In the latest acquisition in what has been a busy time for mergers in the industry, Qualcomm, known mostly for components in mobile phones, aims to get their designs more involved in automotive and IoT applications.
The transaction is expected to go into effect by the end of 2017. Rumors of the acquisition had been circulating over the last month, but Qualcomm formally made the announcement this morning. In the announcement, Qualcomm's CEO, Steve Mollenkopf cited NXP's broad customer base as well as its manufacturing prowess which will give Qualcomm the ability to quickly scale designs in new markets.
Qualcomm CEO, Steve Mollenkopf - Image courtesy of Qualcomm
“By joining Qualcomm’s leading SoC capabilities and technology roadmap with NXP’s leading industry sales channels and positions in automotive, security and IoT, we will be even better positioned to empower customers and consumers to realize all the benefits of the intelligently connected world.”
This move makes a lot of sense as our devices are becoming ever more interconnected, especially since most of these systems are connected to mobile devices. Being involved more closely in IoT and automotive designs will help Qualcomm's mobile devices to integrate more smoothly into these applications... and obviously increase profit potential by expanding into new markets.
What Does NXP Bring to the Table?
NXP is considered an industry leader in semiconductor solutions for automotive applications. NXP acquired Freescale last year, which allowed them to develop discreet automotive applications into more complete systems that run on Freescale's processors. That announcement had a similar message to the one released this morning—each states the goal of delivering better-interconnected systems by collaborating on devices that had been developed separately before.
NXP and Freescale CEOs Rick Clemmer and Greg Lowe doing a Q & A during the merger - Image courtesy of Forbes
NXP is also known for their innovations in RF power and secure identification. All of these specialties make them an ideal partner for a company like Qualcomm who specializes in components for mobile devices and is looking to expand in the IoT and automotive markets. Qualcomm also stands to gain significant ground in the realm of security, especially as safeguards against the rising number of IoT hacks become increasingly important in the success of these systems.
The acquisition of NXP's manufacturing facilities spread around the world will also help Qualcomm, who normally outsources the manufacturing of their patents, get their chips to market faster. Qualcomm's venture into the automotive and IoT markets will be aided by this vertical integration. The end goal is to make the incorporation of their components more appealing to designers who want a smooth process for integrating multiple devices into complex systems that require interconnectivity. Cutting down on the points of contact and legal hurdles required for the design and manufacturing process should help with that.
Will Merger Fever Continue?
The era of semiconductor companies stagnating in their own isolated niches is coming to an end. In order to survive, chip makers will need to either collaborate or merge.
Get ready to see a lot more of this... and remember to put NXP under the Qualcomm family tree - Image courtesy of Alex Voica
The need for collaboration is further fueled by an ever-increasingly educated consumer base that highly values compatibility with multiple systems. Simply having a strong brand isn't enough to guarantee successful products, as companies like Samsung can attest.
I expect to see more mergers and acquisitions in the coming months. As devices are becoming more interconnected, so are the manufacturers of their components. While business is certainly good for the corporate law firms who oversee the negotiation of these acquisitions, the big winner will hopefully be designers. Engineers may end up facing less red-tape to cut through when connecting systems for the IoT devices they develop.