NXP and Qualcomm are duking it out in world’s biggest car market after China blocked tie-up of chip giants

  • The failed marriage partners are duking it out in the world’s largest car market in terms of both demand and supply
  • NXP has been working with almost every major original equipment manufacturer (OEM) in China on chip designs
PUBLISHED : Wednesday, 09 January, 2019, 9:03pm
UPDATED : Wednesday, 09 January, 2019, 11:07pm

The collapse of the US$44 billion bid by US chip giant Qualcomm for Dutch chip maker NXP Semiconductors after China failed to approve the deal has taken a new twist, as the two companies now find themselves fighting it out in the country’s red-hot automotive technology sector.

NXP’s EVP of Global Sales Stephen Owen said the automotive space is a big focus for the company and that it has been working with almost every major original equipment manufacturer (OEM) in China, the world’s largest automotive market, as it steps up competition with Qualcomm in automotive chip designs.

Qualcomm, the largest maker of smartphone chips, unveiled three new chips for cars at CES on Monday, aimed at bringing digital dashboard technology to mass-market models – an area NXP is also focused on.

“Qualcomm’s technologies are in slightly different vehicle areas than ours. They tend to focus on high-end processing whereas we tend to look at system solutions [such as radar and battery management],” said Owen, in an interview at the Consumer Electronics Show (CES) 2019 in Las Vegas on Tuesday. “So we address different things within vehicles, but we are still competitors.”

The failed marriage partners are duking it out in the world’s largest car market in terms of both demand and supply and as China pushes electric vehicles and tightens emission standards. The country is currently on track to enable half of its new cars to go “intelligent” – which means having smart features – by 2020, in an industry that churns out more than 20 million cars a year.

The market has also attracted a rising number of contenders, with aspiring Chinese start-ups such as Horizon Robotics and FABU taking on big names like Nvidia and Qualcomm in offering chips that are vital to autonomous driving. Nvidia has also backed Chinese self-driving truck venture TuSimple and passenger car solution provider through its investment arm.

Meanwhile, Chinese tech giants including Baidu and Alibaba are also developing plans for their first AI chips, after Chinese President Xi Jinping called for self-sufficiency in key technologies as part of the country’s Made in China 2025 policy plan. Beijing-based Baidu, which operates China’s dominant search engine, is China’s state-approved champion of autonomous driving.

NXP, getting past failed Qualcomm deal, sees China as biggest growth market

Qualcomm walked away in July from its US$44 billion bid for NXP after failing to secure the approval of China’s antitrust regulators for what would have been the biggest takeover in the chip industry, becoming a high profile victim of rising trade hostilities between the US and China.

Buying NXP, which specialises in computer chips for carmakers, would have enabled Qualcomm to diversify its growth engines at a time of weak demand for smartphones and after some lacklustre earnings reports.

Qualcomm in December rejected a suggestion by the White House that its collapsed bid could be revived, after US President Donald Trump said that China was “open to approving the previously unapproved” deal “should it again be presented”.

“While we were grateful to learn of President Trump and President Xi’s comments about Qualcomm’s previously proposed acquisition of NXP, the deadline for that transaction has expired, which terminated the contemplated deal,” a Qualcomm spokesperson said in a statement on December 3. “Qualcomm considers the matter closed and is fully focused on continuing to execute on its 5G road map.”

NXP’s Owen echoed those sentiments on Tuesday, saying the deal would not be revived and that the 21 months of bid uncertainty had been “extremely tiresome”.

A combined NXP-Qualcomm was perceived at the time as a negative development for China as it would have strengthened the hand of a major US chip supplier. However, Beijing’s stance appears to have softened at the December G20 summit in Argentina, where Trump and Xi met to find a way out of a deepening US-China trade impasse – which led to Trump’s comments about China now being more open to a Qualcomm deal.

Qualcomm may still decide to re-open NXP bid, analyst says

About 40 per cent of NXP’s business is transacted in China, which is the Dutch chipmaker’s largest single market. It manufactures products both for local use and for shipments outside China, according to Owen. NXP is also working with technology giants Alibaba, Baidu, Tencent and on cloud services.

Huawei Technologies, the world’s largest telecom equipment vendor and currently at the epicentre of the US-China trade war after Washington said its network equipment could be used for espionage purposes, has identified NXP and Intel as two of its top business partners.

NXP works with Huawei on traditional base station and mobile businesses, as well as next-generation 5G networks, said Owen.