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Qualcomm may acquire NXP Semiconductor in $30 billion deal

Qualcomm is a giant in the modern telecommunications market. Its modems and smartphone SoCs power hundreds of millions of devices across the globe. Rumors suggest that Qualcomm might be planning to acquire NXP Semiconductor in a deal worth at least $30 billion.

Talks between the two companies are expected to continue over the next few months, the Wall Street Journal reports. If Qualcomm is a high-profile success story that’s risen to dominate modem licensing and smartphone SoC design, NXP Semiconductor is the multi-billion dollar semiconductor company you haven’t heard of. Today, NXP focuses on the Internet of Things, RFID-equipped devices, embedded markets, and ultra-low power communication. Its technologies are used in multiple public transit systems across the world and it helped invent (and holds patents relating to) Near Field Communication, or NFC.

The timing of the move might raise some eyebrows, given that NXP just finished acquiring Freescale Semiconductor in March 2015. Mergers always take some time to iron out and combining disparate corporate cultures isn’t easy. Like NXP, Freescale focuses on ultra-small, ultra-low-power devices.

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If Qualcomm buys NXP, it’ll probably do so for several reasons. First, NXP has key patents related to various types of wireless communication, and Qualcomm derives more than half its profit on licensing modem patents to other companies. Locking up NFC and snapping up some wireless charging patents would offer additional revenue streams. There’s also the general interest in IoT, embedded computing, and self-driving vehicles — areas where NXP is already winning business and Qualcomm could expand. The WSJ reports that buying NXP would instantly catapult Qualcomm to being the number-one supplier of chips used in vehicles — and in-vehicle computing is a hot topic these days.

Integrating the two companies would be a formidable task. Qualcomm currently employs 33,000 employees, while NXP has 45,000. A strategic partnership or joint venture might give Qualcomm access to some of the upside of buying NXP outright without exposing it to the risk of attempting to integrate a larger business than its own. The companies that earn the most money in semiconductors are the companies that are first to market, whether that means being the first foundry to offer a new process node, or being the first modem supplier to offer full LTE support.

This would be a huge move for Qualcomm, and the first major shake-up to the company since it shook off corporate raiders at Jana Partners LLC earlier this year. Jana was behind the push to force Qualcomm to divest its semiconductor R&D and split the company into a patent licensing and R&D division. Qualcomm decided against this approach and Jana sold its shares thereafter. Good riddance.

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