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Is NXP paving the way for the whole semi-conductor industry?

Week 37, 2006

Now, NXP ownership includes Kohlberg Kravis Roberts (KKR), Silver Lake Partners, Alpinvest, Bain Capital and Apax Partners. The private equity firms paid EUR 6.4 billion for 80.1% of the company, the remaining 19.9% still being held by Royal Philips. NXP has become the second largest European semi conductor firm after ST Microelectronics, and will spend EUR 1 billion in R&D. NXP has over EUR 1.2 billion in cash and credit reserves and may consider further acquisitions.

This move is not isolated: a few years ago, Siemens span off its semiconductor unit and renamed it Infineon, which in turn separated from its flash memory activity that was renamed Qimonda. AMD transformed its flash unit into Spansion.

NXP managers says they are happy to have become an independent company as they fell they lacked recognition in the larger Royal Philips group. NXP is strong on analog chips that are used in digital TV sets and music players. NXP has now the ambition to become one of the top five semiconductor players by focusing on entertainment products, such as multimedia cell phones, digital televisions, portable players, and other consumer devices as well as in the smart card technology.

NXP involvement in the smart card industry will undoubtedly be reinforced by the new situation of the company. NXP is already a key player on the contactless card (and more globally contactless secure transaction device) market, thanks to Mifare division and a strong involvement in NFC. The company is also strongly involved in identity applications, as demonstrates its selection by the US Department of State for the ePassport (cf. below).

Other semiconductor divisions belonging to large groups, such as Sony, Toshiba or Samsung  will undoubtedly have a strong interest in witnessing the future of the newly independent and private equity funds owned company.

Thierry SpanjaardChief EditorSmart Insights