With an estimated price of $47 billion, Qualcomm's acquisition of NXP is the largest deal to date in the semiconductor sector. The deal is expected to produce new and profitable synergies for the combined company in a wide range of markets, including self-driving cars, security, mobile communications and the Internet of Things (IoT).
Announced today, the purchase agreement for NXP has already been approved unanimously by the boards of both companies. The acquisition is expected to close by the end of 2017, although it's subject to the usual review by regulatory authorities in the U.S. and Europe.
Founded in 1985 and based in San Diego, Qualcomm has steadily expanded its offerings from its first CDMA digital wireless technologies to include the flagship Snapdragon system-on-chip (SoC) used in a wide range of mobile devices. Originally launched in 1963 as Philips Semiconductors, Netherlands-based NXP was renamed after a sale in 2006 and has become a leading global supplier of semiconductors for automotive networking, radio frequency identification, security and IoT.
Aiming for 'Ubiquitous Connectivity'
"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," NXP CEO Rick Clemmer said in a statement. "United in a common strategy, the complementary nature of our technologies and the scale of our portfolios will give us the ability to drive an accelerated level of innovation and value for the whole ecosystem."
By joining forces, Qualcomm and NXP hope their complementary technologies will open up new opportunities in a range of "strategically important areas," including automotive connectivity and infotainment, IoT, mobile payment security as well as wired and wireless communications. The combined company is also expected to expand the organizations' global distribution and business channels.
"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," Qualcomm CEO Steve Mollenkopf (pictured above) said in a statement. "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."
Eyeing a $138B Market by 2020
Both Qualcomm and NXP have grown in recent years through acquisitions of other companies aimed at broadening the reach of their products and services.
Last year, NXP acquired a competitor, Freescale Semiconductor, for around $12 billion, making it the world's leading manufacturer of electronics for cars. And since 2010, Qualcomm has purchased more than a dozen companies with a wide range of technologies, including the Wi-Fi networking firm Atheros, semiconductor maker Wilocity and Pixtronix, which specialized in multimedia device display technologies.
The latest deal will create a company with annual revenues of more than $30 billion and a potential market by 2020 worth $138 billion, according to Qualcomm and NXP. Qualcomm said it plans to pay for the acquisition through new debt and "tax-efficient use of offshore cash flow," noting that the structure of the purchase "provides a strong foundation for long-term capital returns to stockholders."
The previous largest transaction in the semiconductor industry was Avago's purchase of Broadcom last year for $37 billion.