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What can companies learn from the NXP-Freescale merger?

Posted: 04 Dec 2015 ?? ?Print Version ?Bookmark and Share

Keywords:merger? semiconductor market? M&A? semiconductor industry?

The new NXP, created through a merger with Freescale Semiconductor worth $10 billion, will officially begin operations on Monday, Dec. 7. However, the bigger issue here is its impact on the semiconductor market.

Actors in other mega mergers announced in 2015 are also looking for teachable moments from the NXP and Freescale dealthe first two entities to consummate the marriage.

"We are in a historic period of M&A for the entire semiconductor industry," said Rob Lineback, a senior analyst at IC Insights. He estimated that by the start of December, semiconductor acquisition agreements had reached more than $102 billion. However, Lineback quickly added, "Not all of the major acquisitions will succeed. We might not know which ones were successful and which were not until 2017."

NXP-Freescale merger

Among mega-mergers announced this year were Avago buying Broadcom and Intel's acquisition of Altera. The jury is still out on those deals, but the analyst community appears confident in smooth sailing for the newly formed NXP.

Asked for reasons why competitors should worry about the new NXP, Tony Massimini, chief of Technology at Semico Research, gave three: the economy of scale the two companies bring, their strength in the automotive sector and a minimum of overlap in their product lines.

No expected cuts?

In particular, Massimini noted, the new NXP "will be a larger company which can deliver more manufacturing capacity, design resources, IP, and sales and marketing expertise."

This forecast, of course, assumes that Rick Clemmer, NXP's CEO, will uphold his end of the bargain. Massimini pointed out that Clemmer "has stated that there are no expected cuts to the fabs or design teams."

The broad product portfolio each company has, with little overlap, also fuels Massimini's optimism.

He said, "The combined portfolio will offer great synergy, especially for Automotive and Digital Networking." He explained, "NXP has many devices for various automotive functions, but no MCUs. Freescale is focused on MCUs for automotive covering three established architectures: PowerPC, ColdFire and ARM. Both companies offer security IP."

Clemmer

Clemmer: There are no expected cuts to the fabs or design teams.

Security is another element the combined forces have the potential to excel. "NXP has a well- established position in smart cards and also has cyber security for cloud applications," noted Massimini. "Freescale has high-end MPUs with security for digital networking."

Strength in IoT is another positive factor noted by the analyst community. Freescale brings analogue and sensors to the merger as well as MCUs. Both companies have been tailoring their product lines for IoT applications, said Massimini.

Jim McGregor, founder and principal analyst at Tirias Research, agreed. "The new NXP will have all the critical components for IoT/embedded applications. They have logic (MCUs/applications processors), wireless interconnects and sensors. On top of that, they have many complementary technologies, including the digital networking, wireless charging, and a complete hardware and software suite of security solutions."

Optoelectronics missing

The Freescale acquisition should make NXP a major player in sensors, according to IC Insights' Lineback.

Prior to the merger, the Dutch company had no MEMS-based sensors but has supplied magnetic-field sensors and temperature sensors, he said.

Freescale brings MEMS-based pressure and inertia sensors (accelerometers and gyroscope devices) as well as electric-field sensing products for proximity detection.

"The combination of NXP-Freescale should increase competition in a number of semiconductor sensor market categories, including acceleration and yaw segments. Price erosion in acceleration/gyroscope sensors has resulted in a decline in dollar-volume sales for this once booming MEMS-based category," he said. "Companies participating in sensors should expect more competition from NXP in the near-term," Lineback explained.


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