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nothing to offer but an unprotected flank. This business field is power devices. According to market researchers like IHS, this is a very strategic place with particular strong growth expectations. The demand in this field is driven by electromobility in general; a strong demand driver is the legislative situation in most industrialised countries that aims for lower emissions. In power electronics, it currently looks like Infineon remains unbeatable; even an axis formed of NXP and Freescale won’t be able to change this. So the die is cast is it really? After all, the terms of the planned merger could trigger dissent among shareholders of both companies, potentially resulting in a veto from the side of the owners. There are already voices speculating that other chipmakers or investors with deeper pockets than NXP could throw their hat into the ring and raise the offer. For the competitive situation in the automotive market such a perspective however would not change anything. NXP CEO: ‘Security, IoT, Cars’ Drove Freescale Deal By Junko Yoshida One Freescale executive who appears to have secured his spot in the soon-to-be merged NXP is Geoff Lees, senior vice president and general manager, responsible for Freescale’s microcontroller business. Reached by EE Times, Lees stayed mum, except to say that he used to work at NXP, before joining Freescale three years ago. In a one-on-one interview Tuesday (March 3) with EE Times, Rick Clemmer, CEO of NXP, said, “Geoff will be coming home to us. He’s a good guy. Glad to have him back.” Clemmer insisted that the planned NXP-Freescale deal is a strategic, not a tactical, acquisition. He explained, “Through the merger, we are adding Freescale’s computing power to our security and wireless communication strengths, in order to drive the Internet of Things.” Product divisions that don’t appear to belong to NXP’s stated focus on “security and connectivity with a smarter world” are Freescale’s NXP’s CEO, Rick Clemmer at MWC network processors and NXP’s standard products, Clemmer pointed out. “But if they continue to perform well, why not? We might as well keep them.” Clemmer, however, did not deny the possibility of letting the two divisions go, “if they can be sold at their full value.” NXP, in announcing the deal, stated that it will sell its own high-performance RF unit in order to avoid regulatory issues. “We’ll keep a stronger unit at Freescale, rather than ours,” he said. The two companies’ RF businesses, when combined, will pretty much hold the entire global high-performance RF market. Asked which regulatory bodies will be looking at the deal, Clemmer said, aside from antitrust authorities in the United States and Europe who will have to approve the deal, “The only one that matters is Mofcom,” the Ministry of Commerce in the People’s Republic of China. Other merger candidates? Freescale certainly isn’t the first company NXP has studied as an acquisition target. Past candidates include IDT and CSR, according to the NXP CEO. Had NXP completed a deal with IDT, for example, it would be “more like tactical deals Avago likes to make,” said Clemmer, since Avago keeps acquiring companies to get into adjacent businesses. NXP did not complete a deal with CSR, either. Clemmer said, “When we looked at them, we only saw 25 percent of the company that we wanted. We weren’t interested in the rest of the stuff.” Clemmer said that NXP has been long interested in Freescale. Aside from sharing the similar background of having been bought out by private equity funds, “We’ve known each other, and I’ve always thought it would make a strategic merger.” The debt loads independently carried by the two companies, however, stymied merger talk for a long time. Freescale in recent years has halted a decline in product revenue and it’s deleveraging effectively. Under Gregg Lowe, it’s getting profitable, making the Austin, Texas-based company more attractive, Clemmer explained. According to Dale Ford, vice president of technology at IHS Technology, the new company will become the 7th largest semiconductor supplier overall based on the firm’s preliminary market share data for 2014. Looking back, Ford said, “Both companies started to outperform the overall market during the past 2 years prior to the merger announcement (2013 to 2014). Before that the growth for each company was below overall market growth since at least 2008.” Really, no overlap? In the connected device market in which NXP hopes to lead, the four elements that matter are sensors, processing, connectivity and security, according to Clemmer. NXP leads in security. Both NXP and Freescale when combined have a broader connectivity portfolio. Although both have Bluetooth, NXP excels in NFC while it doesn’t have ZigBee. Processing is where Freescale shines. NXP’s microcontroller business is only one-fifth the size of Freescale’s, said Clemmer. Asked if they plan to adjust the two companies’ ARM Cortex-M microcontroller lines, Clemmer said that those are the details that NXP needs to deal with, after the completion of the merger, in terms of “product selection.” As for sensors, Clemmer acknowledges that Freescale has a sensor platform. But he quickly added, “I see sensors should be an area where we should work with partners.” Breaking down automotive chip business The merged NXP would become number one in automotive chips, a company “nobody can match,” said Clemmer. Taking a look under the hood, aren’t the two companies developing similar technologies to enable things like Advanced Driver Assistance Systems, security and connected cars? Not necessarily, said the NXP CEO. www.electronics-eetimes.com Electronic Engineering Times Europe March 2015 7


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