NXP Sells to Qualcomm in US$47bn Deal

Qualcomm, one of the world's leading microchip manufacturers is buying NXP, a leading player in connectivity technologies and arguably the leading tech company within the NFC space.

The move can probably be best explained from Qualcomm's view as a play towards the IoT space. As they see it, the last 30 years was about interconnecting people. The next 30 years is about interconnecting their 'worlds'. In other words, connecting the objects that people use and the space around them such as cars, central heating systems and so on.

Focus Change

It significantly changes the balance of Qualcomm's business. After the deal completes, the percentage of revenue gained from mobile will drop from a majority to less than half. The press pack mentions an increase from 8% to 29% in 'Auto, IoT and other'. While the other could well be the slightly less glamorous ticketing and transport areas, there's clearly the mindset that automotive and IoT are where the future is at and where the deal interest lies.

Both Qualcomm and NXP are huge global businesses. However, the merger of American and European companies is never easy. The predicted cost savings from 'synergy' is estimated (according to Qualcomm) to be 500million USD. While it's unlikely to be a Microsoft/Nokia situation, there's likely to be some disruption and the resulting loss of focus. Ultimately, it may result in a stronger, clearer NFC brand which will only be a good thing.

NFC Market Power

Within the NFC space, NXP have a dominant market position in many areas and there's unlikely to be much change to that in the near future. In reality, Qualcomm will effectively buy the NFC chip and tag market in a single move. Whether the combined force of Qualcomm and NXP can push the market forward faster remains to be seen.

IoT is arriving quickly and this, the largest chip deal in history, shows what's to play for.