NXP Semiconductors has taken another step toward sorting out its merger with Freescale and defining its main business. The Dutch chipmaker, which supplies parts to automakers and device makers like Apple, said that it was selling its standard product business to Chinese investment firms for $2.75 billion.
Around 11 thousand employees – nearly 25% of the entire NXP workforce – will shift to a new company, which will be named Nexperia and owned by the investors. The standard product unit’s executive team, including general manager Frans Scheper, will lead the new company, which will remain based in the Netherlands.
The deal represents NXP’s latest bet on the Internet of Things, in which embedded computers and wireless chips are combined in everyday objects like cars and household devices. In the months after the merger with Freescale, NXP redoubled efforts to become a major automotive chipmaker with the release of new radar and sensor fusion chips.
Behind the deal is a confidence that NXP can flourish without nearly one-fifth of its entire business. “This transaction is a positive accomplishment for all parties involved. It enables NXP to continue to focus on its high-performance Mixed Signal business,” noted Rick Clemmer, NXP’s chief executive, in a statement.
The standard product business was not a natural fit with the chipmaker’s new plans, the company said. It makes discrete semiconductor devices, as well as logic semiconductors and power transistors – a far cry from the automotive and embedded chips that the company has pegged for future growth.
One downside to shedding the business, however, is the loss of contracts with consumer electronics makers. NXP has long supplied standard chips for smartphones from Apple, Huawei and Samsung.
In recent years, NXP’s standard product unit has faltered behind the growth of its mixed-signal chip business. In the first quarter of 2016, the division generated $274 million in revenue, which was 15% lower than a year earlier. Over the same period, the mixed-signal business earned $1.91 billion, up around 57% from last year thanks to the infusion of Freescale's business.
China’s JAC Capital and Wide Road Capital will take control of Nexperia. Earlier this year, JAC Capital was rumored to have shown interest in buying the business and that NXP was seeking bids around $2 billion.
The investment firms are planning to steer the business deeper into the automotive market. “Although servicing a variety of markets, Nexperia will be especially increasing focus on automotive applications and providing their required high-level of quality solutions,” said Michael Zhang, a managing partner at Wise Road Capital.
This is not the first time that NXP has struck a deal with JAC Capital. The firm bought NXP’s radio frequency chip business for around $1.8 billion last year. That deal helped to smooth regulatory approval for the Freescale merger, which closed for around $11.8 billion. Both sides have also worked together on a joint venture making bipolar power transistors.
Nexperia will take control of wafer plants in Manchester, England and Hamburg, Germany. Also included in the deal are back-end facilities in China, Malaysia, and the Philippines, as well as patents and intellectual property.
The deal is likely to close in the first quarter of 2017, following regulatory approval from the United States Federal Trade Commission, the European Commission, and Chinese authorities.
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