Qualcomm to acquire NXP Semiconductors for $47 billion

Qualcomm and NXP have both signed a definitive agreement that will see that mobile SoC giant acquire Netherlands based NXP at a cost of $110.00 per share. This works out to a deal worth $47 billion, the largest ever semiconductor deal, surpassing the $37 billion purchase of Broadcom by Avago.

Smartphone enthusiasts won’t necessarily be familiar with NXP, but the company produces a wide range of semiconductor parts, ranging from ARM microcontrollers to audio amplifiers and transistors. NXP’s product range and sales channels will help Qualcomm reach into the automotive, security, and internet-of-things markets that have previously been out of reach.

The NXP acquisition accelerates our strategy to extend our leading mobile technology into robust new opportunities, where we will be well positioned to lead by delivering integrated semiconductor solutions at scale,” – Steve Mollenkopf, CEO of Qualcomm

Analysts believe that NXP’s position in the growing automotive chip market is the primary motivation behind the purchase. Qualcomm is thought to want to put its own components inside self-driving cars, and NXP’s sales channels and complimentary products will provide a way in.

Importantly, NXP also owns a significant manufacturing operation, part of which was acquired last year when the company purchased semiconductor rival Freescale. The company owns 14 manufacturing and packaging factories in five countries. Qualcomm, on the other hand, is a fabless semiconductor company, which means that it sends its designs off to partners, such as TSMC or Samsung, for manufacturing.

However, some of NXP’s older factories are unsuitable to manufacture typical Qualcomm products, so don’t expect NXP to start building smartphone processors anytime soon. Although NXP’s sensor, RF, power management, and automotive MCU production lines could be of some use to some of Qualcomm’s other products.

“The combination of Qualcomm and NXP will bring together all technologies required to realize our vision of secure connections for the smarter world, combining advanced computing and ubiquitous connectivity with security and high performance mixed-signal solutions including microcontrollers.”

Combined, the two companies are expected to turnover an annual revenue worth approximately $30 billion. The deal is still subject to regulatory approval in various jurisdictions and other closing conditions, so is not expected to be fully completed until the end of 2017.