Intel Corp (INTC)

[Andy Grave]

..... author sees this combo as a deterrent to Intel aspirations.

http://www.forbes.com/sites/tiriasresearch/2016/09/30/quacomm-nxp-would-change-everything-in-semiconductors/?utm_source=yahoo&utm_medium=partner&utm_campaign=yahootix&partner=yahootix#4ca2e0ff3200

Quacomm + NXP Would Change Everything In Semiconductors

Tirias Research


Opinions expressed by Forbes Contributors are their own.
Jim McGregorJim McGregor, Contributor



Qualcomm_NXPA report in the Wall Street Journal said that Qualcomm was in talks to acquire NXP for an estimated $30 billion, marking another mega acquisition in the semiconductor industry. Ironically, it was NXP’s acquisition of Freescale Semiconductor in 2014 that sparked this recent acquisition wave in the semiconductor industry. After the announcement of that acquisition, other semiconductor companies rushed to acquire, merge, or be acquired by other companies to better position themselves for the coming Internet of Things (IoT) era. IoT requires a complex mix of expertise and intellectual property in logic, connectivity, and sensors along with other complementary technologies. In addition, there’s an abundance of cheap funding and a desire to build bigger companies for economies of scale as Moore’s Law cost scaling comes to an end.

NXP’s ’acquisition of Freescale created an IoT powerhouse. The combined company is the leader in the automotive chip market and security applications as well with the largest product line of ARM-based microcontrollers (MCUs) and microprocessors (MPUs). Thus far, that NXP/Freescale acquisition appears to be successful due to similar corporate cultures and complementary products of the two entities. An acquisition of the new NXP by Qualcomm, however, is a whole different ballgame.

On the negative side, Qualcomm (a southern California-based company) and NXP (a Netherlands-based company) have significantly different corporate cultures. Working with both companies, I can attest to this difference in cultures. However, the companies’ products and intellectual property portfolios (IP) are almost a perfect complement. NXP lacks RF and cellular modem expertise, and Qualcomm is just developing its embedded/IoT and machine intelligence solutions. In addition, Qualcomm is accustomed to fast innovating consumer applications like smartphones, while NXP is accustomed to slower moving and long running embedded designs like automotive and medical.

Together, though, the combined company would have the most complete semiconductor set of expertise in the industry and could thwart competitors like Intel from expanding into new or adjacent markets. In the view of TIRIAS Research, the combined entity would be in the driver’s seat of the entire electronics industry with the potential to even enter new markets like servers, which Qualcomm is just now making efforts to enter.


Such an acquisition might also spur further consolidation in the semiconductor industry, just when it looked like the acquisition trend was on starting to taper off. To be sure, the acquisition would put all other semiconductor companies back on their heels and force them to re-evaluate strategic options for future growth and competitiveness.

This acquisition may make sense for Qualcomm because it would allow it to expand its total available market (TAM) opportunity while increasing the strength if its IP portfolio. However, integrating such a large acquisition may be a challenge especially with a large number of Europeans that are protected by a complex web of labor laws. But in the view of TIRIAS Research, NXP would be a good acquisition target because of the company’s growth potential. Despite the size of such a deal, it would likely not face regulatory scrutiny because there is little overlap between the two companies. In addition, the size would likely prohibit a bidding war with other potential acquirers, which could include Intel.

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While our experience with technology acquisitions indicates that nothing is guaranteed until everything is signed, this acquisition would cause major seismic shifts throughout the industry. Almost immediately after the news hit, the next question was: who’s next? This acquisition spree is not over yet. As the cost of building chips in leading edge process nodes start to go up and as new compute workloads like neural network and machine learning take root, companies will be on the hunt for combinations that will give them an edge in new markets.

– The author and members of the TIRIAS Research staff do not hold equity positions in any of the companies mentioned. TIRIAS Research tracks and consults for companies throughout the electronics ecosystem from semiconductors to systems and sensors to the cloud.

Jim McGregor
Principal Analyst at TIRIAS Research
E-mail: [e-mail]
Twitter: @TekStrategist