NXP-Freescale: merger of ‘compatible’ giants on track

NXP-Freescale: merger of ‘compatible’ giants on track

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By eeNews Europe

Steve Wainwright

Steve Wainwright

Speaking with EE Times at Freescale’s event – "Designing with Freescale" – here Thursday (Oct. 1), Wainwright was upbeat about the opportunity for the merged entity. NXP will become the world’s fourth largest non-memory semiconductor company, after Intel, Texas Instruments and Broadcom; and will become the world’s biggest automotive semiconductor supplier.

Last month, the European Commission approved NXP’s acquisition of Freescale, subject to the divestment of NXP’s radio frequency power business.

Wainwright said NXP and Freescale expect to hear from the Ministry of Commerce People’s Republic of China (MOFCOM) and the Federal Trade Commission (FTC) of the United States soon — most likely “in November.”

"We said, at the time of the [M&A] announcement, this will get done in the fourth quarter. That hasn’t changed. But of course, you know Rick Clemmer [NXP’s CEO]. I’m sure he would have liked to see it happen in September."

Freescale’s Wainwright has been appointed as NXP’s general manager responsible for EMEA, once the merger goes through.

IoT and security
Wainwright believes automotive and the Internet of Things (IoT) will bring significant opportunities to the merged entity.  At Thursday’s "Designing with Freescale" event in Paris where more than 80 demos were presented, he cautioned, "What can derail IoT is security."

Referring to data in the United States, where 70 percent of connected devices have no password-protected connectivity, he said Freescale is positioned and well-prepared to help IoT startup companies with security. "We offer trusted architecture to end node, gateway and cloud" complete with cryptographic security protocols.  

Freescale also runs "Freescale Security Labs" in two U.S. locations, Romania and China. Its goal is to drive security standards and solve customers’ security issues.

By 2020, 4.6billion own a tooth brush; 7.3billion use a cellphone, tablet or PC; 24billion unmanned Internet devices(Source: Freescale's slide shown in Paris by Steve Wainwright)

By 2020, 4.6billion own a tooth brush; 7.3billion use a cellphone, tablet or PC; 24billion unmanned Internet devices. (Source: Freescale’s slide shown in Paris by Steve Wainwright)


Compatible with NXP?
Prior to the completion of the merger, NXP and Freescale aren’t legally allowed to share financial details of their businesses. Visiting their customers together is also prohibited, according to Wainwright.

He said, "But the nice thing is that we do share a lot of the same customers, and yet, our businesses have very little overlap."

Most acquisitions usually involve one dominant company that integrates a smaller and lesser firm. But for NXP and Freescale, it’s a merger of equals. Wainwright said, "We are roughly about the same size – $5 billion each in revenue."

More importantly, he added, "both companies are financially healthy."  That isn’t usually the case in mergers and acquisitions.

The two companies, however, still have a long route to getting to know each other. In Wainwright’s view, a few factors make the companies’ cultures more compatible. "We both share strong engineering culture. And both companies, acquired by private equity funds, went through tough times," he said. That experience has made both companies "driven" and "aggressive," in his opinion.

The biggest difference might be that NXP, due to its Royal Philips’ heritage, is more consumer-centric. Freescale is more used to the longer-term industrial market, according to Wainwright. "NXP is more ‘agile’, shall we say," he added.

Once the two companies merge, Freescale will not keep its brand name. The company, however, will keep all of its parts numbers the same and even where those parts are manufactured. "So that there will be ‘no disruptions’ in distribution channels from the day one," explained Wainwright.

Since both companies have a number of development teams scattered all over Europe, tough decisions for consolidations await Wainwright.

Wainwright has been with Freescale over the last turbulent decade.  The ex-IBMer joined Freescale in 2005, only a year after the company was spun out of Motorola. By 2006, a consortium of private equity funds led by the Blackstone Group took over the company.

— Junko Yoshida, Chief International Correspondent, EE Times

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