NXP Says Freescale Will Boost Operations in IoT, Connected Cars

With the $12 billion deal complete, NXP executives expect the combined company to be number-one in such areas as automotive and identification tech.


Freescale is now part of NXP Semiconductors as the two companies on Dec. 7 announced the closing of their $12 billion merger.

The new company, which will continue operations as NXP Semiconductors, will boast $10 billion in combined annual revenue, about 45,000 employees, more than 11,000 engineers, a presence in more than 35 countries and more than 75 sales offices worldwide. It also is better positioned to continue its push into general-purpose microcontrollers (MCUs) and such emerging markets at automotive technology, the Internet of things (IoT), smart cities, home automation and medical devices, according to officials.

The deal was announced in March.

Automotive technology is a market of particular opportunity, they said, with the combination of Freescale's products with NXP's putting the new company in the number one spot in a range of areas, from infotainment and safety to body elements and security. As the industry moves toward self-driving cars, everything from networking to analytics to connectivity will play critical roles, and NXP will have products that address these areas.

NXP officials reportedly expect that 40 percent of the new company's revenue will come from the automotive business.

"The car industry is clearly changing in the next five to 10 years, much more than it's changed in the last 50 years," Kurt Sievers, executive vice president and general manager of NXP's Automotive Business, said during a conference call with analysts and journalists to discuss the acquisition, adding that there is little, if any, overlap between the automotive product portfolios from Freescale and NXP. "In combination, we are a powerhouse in the automotive industry. … We will make cars sense, think and act."

The semiconductor industry is rapidly changing to meet the new demands brought on by such trends as cloud computing, mobility, security and broad connectivity through the IoT, and that, combined with slowing demand for PCs and other computing devices, is helping drive consolidation in the space. That includes not only NXP's acquisition of Freescale, but also Intel's move to buy programmable chip maker Altera for $16.7 billion as it looks to bulk up its capabilities in the IoT, data center and cloud computing. Altera's field-programmable gate arrays (FPGAs), which can be programmed and reprogrammed through software, are becoming increasingly important accelerators for cloud and Web-scale environments for improving performance and holding down power consumption

In addition, Avago Technologies is buying Broadcom for $37 billion to create a company that can better compete with the likes of Qualcomm and Samsung.

Executives with the Netherlands-based NXP said the Freescale acquisition was important to the company as it looks to compete with a highly connected world that will see more than 40 billion intelligent, connected devices by 2020.

"The requirement for constant connectivity all the time and secure connectivity is critical, Steve Owen, executive vice president of sales and marketing at NXP, said during the conference call. "This is a very complementary merger and portfolios."

In a statement, CEO Rick Clemmer said the new company is "focused on the high growth opportunities in the smarter world, capitalizing on the emerging opportunities offered by the accelerating demand for connectivity, processing and security. Today's formation of the new NXP is a transformative step on our journey to become the industry leader in high-performance mixed-signal solutions."

The company expects to be the number one vendor of such semiconductor technologies as broad-based MCUs, communications processors, identification, security, radio-frequency (RF) power transistors and automotive, combining Freescale's expertise in such areas as connected cars with NXP's capabilities in secure transactions, smartphone RF and industrial systems, Owen said.

NXP officials said they expect to save $200 million in 2016 and $500 million in the future as they combine the two companies. In response to an analyst question during the conference call, company officials decline to give much detail concerning expected job cuts, saying only that they expect few, if any, in such jobs as engineering or customer-facing positions, but that there would be some in operations and administration areas.