Will Qualcomm Take The Bait?

Ever since early summer there have been stories that Qualcomm wants to diversify away from wireless chips.

The wireless market is commoditising and China, the biggest wireless market, is getting keener on using locally-made chips.

The most frequently quoted targets for a Qualcomm takeover were Xilinx and NXP.

Most people dismissed the stories as Wall Street-ers trying to promote a deal to suck some fees.

Now NXP’s shares are up 17% on reports that Qualcomm and NXP are talking turkey.

NXP does not deny the reports. The game could be on.

Qualcomm would be transformed by this takeover from a specialised wireless chip-maker to a broadline vendor with particular strengths in auto, security and mobile payments.

Would this be biting off more than it can chew? Yes, because it has little experience outside wireless. No, because it would give Qualcomm a solid base to protect it against the vagaries of the wireless market.

A positive is that Rick Clemmer has done most of the work necessary to streamline NXP into a lean, competitive machine.

However Qualcomm’s persona would change from this deal. Instead of leading an important segment of the semiconductor industry by out-spending and out-researching everyone else, Qualcomm would become a day-to-day vendor of a huge number of relatively mundane product lines.

Instead of relying on technical brilliance and a bullying exploitation of its technical superiority, Qualcomm would become a conventional semiconductor vendor getting down and dirty in the quest for sockets.


Comments

8 comments

  1. Institutional investors don’t own huge holdings as they did but the board is still made up of Bain, KKR etc. Clemmer himself is an ex KKR employee and if one had watched the FSL/NXPI merger the private equity guys did very well out of it when FSL shopped themselves in almost identical fashion. One might have also noticed that Clemmer issued a bit over a billion in bonds this year – I smell PE guys in the mix somehow. Also the NXP standard products division is being divested of as we speak. FSL’s Digital networking group has been effectively shut down (rumour internally is that Clemmer attempted to shop it without success) with the loss of thousands of jobs in Austin. This is an echo of the pre-NXP takeover of FSL when FSL took on the responsibility and the bad PR of closing groups and downsizing before the takeover was complete. Qualcomm could be very good for the few really great engineers in NXP currently but the problem is most of the really great tech is run more or less exclusively out of San Diego. So there will be a lot of collateral damage in any takeover by Qualcomm.

    • Digital Networking group was not shut down. We’re still selling, designing and planning chips to serve our customers’ needs.

  2. To my mind it will change Qualcomm fundamentally, Tim, from a company with a few products to a company with thousands. The San Diego-ites have not had to cope with this kind of operation before. They’re used to selling must-have stuff not might-have-if-the-price-is-right stuff. It looks curiously like one of Intel’s many ill-fated diversifications where a misunderstanding of the culture of a new market sector has led to serial disasters.

  3. It's happened before

    There have been worse suggested deals…I would assume Qualcomm want the automotive leadership from the Freescale ‘acquisition’, a lot of the push in 5G is for automotive related applications, QLCM are missing any expertise in this area…as for the rest…they could float the CPU business and sell off discretes & logic, and NFC – not sure how they’d ultimately balance the books though, (but that’s such an outdated concept in semiconductor these days)

  4. Yes I think it’s a rotten idea, SEPAM, and NXP comes with $9bn of debt so it would cost Qualcomm $40bn plus the costs of sacking loads of people. Mind you it would add $9bn to revenues.

  5. SecretEuroPatentAgentMan

    Wouldn’t there be a lot of overlap especially in processors and DSPs? Perhaps also in what NXP has that Qualcomm offers in SOCs. In that case being acquired by Qualcomm would be a brutal experience for NXP. From NXP’s front page product list:
    ARM® Processors
    Automotive
    Discrete & Logic
    NFC
    RF

    Only Discrete & Logic would escape “synergy”. NXP even has a drone on the front page and that is a field Qualcomm is active in too.

  6. I thought private equity no longer had a significant stake in NXP, martijn.

  7. hmm an article about NXP without a sneer towards private equity. Are you ok??

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