NXP Semiconductor and Virage Logic go for a long-term give and take relationship

In a strategic move NXP Semiconductors and Virage Logic are bartering resources to ensure optimal use of resources and money and to gain competitive advantage. As per the agreement, NXP will transfer its CMOS IP (25 selected patent families), 160 Engineering staff and equipment to Virage Logic and NXP gets long-term license of Virage Logic's IPs. Virage Logic will provide IP license and services for 3.5-years to NXP Semiconductor for its future SoCs. Also Virage Logic to start a R&D center in Eindhoven to support NXP in developing new products based on the acquired IP.

On the money front, NXP to receive 2.5 million shares of Virage Logic common stock subjected to transfer restrictions, and a share in Virage Logic's IP revenues.
Virage Logic will get $60 million from NXP over four years from the closing of the transaction.

It's clear both are getting money as well as each other's technology. This is a new type of relation emerging in the semiconductor industry, where it's nearly close to merging of businesses but with lot of freedom of thinking. Mainly the brands and company cultures are protected.

NXP has nearly every domain expertise and skillset in all application areas of Semiconductors. It's not just NXP there are atleast more than half dozen semiconductor firms with top-class capabilities in analog, logic, and RF. Also these types of companies know market requirements of computer, telecom, consumer and industrial applications in every detail. All these years, they could maintain multi-domain expertise along with leading position due to their enormous availability of resources. However due to changing economic and technology situations, part of it created by their own smart chips, new innovative companies are emerging with unique talent and business model posing slight challenge to these multi-disciplinary semiconductor vendors with revenues of billions of dollars.

Most of the emerging startups like Virage Logic are IP houses. For them understanding market and selling their own IPs in the form of chips is behemoth task and highly risk. So they go behind companies selling billions to market their IPs. Big semiconductor companies get attracted to these companies due to their better IPs and the team.

Here the strategy followed by NXP is to handover technical work to Virage Logic and feeding that output in the form IPs to its SoC developers to design chips for the exact market needs. This will become efficient no-reverse going product design chain ensuring stronger commitment from each other.

Virage is strong in embedded memory, embedded logic, and interface such as PCI Express. Recently it has acquired ARC international.

Virage Logic stocks are already in gain mode and now this news may trigger another bout of gain.

Comments from René Penning de Vries, chief technology officer (CTO) of NXP:
"This partnership enables us to serve customer demands and boost flexibility in the timely supply of cost effective and innovative ICs for a multitude of applications,"

"Our internal IP development team is world class as evidenced by the first-time functional success we experienced with our 45-nanometer chips. We selected Virage Logic because we have been working with them for many years and their proven technology leadership as a broad line IP supplier made them our partner of choice to distribute NXP's IP globally as well as further the development of this advanced IP."

Comments from Dr. Alex Shubat, president, CEO and co-founder of Virage Logic:
"Virage Logic was founded on the vision that an independent IP company could provide the technically superior building blocks the global semiconductor industry needs to develop their highly differentiated end products more cost effectively and deliver them to market more quickly,"