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NXP's Clemmer sees smooth sailing ahead
Dylan McGrath
3/6/2011 11:45 PM EST
Times are good for NXP Semiconductors NV, according to Rick Clemmer, the company's president and CEO. Clemmer sees NXP growing faster than the overall chip market over the next few years thanks to a more manageable debt load, growth prospects in areas like near field communications (NFC) and NXP's strength in what the company calls high-performance mixed-signal (HPMS) technology.
NXP's product revenue from continuing operations grew by 43 percent in the rebound year of 2010, higher than the chip industry's overall growth rate of 30 to 32 percent for the year. (NXP's total revenue growth in 2010 was closer to 25 percent, in part because of shrinking revenue from manufacturing services provided to companies that have purchased some of NXP's former businesses, an area where the company, by design, does not generate profit).
Significantly, NXP also reported last month that it reduced its net debt by $604 million in 2010 to $3.65 billion, down from more than $6.5 billion at the end of 2007. The company's total long-term debt in 2010 shrank to $4.1 billion from nearly $4.7 billion at the end of 2009.
NXP's long-term survival was an open question a few years ago. The company was saddled with debt and a host of other issues after being spun out of Royal Philips Electronics in a leveraged buyout. But the company began dropping off speculators' "death watch" lists a couple of years ago after aggressive moves by NXP began to pay dividends.
To right the ship, NXP had to cut close to 5,000 jobs, close several fabs and divest a number of businesses. The result, according to Clemmer, is a leaner, more-focused company concentrated on areas where its technology offers competitive differentiation.
While the debt load remains a significant concern, NXP's progress has resulted in the healthiest balance sheet it's had since with spinout. Last summer the company raised nearly $450 million to put towards debt payments through an initial public offering on the Nasdaq market.
These days, NXP is hanging its hat largely on HPMS, which Clemmer said leverages NXP's strengths in RF and high-voltage technologies. On its website, NXP calls HPMS "that combination of analog and digital circuitry that lies somewhere between Moore's Law and 'More-than-Moore.' "
Sales of high-performance mixed-signal products for NXP amounted to $2.8 billion in 2010, 77 percent of the company's total product revenues. Growth was particularly strong in the automotive, identification and wireless infrastructure, lighting and industrial segments, according to the company.
While revenue from NFC remains a relatively small portion of NXP's business, shipments of NFC-enabled handsets are projected to grow from 52.6 million last year to nearly 80 million this year, according to IHS iSuppli, which projects shipments will continue growing to reach 220 million in 2014.
NXP divested or closed most of its fabs in the past few years and now relies heavily on foundries. But the company maintains three fabs in Europe, as well as stakes in two joint venture fabs in Asia and has several back-end test and assembly facilities. Clemmer said it remains a critical part of NXP's strategy to hold on to some manufacturing in areas where the company's manufacturing know how is perceived as a competitive advantage.
At the SEMI Europe International Strategy Symposium last week, Carlo Bozotti, president and CEO of Europe's biggest chip maker, STMicroelectronics NV, reaffirmed his company's commitment to maintain chip manufacturing in Europe, even as he also said foundries and Asian manufacturing are critical to ST's future. Later in the week, Alain Astier, senior vice president for front-end technology at ST, said the company is moving more of its capital expenditure investment back to Europe.
ST's moves to invest more in more European manufacturing comes as the European Commission has been making noise about the importance of rebuilding advanced manufacturing in Europe. Though NXP's three remaining wholly owned fabs are all in Europe, Clemmer doesn't sound like European initiatives are at the top of his list of priorities. He said he views NXP not as a European company but a global company focused on being No. 1 in the markets in which it competes. No matter where its manufacturing facilities are, they exist to support that goal.
NXP's product revenue from continuing operations grew by 43 percent in the rebound year of 2010, higher than the chip industry's overall growth rate of 30 to 32 percent for the year. (NXP's total revenue growth in 2010 was closer to 25 percent, in part because of shrinking revenue from manufacturing services provided to companies that have purchased some of NXP's former businesses, an area where the company, by design, does not generate profit).
Significantly, NXP also reported last month that it reduced its net debt by $604 million in 2010 to $3.65 billion, down from more than $6.5 billion at the end of 2007. The company's total long-term debt in 2010 shrank to $4.1 billion from nearly $4.7 billion at the end of 2009.
NXP's long-term survival was an open question a few years ago. The company was saddled with debt and a host of other issues after being spun out of Royal Philips Electronics in a leveraged buyout. But the company began dropping off speculators' "death watch" lists a couple of years ago after aggressive moves by NXP began to pay dividends.
To right the ship, NXP had to cut close to 5,000 jobs, close several fabs and divest a number of businesses. The result, according to Clemmer, is a leaner, more-focused company concentrated on areas where its technology offers competitive differentiation.
While the debt load remains a significant concern, NXP's progress has resulted in the healthiest balance sheet it's had since with spinout. Last summer the company raised nearly $450 million to put towards debt payments through an initial public offering on the Nasdaq market. These days, NXP is hanging its hat largely on HPMS, which Clemmer said leverages NXP's strengths in RF and high-voltage technologies. On its website, NXP calls HPMS "that combination of analog and digital circuitry that lies somewhere between Moore's Law and 'More-than-Moore.' "
Sales of high-performance mixed-signal products for NXP amounted to $2.8 billion in 2010, 77 percent of the company's total product revenues. Growth was particularly strong in the automotive, identification and wireless infrastructure, lighting and industrial segments, according to the company.
While revenue from NFC remains a relatively small portion of NXP's business, shipments of NFC-enabled handsets are projected to grow from 52.6 million last year to nearly 80 million this year, according to IHS iSuppli, which projects shipments will continue growing to reach 220 million in 2014.
NXP divested or closed most of its fabs in the past few years and now relies heavily on foundries. But the company maintains three fabs in Europe, as well as stakes in two joint venture fabs in Asia and has several back-end test and assembly facilities. Clemmer said it remains a critical part of NXP's strategy to hold on to some manufacturing in areas where the company's manufacturing know how is perceived as a competitive advantage.
At the SEMI Europe International Strategy Symposium last week, Carlo Bozotti, president and CEO of Europe's biggest chip maker, STMicroelectronics NV, reaffirmed his company's commitment to maintain chip manufacturing in Europe, even as he also said foundries and Asian manufacturing are critical to ST's future. Later in the week, Alain Astier, senior vice president for front-end technology at ST, said the company is moving more of its capital expenditure investment back to Europe.
ST's moves to invest more in more European manufacturing comes as the European Commission has been making noise about the importance of rebuilding advanced manufacturing in Europe. Though NXP's three remaining wholly owned fabs are all in Europe, Clemmer doesn't sound like European initiatives are at the top of his list of priorities. He said he views NXP not as a European company but a global company focused on being No. 1 in the markets in which it competes. No matter where its manufacturing facilities are, they exist to support that goal.
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