NXP Semiconductor
is holding an internal debate to decide what to do with the $1.5bn
it is to get from STMicroelectronics
for the wireless assets which NXP put into the
ST-NXP joint venture announced last
week.
"There are three lots of people who could have got that money",
Theo Claasen, head of business development at NXP, told Electronics
Weekly.
"First, the bondholders, but we don't have to pay them; second,
the private equity owners (led by Kohlberg Kravis and Roberts) but
they have said they are not looking to take the money out of the
business. They assume we can deploy the $1.5bn in such a way that
it will produce a better return than if they take it now." So, it
is the third claimant, NXP, which gets the $1.5bn.
"We are now looking to revisit our strategy where to deploy this
money", said Claasen. "We are making an orderly assessment of how
to spend the money best on where it will produce the best return on
investment."
That means it will be spread over NXP's remaining business
divisions of automotive, identification and multi-market
semiconductors.
Asked why NXP had been willing to give ST control over its
wireless assets, Claasen replied: "In the wireless business there
are two leaders: Texas Instruments and Qualcomm; then there were
six second tier players, us, ST, Broadcom, Freescale, Infineon and
Mediatek. Qualcomm and TI have sales twice as big as ours and their
R&D spend is twice as big as ours. To invest in new standards
and new capabilities you have to invest $500m per annum in
R&D."
Meanwhile the handset manufacturers have consolidated into five
big player plus some Chinese indigenous players so, logically, the
chip-set suppliers to the hand-set suppliers should also
consolidate.
ST and NXP have complementary product lines, according to
Claasen, with ST more focused on ASIC-based
high-end phones and NXP more on ASSP-based mid and low-end
phones.
See also: Mannerisms, the blog of David
Manners. Updated twice daily, it's the distinctive, entertaining,
authoritative and never dull commentary on the semiconductor
industry, from someone who knows...