Qualcomm agreed in late 2016 to buy NXP Semiconductor for about US$47 billion in the biggest-ever deal in the semiconductor industry - a move which clearly indicates Qualcomm's roadmap for its long-term growth.

Company president Derek Aberle recently talked about the company's integration plan with NXP, the introduction of the Snapdragon 835, and its plans for the fast-growing IoT and automotive chip markets during an exclusive interview with Digitimes. The following is a summary of the key points of the interview.

There are not much overlap in products or technologies between Qualcomm and NXP, and therefore the two companies will complement each other after the merger. Most merger deals are likely to encounter the overlap issue which eventually will complicate the merger processes. But this is not a case for Qualcomm; the most important issue for Qualcomm is to ensure maximum synergies.

Of course, Qualcomm and NXP are different in terms of corporate culture and structure, as Qualcomm has been a fabless semiconductor firm, while NXP has been an IDM operating over 10 wafer fabs and packaging/testing plants.

But Qualcomm has no plans to liquidate NXP's existing fabs and plants after the merger and will let these production lines maintain their original business models. So Qualcomm eventually will become a blended company following its integration with NXP.

However, the integration with NXP will bring in the management of wafer production lines which presents a new challenge to Qualcomm. With a number of factories, NXP can decide which products to be manufactured in-house and others to be outsourced to OEMs. This business model will continue.

With the deal, Qualcomm will gradually reduce its reliance on the smartphone market and step into the Internet of Things (IoT), wearable devices and in-car electronics markets. Previously, Qualcomm is selling smartphone solutions to a few clients at large quantities, but the clients in the IoT sector are more diverse with even larger quantities. Managing channel distributors and reaching end customers in the IoT sector will be quite different from the smartphone sector.

NXP has an established distribution channel to serve a total of 125,000 clients; this channel will be complementary with Qualcomm's own channel and will help shorten Qualcomm's time to the IoT market. Qualcomm's product mix will become more diversified but shipments of in-car electronics products are unlikely to surpass those of smartphone solutions in the near future.

By: DocMemory
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