Said Clemmer, once a senior advisor to KKR
and handpicked by the firm to turn NXP around: “They’ve given us
focus and regeneration,” adding, “The jury is still out on Freescale,
but there are a plenty of examples where private equity firms were
beneficial to chip companies … like Fairchild or Intersil.”
While Freescale is still in the process of narrowing its focus in terms of product and market segments, NXP has adopted far
more drastic measures to streamline its operations. So far, Clemmer and his lieutenants have shown an uncanny ability to spot market niches it can dominate.
For example, the Dutch chip maker leads in auto markets segments like passive, key-less entry and in-vehicle networking. Clemmer added that NXP chips are used in nearly all of mid- to high-end car radios. These moves reflect its discipline not to take on Freescale, Renesas or STMicroelectronics across the breadth of general auto electronics market.
While NXP continues to pursue only narrow slices of the auto electronics market, those it does pursue amount to a $2.5 billion market that offers it a path to future growth. Hence, the company is positioning itself to lead in specific categories rather than locking horns for overall leadership of the auto market. So far, Clemmer's strategy is working.
“I realized that this was a company with a lot of
great technologies," Clemmer said. "But the company didn’t have structures or resources
to take those technologies to market," adding that it also lacked "competitive manufacturing capacity or processes.”
When Clemmer arrived, NXP was
still focused on SoCs for products like TVs and basebands. “There were just too many
things to focus on,” he said. By narrowing the focus, “You
get to do more R&D, you get better margins and you solidify [your
The highlight of NXP's third quarter results was
identification technology. “We ship security in a semiconductor format,” Clemmer explained. The former Philips Semiconductors was an industry leader in near-field communications development. “We built it but customers didn’t
come for the first 10 years,” said Clemmer. NXP is finally
profiting from NFC technology, which is used in applications ranging from
passports, ID cards and mobile transaction to banking cards and
NXP is expecting 100 million smart phones to be shipped in 2012 equipped
with NFC and security features. Most are made by Samsung, with some by Nokia. Of the 200 handsets
and tablets developed worldwide, “Our chips are in almost all of them," claimed Clemmer.
"There are only six to seven models we are not in."
Asked about meeting demand for NFC chips, Clemmer acknowledged that NXP is "constrained by capacity.” Production of chip destined for
credit cards and IDs requires a secure manufacturing facility.
The company's NFC chips are made in a walled-off section of Systems on Silicon
Manufacturing Co. (SSMC), a Singapore-based joint venture between NXP and
Taiwan Semiconductor Manufacturing Inc.