Qualcomm/NXP Would Add Strength in Auto, IoT, Security

Qualcomm’s total serviceable addressable market resulting from the acquisition would grow by 40 percent to $138 billion by 2020, Mollenkopf said. The deal would expand Qualcomm’s footprint in automotive, IoT, security and networking, he said. The combined company is expected to post annual revenue of $30 billion, the companies announced.

The proposed acquisition is about “complementary technology and scale,” said Mollenkopf, that will deliver an SoC (system on chip) technology road map in the “intelligently connected world.” The combined company would be a leader in mobile, modem, SoC, connectivity, compute and security technology, he said.

NXP’s infotainment, networking and safety systems are designed into vehicles from 14 of the top 15 infotainment customers in 2016, said the companies. The company has more than 25,000 customers through its direct sales channel and global network of distribution channel partners, they said.

In addition to infotainment, NXP brings automotive market strength in secure car access and in-vehicle networking and safety, Mollenkopf said, while Qualcomm has strength in “compute and multimedia.” Both are “trusted partners” in the global auto industry, while NXP brings a “complete solution” semiconductor offering, he said.

The growth of semiconductors in cars is expected to outpace the rate of vehicle production as features migrate from luxury vehicles to the broader market, Mollenkopf said. The companies will target the ADAS (advanced driver assist systems) and autonomous driving segments, believing ADAS development will be “similar to that of the smartphone where the breadth of technology matters” and lead to fully connected, autonomous vehicles.

In the IoT, NXP will bring expertise with its microprocessors, security and sensors. The combined company will position itself as a leader in broad-based microcontrollers, secure identification, payment cards and transit applications, Mollenkopf said. NXT’s global network of distribution partners will be a “key asset” allowing Qualcomm to bring its technology “beyond the global mobile ecosystem,” he said.

Reviewing Qualcomm’s role in the maturing mobile segment, Mollenkopf compared its history to the nascent automotive and IoT markets. Qualcomm views the car and the IoT as “very similar” to the mobile handset market in 2000, he said. “The technology and the pace of innovation in automobile and IoT will increase dramatically,” he said. “What a tremendous opportunity to extend the technology roadmap that we have in mobile.” The combining companies can drive “the next couple of decades of innovation in those markets,” he said.

The acquirer’s technologies and communications systems designed for the mobile device ecosystem will translate to the IoT “as we bring the IoT from its early stage today to widespread global adoption,” Mollenkopf said. For 30 years, Qualcomm technology connected people “and some of the things around them,” he said: For the next 30, “we’ll be interconnecting their world and everything around them.”

Mollenkopf cited his company’s role in building out the 5G ecosystem, “applying our core smartphone technologies into rapidly expanding adjacent technologies,” including mobile computing, automotive, the IoT and networking. Its work in low-power embedded computing is driving development in machine learning, computer vision, sensor fusion and autonomous driving technologies, he said.

The takeover is part of the company’s merger and acquisition strategy to “accelerate and de-risk our growth agenda,” said Mollenkopf. He also cited acquisitions including CSR for products, channels and customers in the IoT and infotainment and its pending joint venture with TDK (see report in the Jan. 14 issue) to address the “increasing complexity of the numerous spectrum bands that need to be supported for LTE and 5G.”

On why the timing is right for NXT to be acquired, its CEO Richard Clemmer said the company made good progress with its product portfolio but needed expanded computing capability in ADAS. He highlighted machine learning capability the company didn’t have internally. In the IoT, Clemmer said, NXP was “positioned okay” on the connectivity front near term, but “when we looked out over a couple of years, we clearly needed a much broader connectivity platform than we had.”

NXP’s board unanimously approved the proposed acquisition. The deal is pending regulatory approvals. Qualcomm shares closed 2.8 percent higher Thursday at $$70.09; NXP shares closed 0.4 percent higher at $99.08.