Opinion: What the NXP/Freescale takeover means for automotive electronics

March 03, 2015 // By Christoph Hammerschmidt
Will the planned acquisition of Freescale through NXP change the automotive semiconductor landscape? Obviously yes, since both companies are already massively involved in this market, and united they will certainly gain significance. But at whose expense?

The die is cast: NXP will take over the highly indebted Freescale. The takeover will create a combined company with sales of more than $10 billion and catapult the company to the pole position in the automotive semiconductor race. Both NXP and Freescale hold strong positions in that segment, with plenty of expertise in success-critical areas such as signal processing, sensor fusion, security and (wireless) data communications. Without any doubt the combined company will occupy the strategic technology points in some of the hottest market segments like ADAS, autonomous driving and Connected Car. The same by the way holds true for non-automotive markets with high growth potential such as IoT and Industrial Internet - in particular if one includes the security requirements into the picture.

Competitors in these segments have reasons to wrap up warmly, namely Renesas and Infineon. Both pursuit a more focused approach and cover specific niches. Infineon, for example, holds strong positions in the motor control and body electronics segment whereas Renesas dominates the infotainment sector. However, none of these two is positioned as broadly as a potential NXP / Freescale combo. Infineon keeps aloof of everything in the car that deals with graphics - instrument clusters, infotainment and modern HMIs. These applications however are among those with the strongest growth expectations. And in terms of wireless automotive connectivity neither Infineon nor Renesas can compete to the future Dutch-American duo. Perhaps Infineon now has to pay the price for having sold its wireless communication business to Intel years ago.

However, there is a major business field where NXP even with Freescale on board has nothing to offer but an unprotected flank. This business field is power devices. According to market researchers like IHS, this is a very strategic place with particular strong growth expectations. The demand in this field is driven by electromobility in general; a strong demand driver is the legislative situation in most industrialised countries