According to sources quoted by The Wall Street Journal, Qualcomm believes that it will acquire NXP Semiconductors and may reach a deal in the next three months. The transaction amount may be as high as $30 billion, after the news Both semiconductor stocks have risen.
So why is Qualcomm going to acquire NXP Semiconductors, and what changes will it bring once the acquisition is completed?
What kind of company is NXP?
Perhaps many people have heard of Intel, AMD, Qualcomm and other companies, but they don't know much about NXP.
In fact, NXP Semiconductors is also a strong semiconductor company with a strong presence in automotive electronics, RF and identity and security. In particular, since the merger of NXP and Freescale in March 2015, the new company has a market capitalization of more than $40 billion. NXP Semiconductors is the world's largest automotive semiconductor company and China's number one ARM MCU supplier.
In automotive electronics, NXP Semiconductors is actively deploying autonomous driving while consolidating its existing dominance.
Since autonomous driving is already the trend of the times, this will inevitably lead to a huge market. If you want to achieve automatic driving, you need to perceive the surrounding environment with the help of radar and video recognition. Secondly, you need a powerful processing environment to process the collected data and provide timely feedback. Finally, you need to make feedback based on the feedback results. Timely response allows the car to operate safely. In order to safely drive the car, the industry further promoted the communication between the car and the car, and the vehicle and the object, and was called the V2X. NXP Semiconductors has a good technology accumulation in V2X, automotive radar solutions, and autonomous driving computing platforms.
In terms of radio frequency, NXP Semiconductors also has deep technical accumulation.
Nine of the world's five mobile phones use NXP's power amplifiers. It can be said that NXP has a high market position in the RF field. In the context of the booming mobile devices and the upcoming 5G era, the RF chip market will continue to be hot. Since 5G communication has a data rate of up to 10 Gbps and a delay of no more than 1 ms, this makes conventional RF devices unable to meet such high requirements. The GaN material device with natural advantages has become the favored target of RF manufacturers. Especially in 5G communication, the high frequency part will be the stage of the GaN device with innate advantages, and the design of GaN products. NXP Semiconductors has a lot of experience in this regard, packaging, manufacturing, etc., its new Airfast 48V GaN equipment has also been well received by customers. In addition, NXP's RF chips can be used in smart homes as the Internet of Things era opens, and this is a very large market.
In terms of identity and security, NXP Semiconductors also has strong technical strength and its absolute leadership cannot be shaken - NXP Semiconductors has more than 1,700 security patented technologies that guarantee 80% of passports worldwide.
Although QR code payment has a large market share in China, the NFC solution is relatively more secure in terms of security, especially as NFC payments are gradually rolled out in China, and NFC payments will also occupy a place. Xiaomi 5 is equipped with NXP's full-featured NFC solution, with the introduction of functions such as MiPay, which can implement functions such as bus card payment and shopping payment on Xiaomi 5. NXP Semiconductors can also open up a vast market through the promotion of NFC in China.
Therefore, although NXP Semiconductors is not as good as IBM, Intel, and ARM in terms of market value, it is not as good as Qualcomm in market value, but it does have its own unique features, and its expertise in automotive electronics, radio frequency, etc. in the Internet of Things, autonomous driving In the 5G era, there are areas with broad market prospects.
Why did Qualcomm acquire NXP?
Although Qualcomm has been in the 3G era, it is now a giant with a market value of $93 billion, but Qualcomm was once a miserable company and almost bankrupt. It was only after CDMA became the mainstream standard in CDMA. After CDMA became the mainstream standard in the 3G era, Qualcomm was almost in a dominant position in the 3G era. On the mobile phone chip, Qualcomm pulled Texas Instruments off the altar to achieve a high degree of CDMA technology. In addition, because most of the underlying patents are in Qualcomm, Qualcomm can use this to establish anti-patent authorizations with communications companies such as Ericsson, Huawei, and Nokia, and to charge mobile phone manufacturers with Qualcomm. However, this is also a lot of vendors who hate the above behavior of Qualcomm, so that Qualcomm is marginalized in the 4G era.
Because Qualcomm's revenue is largely from patent licensing – in 2014, Qualcomm earned a profit of US$6.6 billion from its patent business, and its chip business earned US$3.8 billion. Nearly 60% of its operating profit comes from technology licensing fees. In 2015, Qualcomm released its third-quarter earnings report, net profit dropped by 44%. The root cause of this is that in the 4G era, Qualcomm’s patent advantage no longer exists, and the NDRC’s anti-monopoly has caused some mobile phone manufacturers to delay Qualcomm entered into a new licensing agreement, which together led to a sharp drop in Qualcomm’s technology licensing revenue in the third quarter of 2015. In the long run, with the 4G and 5G eras, Qualcomm is no longer as strong as the 3G era, and with the intentional and unintentional crowding out of communication standards in China and Europe, Qualcomm's patent licensing revenue will decrease year by year.
