Merged NXP, Freescale focused on the road ahead
The merger has created the world’s sixth largest chip company with annual revenues of about $10 billion.
The merged entity continues under the NXP name, continues to be headquartered in Eindhoven, The Netherlands, and to be led by Rick Clemmer as CEO. The combination has produced a clear market leader in automotive semiconductors and in general-purpose microcontroller sales and executives from the "new NXP" announced that the company would operate with five business units: RF power; digital networking; security and connectivity; automotive; and standard products.
However, there is a great emphasis on the opportunities for the company in the areas of security, connectivity and automotive. These are seen as areas where the combined entity leads the market while being well placed to leverage that leadership into the developing Internet of Things market and connected automobile.
Ruediger Stroh, evp of security and connectivity business at NXP.
Ruediger Stroh, who becomes executive vice president of the security and connectivity, spoke on a conference call about how IoT needs a secure infrastructure to reach its potential, His main point was the enlarged NXP is the only company able to provide end-to-end secure communications, from leaf nodes through gateways to the edge of the network and up to the data center. This was also used as an example of how NXP and Freescale dovetail together even down to NXP’s leading position in ZigBee complementing Freescale’s position as a founder member of the Thread initiative.
Next: automotive
On the same call, Kurt Sievers, executive vice president for the automotive business, promoted same message in the automotive domain. The complementary nature of the Freescale and NXP producing a market leader that can do almost all that is required in the car electronics and is in position to lead the secure connectivity required for automotice driving assistance systems (ADAS). In response to a direct question on lay offs Sievers said that in his group he saw "no need to lay off people. It’s a global business Munich, Austin remain important. Synergies are not about reducing engineering, R&D, marketing."
Kurt Sievers, evp of automotive business at NXP.
Throughout the lead in to the merger executives have stressed that despite the fact that NXP and Freescale were relatively large and addressed similar embedded market sectors – with annual sales of $6.0 billion and $4.6 billion respectively – there was little overlap. There have been assurances that there are no planned cuts in manufacturing or design staff but nonetheless the new company has a large payroll of approximately 45,000 people. NXP anticipates $200 million of cost savings in 2016 and a path to $500 million of annual cost savings later on.
Next: Grow the business
Steve Wainwright, vice president of sales and marketing for Europe, Midldle East and Africa, at NXP, said that while some attention has been the assumption of rationalization after the merger he is excited by the scaling produced by pooling R&D. "Yes, there’s some scope for streamlining; there may be some duplicate factories, duplicate product lines, but not many." He added that rationalization would mostly be in central administration – legal teams and the like – and some administrative logistics. The new NXP doesn’t need two administration offices in Paris or Milan, Wainwright said by way of example but that sites such as East Kilbride would continue.
Steve Wainwright; vp of sales and marketing for EMEA at NXP
Wainwright said the focus should be on growing business and that this will be possible in an organization with 11,200 engineers working on R&D and with an annual R&D budget of about $1.5 billion. "Things like IoT, mobile health care, autonomous driving, are exciting possibilities but they will take a lot of resources and dedication." And Wainwright hinted that the M&A activity may not yet be done for the enlarged NXP. "It is business as normal and that means looking for opportunities to increase value both internally and externally," said Wainwright.
Related links and articles:
News articles:
NXP, Freescale merger clears FTC hurdles
NXP, Freescale plan mega merger
What Freescale-NXP Merger Can Teach Us
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