, industrial, security and networking that should result with Substantial financial benefits.
Rick Clemmer, NXP Chief Executive Officer said: “The combination of Qualcomm and NXP will bring together all technologies required to realize our vision of secure connections for the smarter world, combining advanced computing and ubiquitous connectivity with security and high performance mixed-signal solutions including microcontrollers. Jointly we will be able to provide more complete solutions which will allow us to further enhance our leadership positions, and expand the already strong partnerships with our broad customer base, especially in automotive, consumer and industrial IoT and device level security," “United in a common strategy, the complementary nature of our technologies and the scale of our portfolios will give us the ability to drive an accelerated level of innovation and value for the whole ecosystem. Such a strong fit will bring opportunities for our employees and customers, as well as provide immediate attractive value for our shareholders, in creating the semiconductor industry powerhouse.”
So now that's happened and transformed Qualcomm to a much stronger player than any time before. This will put a lot of pressure on direct competitors including Intel, Nvidia, MediaTek and a few others. From today, people won’t be able to say "Oh I know Qualcomm, that is a modem company".
The world has just changed a bit.
