Qualcomm Plans To Acquire NXP For $47B To Expand Into New Markets (Updated)

Update, 11/18/16, 7am PT: Qualcomm announced that it's "commenced the previously announced tender offer for all of the outstanding common shares of NXP Semiconductors." The company is paying $110 per share. The offer expires at 5pm ET on February 6, 2017.

Original article:

Qualcomm announced that it will acquire NXP Semiconductor for approximately $47 billion. This acquisition is meant to strengthen Qualcomm’s position in the smartphone market and help it expand into new areas.

Qualcomm and NXP have historically served different markets, but with somewhat similar devices. Although Qualcomm is best known for its SoCs and ARM processors, the company has its roots in mobile modems and telecommunications technologies.

"With innovation and invention at our core, Qualcomm has played a critical role in driving the evolution of the mobile industry. 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," said Steve Mollenkopf, CEO of Qualcomm Incorporated. "By joining Qualcomm's leading SoC capabilities and technology roadmap with NXP's leading industry sales channels and positions in automotive, security and IoT, we will be even better positioned to empower customers and consumers to realize all the benefits of the intelligently connected world."

NXP has been active in a number of markets over the years. The company’s predecessor, Philips Semiconductor, invented the I²C interface, and NXP continues to produce and sell I²C solutions. NXP cooperated with Sony to invent the first NFC devices, which has since become a major part of the company’s business as well. Today, NXP also produces security identification hardware and smart automotive products, which are the company’s most successful businesses.

After the merger, Qualcomm said that it will primarily operate in the following areas:

Mobile: A leader in mobile SoCs, 3G/4G modems, and security.Automotive: A leader in global automotive semiconductors, including ADAS, infotainment, safety systems, body and networking, powertrain and chassis, secure access, telematics, and connectivity.IoT and Security: A leader in broad-based microcontrollers, secure identification, mobile transactions, payment cards, and transit; strength in application processors and connectivity systems.Networking: A leader in network processors for wired and wireless communications and RF sub-segments, Wave-2 11ac/11ad, RF power and BTS systems.

We should see a wide range of improved products in each of these areas as Qualcomm integrates NXP’s technology into its designs and vice versa. Qualcomm developed its own security hardware years ago, but that will soon be enhanced by NXP’s designs. The NFC technology acquired from NXP is also likely to be used to bolster Qualcomm Atheros’ existing NFC chip designs. NXP's CEO, Rick Clemmer, explained how the two will work together:

The combination of Qualcomm and NXP will bring together all technologies required to realize our vision of secure connections for the smarter world, combining advanced computing and ubiquitous connectivity with security and high performance mixed-signal solutions including microcontrollers. Jointly we will be able to provide more complete solutions which will allow us to further enhance our leadership positions, and expand the already strong partnerships with our broad customer base, especially in automotive, consumer and industrial IoT and device level security. United in a common strategy, the complementary nature of our technologies and the scale of our portfolios will give us the ability to drive an accelerated level of innovation and value for the whole ecosystem. Such a strong fit will bring opportunities for our employees and customers, as well as provide immediate attractive value for our shareholders, in creating the semiconductor industry powerhouse.

Although the acquisition has been approved by the leaders of the two companies, it won’t officially close until the end of 2017. Until then, the acquisition still needs to pass a series of checks by the government to ensure that this doesn’t give the company a monopoly in any area, and the leadership teams will need to work out the merger's finer details before the two companies will be able to become one.