Qualcomm Buys NXP for $47 Billion, Turning Eyes to Internet of Things

Qualcomm’s booth at the 2016 CES show. (Image courtesy of Maurizio Pesce, Creative Commons).

Qualcomm has made the clearest statement yet that its future lies beyond smartphones.

The chipmaker said Monday morning that it had signed an agreement to buy NXP Semiconductors for $47 billion. The acquisition is by far the largest in Qualcomm’s history, but it also represents that largest deal in the history of the semiconductor industry, which has consolidated sharply in recent years.

The deal combines two companies a world’s apart in their product offerings. For years, Qualcomm has ridden the smartphone wave to become a leader in mobile processors and wireless chips for tapping into cellular and Wi-Fi networks. NXP Semiconductors has focused more on chips for automobiles and sensor devices.

The deal is also the latest evidence that Stephen Mollenkompf, Qualcomm’s chief executive, views the company further removed from the smartphone chips that transformed it from a wireless specialist into a significant rival for chipmakers like Intel. 

“The NXP acquisition accelerates our strategy to extend our leading mobile technology into robust new opportunities, where we will be well positioned to lead by delivering integrated semiconductor solutions at scale,” Mollenkopf said in a statement.

NXP, which is based Eindhoven, the Netherlands, is a major supplier of microcontrollers, discrete components and logic, power management, and sensors that form the backbone of a new generation of cars and internet-connected devices. It also sells near-field communication chips that enable mobile phones to wirelessly connect with credit card terminals.

After the acquisition, Qualcomm predicts to have annual revenues of more than $30 billion. But the deal comes with an array of complications, including how to resolve Qualcomm’s 33,000 and NXP’s 45,000 employees. It also has the potential to fundamentally upend Qualcomm’s identity.

Qualcomm will be forced to grapple with its fabless model, in which the company contracts the manufacturing of its chips. It also makes most of its profits from licensing out its wireless patents. But NXP makes some its own chips and runs wafer fabrication plants in the United States, the United Kingdom, Germany, Singapore, and the Netherlands.

The deal is expected to close by the end of 2017 after regulatory approval.

Check back for more details on this developing story.