Posted: March 5, 2015

Contributed by Ray Angers

It was announced this week that NXP Semiconductor NV (Eindhoven, the Netherlands) and Freescale Semiconductor Ltd (Austin, Texas) plan to merge their operations. The deal, if approved in the second half of 2015, would bump the combined company into the top 10 semiconductor manufacturers.

 What was the motivation to bring these two companies together?

At first glance, there are many similarities between the two companies. Both have deep roots stretching back to when they were part of Philips NV (in the case of NXP), and Motorola (Freescale).  Each has comparable revenue figures; US$4.8B and US$4.2B for NXP and Freescale respectively in 2013. Both have operations in over 25 countries. These include several fabrication facilities, however both employ foundry services such as TSMC and UMC to manufacture chips in advanced CMOS processes.

To be sure, there are some differences between these two companies. Obviously there’s the fact that one is a European company while the other is based in the US. NXP has a larger headcount with over 23,000 employees worldwide compared to Freescale’s 17,000. Technically, NXP has leveraged their strength in near field communication (NFC) and high-performance mixed signal (HPMS) solutions to become a leading provider to mobile product manufacturers.  Freescale has built on its microprocessor and microcontroller strength, and has targeted these products at high growth areas such as automotive.

Chipworks continually monitors the consumer electronics space looking at who is winning sockets in high volume products. Using our Design Win Tracker database, we have observed strong growth for these two companies over the past five years, NXP in particular. This growth was driven primarily by wins in handheld devices, automotive, cameras, computers, television and set top boxes. The six product segments shown in the chart below represents about 90% of the socket wins observed in this period.

When comparing companies, one aspect that we always consider is the depth of their intellectual property. Using our advanced patent analytical tools, we can quickly get a sense of a company’s strength, where they innovate, and in the case of a merger such as this, how the two companies compare in terms of patented technology. Learn more about how we match patents to products.

How do the two companies compare in terms of patented technology?

The patent portfolios of NXP and Freescale are comparable in size, each having about 10,000 active patent grants or applications worldwide. Considering only the US jurisdiction, Freescale has a larger proportion of US publications with 6,000 compared to NXPs 3,800. Conversely, NXP has a larger number of Chinese and European patents.

We used KMX, a patent analytics and visualization tool, to develop a quick understanding of the overlap between the NXP and Freescale portfolios from a technology standpoint. The patent landscape below is a graphical representation of NXP and Freescale’s combined patent portfolio. US grants and applications are represented here – each by a colored dot.  Patents with similar text are grouped together. Topographical peaks denote key technology concepts, with the top three most frequent words for each peak shown.

Our automated patent classifier indicates that the bulk of the process and packaging related patents are found on the right hand side of the landscape. Circuit and systems related patents cover the remaining area to the left of this, with circuit patents located predominantly in the upper half.

The first thing we noted at this high level was how complimentary the two patent portfolios are. There are no areas dominated by a single company. This begs the question, what are the benefits of this merger? Certainly, each company brings core strengths to the combined organization, NFC from NXP and microcontrollers from Freescale as noted earlier.  Also, both companies have been actively involved in litigation over the years as both plaintiff and defendant, so a larger and, more importantly, a more geographically diverse patent portfolio could likely prove useful in such matters. However, this analysis suggests divestitures are almost a certainty in the future as the merger progresses. The sale of NXP’s high performance RF unit has already been reported.


To summarize, this merger will no doubt create a powerhouse in the HPMS/NFC and microcontroller segments that will continue to win business in both handheld and automotive product segments, as well as emerging segments such as internet of things (IoT) related products. Business analysts and the markets have signaled their approval. Savings in operating costs after the two companies merge are expected to be about $500 million in general and administrative expenses. Technical analysts on the other hand are perhaps not as unanimous in their opinions, and not an unexpected reaction to those who are married to a given development platform. How well this new semiconductor giant executes the consolidation of their broad array of product families will ultimately determine their success in the future.

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