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Date: 15-06-16

NXP sells its discrete logic and power semiconductor biz to Chinese investors

NXP Semiconductors N.V. agree to sell its Standard Products business which includes Discrete, Logic and PowerMOS semiconductor devices to China-based consortium of financial investors consisting of Beijing Jianguang Asset Management Co., Ltd and Wise Road Capital LTD for an approximate price of $2.75 billion. After the process of acquisition, the new business to be named as Nexperia with its headquarters at Nijmegen, the Netherlands. NXP said its standard products business generated a annual revenue of $1.2 billion in the fiscal year of 2015.

NXP semiconductors is one of the wide range semiconductor supplier all the way from diodes to vision SOC for self driving cars in automotive. It takes a huge amount of effort to manage multiple verticals in a tough semiconductor market. Many of the US semiconductor companies, except Texas Instruments have moved away from broad supplier to focused product supplier. Motorola did that by forming Freescale and On Semiconductor. Eventually Freescale's financial performance was not that satisfactory and got acquired by NXP. All these past years somehow the three big European semiconductor companies Infineon, STMicroelectronics and NXP semiconductors try to maintain the tag of broad range semiconductor suppliers in the world, but now NXP is becoming more vertical.

Though discrete semiconductor business is commoditised a lot, companies such as International rectifier, On Semiconductor, and Fairchild Semiconductor are not that bad performers by revenue. Infineon has recently acquired International Rectifier. On Semiconductor is continuously trying to acquire Fairchild Semiconductor. Diodes Inc is another discrete semiconductor vendor who is also doing fairly well in the market.

If you look at the future market opportunity, solar power, electric vehicle, rise in battery power devices, and Internet of things only expected to drive the unit demand of power semiconductor devices. The question here is, whether the unit growth will convert into revenue growth. China as a whole is a good source for low-cost discrete semiconductor devices. China based Hua Hong Semiconductor announced that the accumulated shipment of its Super Junction MOSFET (SJNFET) process platform crosses the 100,000th wafers mark, attributable to the strong market demand for SJNFET devices. Hua Hong said its SJNFET platform has recorded an increasing shipment since its mass production in 2011. And there are lot of players in Asia outside China.

So there is significant opportunity and more than that is the competition.

If you look at the technology, and what is driving power semiconductor market is use of compound semiconductor material such as SiC, GaN in building extremely efficient power semiconductor switches. ST microelectronics is already a supplier of SiC and GaN power semiconductor devices, infineon is also into it through the acquisition of IR.

Rick Clemmer, NXP Chief Executive Officer says this transaction enables NXP to continue to focus on its High-Performance Mixed Signal business, furthering our Secure Connections for a Smarter World strategy.

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