And Qualcomm's other revenue chip business is not optimistic.
At present, the competition in the mobile phone chip market is also very fierce. MTK, Huawei HiSilicon, Samsung, and Spreadtrum are all working hard in this area. ZTE, LG and other manufacturers are also trying to make their own mobile phone chips, because Huawei HiSilicon and Samsung can do it. Vertical integration and self-production, which means that in the near future, Qualcomm may lose a considerable part of the Android mobile phone two major mobile phone brands, and ZTE and LG once used their own mobile phone chips for their own mobile phones, Qualcomm is likely to To lose some markets.
At the same time, MTK is also actively attacking high-end mobile phone chips. Spreadtrum has also become the leader of the money with the support of Ziguang. In the long run, MTK and Spreadtrum will also be more competitive opponents. In addition, chip giants such as Intel are also actively expanding the mobile phone chip business. After Intel received Infineon's chip division, it also began to squeeze the Qualcomm market on the baseband. For example, some Apple 7 mobile phones abandoned Qualcomm and adopted it. Intel's baseband. Therefore, the author believes that whether it is a patent licensing business or an authorized chip business, it is not easy for Qualcomm to maintain its current level. It is basically impossible to get a higher level.
Then the problem comes. If you can't find a new profit growth point and find a new direction of development, it will bring a series of problems such as stock price decline. NXP is precisely a chicken that will produce golden eggs, especially the automotive electronics, radio frequency and other technologies that it is good at. In the Internet of Things, autonomous driving, and the 5G era, there are areas with broad market prospects. The acquisition of NXP Semiconductors clearly solves the problem of what Qualcomm's next story should say.
| What can Qualcomm get when it acquires NXP?
First, it can make up for shortcomings in technology.
Although NXP Semiconductors has a much lower market value than Qualcomm, it is almost dominant in terms of automotive electronics, and its market position is booming. Non-digital devices such as the Internet of Things, automotive electronics, and autonomous driving require a large number of RF devices. And this is exactly what NXP Semiconductors is good at.
It is precisely in this respect that Qualcomm does not have much technology accumulation - Qualcomm is mainly good at digital design, the strongest is processors, transceivers, etc. These are digital-dominated, non-digital devices, Qualcomm is not too More technical accumulation. In the wake of the Internet of Things, autonomous driving and the 5G era, Qualcomm's technical support in order to tell stories in these areas requires a lot of technical support from NXP Semiconductors.
Second, it is possible to revitalize funds.
Qualcomm does not lack liquidity, and Qualcomm and Apple are somewhat similar. If the products are sold overseas, the money will not be returned to the US – because once the funds flow back to the US, a large amount of tax will be paid. Therefore, proper overseas acquisition can make it impossible to flow. From this perspective, the probability of Qualcomm's acquisition is quite high.
Third, NXP Semiconductors' business is strong in wind resistance.
Although the competition of Qualcomm and MTK and Spreadtrum's mobile phone chip market is fierce, the market is very large. Once it is successful, it will be very profitable if it accounts for half of the market. However, because the mobile equipment factory is too concentrated, this time the risk of the market is relatively large - if Apple's order is lost, one-fifth of the market will be gone, if Samsung's order is lost, a big The block market has been lost, especially in the case of Huawei, Samsung, ZTE, LG and other companies have developed their own mobile phone chips, the risk of the mobile phone chip market is even greater.
NXP Semiconductors is mainly based on auxiliary ICs such as industrial and automotive electronics. Although the shipment volume is not as large as that of mobile phone chips, the profit margin of these ICs is relatively high, especially the customers are scattered. The customers who make industrial chips are hundreds. Even thousands of homes, therefore, these businesses are better at wind resistance. If Qualcomm acquires NXP Semiconductors, it will have a relatively stable source of income.
| Conclusion
Although the acquisition of NXP Semiconductors from the perspective of Qualcomm has many advantages, if you stand on the side of NXP Semiconductors, there is no urgent reason for selling - NXP Semiconductors' market dominates, there is no such thing as being able to provoke itself. Competitors have good profit margins, and they are not short of money. Selling themselves to Qualcomm may not have obvious benefits for NXP Semiconductors. However, the capital market is so magical, just as there is money to make the ghosts, as for how the next acquisition will develop, please wait and see.
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