Design Con 2015

NXP today: 'Practically a Chinese company'

April 30, 2012

junko.yoshida-April 30, 2012

  
NEW YORK – For anyone who has known NXP Semiconductors since it was the Dutch giant Royal Philips’ subsidiary, NXP today feels much transformed. Instead of pledging changes every quarter, NXP has grown into a company with its own distinct personality and disciplines.

Under the leadership of Rick Clemmer, NXP’s CEO, the company has drastically slimmed its product portfolio. The company’s management team has cherry-picked product lines that already have either a commanding market position or clear potential – showing “a path to become a leader,” Clemmer explained. “It’s all about focus.”

Further, there is another vital sign of the company’s transformation. Clemmer said last week in an interview with EE Times, NXP today is “practically a Chinese company.”

Say what?

NXP makes more money in China than in any other single country, said Clemmer. Moreover, the Dutch company employs 8,000 people in China, he added. “The only reason we are still a Dutch company is because we enjoy our tax breaks in the Netherlands.”

Indeed, to call NXP a European chip company is a little misleading, since NXP’s shipment-based revenue in Greater China has become twice as big as that in Europe, and one in every three employees at NXP is located in China.

Of course, nobody should be surprised. NXP has established a strong presence in China’s growing market because China is where a greater number of components are procured, designed into systems, and manufactured.


Rick Clemmer, CEO of NXP Semiconductors


Last week, EE Times sat down with Clemmer who was here for the announcement of the company’s first quarter financial results. With $978 million in revenue in the first quarter, NXP showed a five percent sequential growth. “We delivered near the upper end of our original guidance range,” Clemmer noted.

When asked how much of that growth owes to the cyclical upswing of the market, Clemmer responded cautiously. While saying that NXP is “in the early stages of a positive cyclical rebound,” Clemmer noted much of its growth actually came from company-specific design wins. The good news is that NXP is beginning to see “tangible results,” he said, of the company’s transformation.

Clemmer was particularly bullish about NXP’s Identification business, serving a range of markets including e-passports, transit ticketing, tags and labels, contact banking cards and e-wallets. In particular, Clemmer said, For NXP, the e-wallet segment – where NFC technology together with security components have been embedded in smart phones – has jumped by 30 percent in the first quarter, while the rest of the company’s identification business grew by 20 percent.

Intel-like market share

In fact, NXP, a frontrunner in NFC technology, claims a huge lead in NFC-enabled smartphones and tablets -- over such competitors as Qualcomm, Broadcom and Intel. NXP’s customers in NFC-featured smartphones and tablets are said to include: Apple, Nokia, and Samsung.

Noting that NXP’s NFC (its wireless technology and security components included) is being designed into 130 smartphone models, Clemmer claimed, “NXP has an Intel-like position” in the red hot e-wallet market. One third of those products are shipping today, he added.

As more consumers carry smartphones, transactions completed by simply by waving an e-wallet-enabled smartphone (without a physical credit card or cash) at the point-of-sale are fast becoming a reality. Contrary to the notion that it may take a long time before the NFC chips actually get inside smartphones, Clemmer said, a number of smartphones are already shipping with NFC in them, often without the user’s knowledge. The NFC feature is just waiting to be turned on as the payment infrastructure develops, Clemmer explained.

According to a recent research by Berg Insight, a Sweden-based market research firm serving the telecom industry, global sales of handsets featuring NFC increased ten times in 2011 to 30 million units. Growing at a compound annual growth rate (CAGR) of 87.8 percent, shipments are forecast to reach 700 million units in 2016, according to the firm.

Rare earth hiccups

Unlike its identification business, where NXP fell flat over the last two quarters, its lighting business was a key thrust of the company’s Internet of Things initiative launched a year ago.

By giving a unique IP address to every light bulb at home, NXP has been promoting an energy-saving future in which the user can turn lights on and off individually, dimming or creating scenes from his smartphone, tablet, PC or TV. Clemmer blamed a shortfall of projected revenue in the lighting business to a shortage of rare earth.

China's decision to shut down or nationalize dozens of rare earth metal producers drove up the cost of compact fluorescent light bulbs (CFLs), forcing CFL manufacturers to delay a plan to add IC drivers to their light bulbs. Such drivers would enable dimming, coloring or networking capabilities in each light bulb. As the price of CFL bulbs shot up, “CFL manufacturers couldn’t simply afford to add those IC drivers,” said Clemmer.   

NXP’s GreenChip-enabled light bulbs, according to the company’s scenario, will operate on a wireless home sensor network being developed for energy metering, smart appliances and security systems. The JenNet-IP network layer software, designed to tie things together, enables ultra-low-power wireless connectivity in the GreenChip smart lighting solution.

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