Rambling 'Round
NXP's 'no-big-chip-in-the-middle' strategy
Junko Yoshida
5/11/2011 3:05 PM EDT
The story of how NXP has re-invented itself by divesting a lot of what used to be core businesses isn't exactly easy to sell—especially among those of us who knew the Dutch chip company in its heyday, when it was still Philips Semiconductors.
I'll admit some nostalgia here. I remember, for example, when then Philips Semiconductors CEO Doug Dunn unveiled TriMedia, the company's first VLIW architecture-based processor. And it was fun listening to CTO Theo Claasen talking about next-generation process technologies, the company's "platform" strategy, and its plans for Crolles 2.
Now fast forward to NXP, which was spun out of Royal Philips Electronics and forced to fend for its own future. The newborn acronym quickly shed close to 5,000 jobs, managed its debt load, and—in August, 2010—raised nearly $450 million through an initial public offering.
Along the way, NXP got rid of its mobile/wireless group to ST-NXP Wireless, a joint venture established in 2008; NXP also sold its television systems and set-top box business lines—along with its crown jewel video IPs—to Trident Microsystems in 2009.
NXP's message to the world in the last two years was consistent: "Our new focus is on high-performance mixed-signal products."
Talk about your mixed signals! This is when many of us either got confused or just plain lost interest in NXP.
We understood the corporate line here. But what is, really, a high-performance mixed signal? What are its products? Why are they suddenly so important? How significant a business can you get from mixed signals—not just for NXP but for the rest of the semiconductor industry?
Many of us grew up covering highly-integrated digital SoCs, advanced processor architectures and next-generation multimedia applications processors for the next mobile handsets—all of which somehow conditioned us to see them as "glamorous." In contrast, high-performance mixed-signal products seemed—to put it politely—"peripheral."
During the recent Embedded Systems Conference in San Jose, I sat down for about an hour with Mike Noonen, NXP's executive VP for global sales and marketing. Noonen described NXP's new [high performance mixed-signal] strategy more effectively than anyone I've heard before. He said, in essence, "Today, NXP offers products with no big chip in the middle."
Damn.
Now, I get it.
Picture a block diagram for a handset or media tablet without that big fat SoC hogging all the real estate. No big chip in the middle. Get it?
NXP, once armed with a coveted TriMedia-based solution, no longer offers a big SoC for digital TVs or set-top boxes, either.
Instead of throwing more money at the crowded, cutthroat digital SoC market, up against companies like Broadcom, Qualcomm, MediaTek and Mstar, NXP focuses now on supplying mixed-signal components that these bigwigs don't have.
Look back on NXP several years ago, when it was still bloated with a large—and nebulous—product portfolio. The company now has a sharper focus and a leaner strategy. In fact, "no big chip in the middle" should become NXP's new corporate tagline. It sums up everything that makes the company appealing to Wall Street.
But of course, as a skeptic (journalists are paid for skepticism), I wonder if doing everything but a big chip in the middle is a viable long-term strategy. Much of what you do still aims, eventually, for integration, doesn't it? That's the nature of the semiconductor business.
Next: Future of analog
I'll admit some nostalgia here. I remember, for example, when then Philips Semiconductors CEO Doug Dunn unveiled TriMedia, the company's first VLIW architecture-based processor. And it was fun listening to CTO Theo Claasen talking about next-generation process technologies, the company's "platform" strategy, and its plans for Crolles 2.
Now fast forward to NXP, which was spun out of Royal Philips Electronics and forced to fend for its own future. The newborn acronym quickly shed close to 5,000 jobs, managed its debt load, and—in August, 2010—raised nearly $450 million through an initial public offering.
Along the way, NXP got rid of its mobile/wireless group to ST-NXP Wireless, a joint venture established in 2008; NXP also sold its television systems and set-top box business lines—along with its crown jewel video IPs—to Trident Microsystems in 2009.
NXP's message to the world in the last two years was consistent: "Our new focus is on high-performance mixed-signal products."
Talk about your mixed signals! This is when many of us either got confused or just plain lost interest in NXP.
We understood the corporate line here. But what is, really, a high-performance mixed signal? What are its products? Why are they suddenly so important? How significant a business can you get from mixed signals—not just for NXP but for the rest of the semiconductor industry?
Many of us grew up covering highly-integrated digital SoCs, advanced processor architectures and next-generation multimedia applications processors for the next mobile handsets—all of which somehow conditioned us to see them as "glamorous." In contrast, high-performance mixed-signal products seemed—to put it politely—"peripheral."
During the recent Embedded Systems Conference in San Jose, I sat down for about an hour with Mike Noonen, NXP's executive VP for global sales and marketing. Noonen described NXP's new [high performance mixed-signal] strategy more effectively than anyone I've heard before. He said, in essence, "Today, NXP offers products with no big chip in the middle."
Damn.
Now, I get it.
Picture a block diagram for a handset or media tablet without that big fat SoC hogging all the real estate. No big chip in the middle. Get it?
NXP, once armed with a coveted TriMedia-based solution, no longer offers a big SoC for digital TVs or set-top boxes, either.
Instead of throwing more money at the crowded, cutthroat digital SoC market, up against companies like Broadcom, Qualcomm, MediaTek and Mstar, NXP focuses now on supplying mixed-signal components that these bigwigs don't have.
Look back on NXP several years ago, when it was still bloated with a large—and nebulous—product portfolio. The company now has a sharper focus and a leaner strategy. In fact, "no big chip in the middle" should become NXP's new corporate tagline. It sums up everything that makes the company appealing to Wall Street.
But of course, as a skeptic (journalists are paid for skepticism), I wonder if doing everything but a big chip in the middle is a viable long-term strategy. Much of what you do still aims, eventually, for integration, doesn't it? That's the nature of the semiconductor business.
Next: Future of analog
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Sanjib.Acharya
5/11/2011 11:38 PM EDT
Well written report! Reading through the article, I was not bored either :). The strategy of NXP is clearly understood from this article. Apart from what is said, I think many of the system designers would agree that products offered by NXP carry a higher level of quality & reliability compared to some of its peers in the market. They should continue to carry this forward.
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Frank Eory
5/12/2011 3:38 AM EDT
I like and totally agree with Noonen's comment that "the future of analog is not just analog."
Analog -- particularly sensors -- requires digital processing to make useful outputs. For example, integrating a magnetometer with a 32-bit micro to make a standalone e-compass with processor-friendly outputs. Some companies are doing stuff like that.
When it's all said and done, there is still a "big chip in the middle" in any complex system, and the company that can offer both the smart analog IC and the big chip in the middle has a distinct advantage in offering total system solutions to customers.
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junko.yoshida
5/12/2011 7:27 AM EDT
I agree. And yet, I keep wondering who would have the staying power and money to be "the company that can offer both the smart analog IC and the big chip in the middle," as you described.
NXP had every intention to be THAT company and found the strategy unsustainable.
Expect more analog and mixed-signal companies to be primed to get picked up by those companies who do the big chip in the middle.
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garyh12203
5/12/2011 4:26 PM EDT
I guess they didn't have a lot of options, but now they'll be up against Texas Instruments, saddled with $4B in debt, little or no DSP capability, and they've hollowed out the expertise in what they were best known for - video. Good luck!
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docdivakar
5/12/2011 4:31 PM EDT
@Junko: one question: most hybrids don't have a key to start the engine (you press the brake and hit a button on the dash to start!), so what does that do to NXP's market? The smart cars of the near future will most likely dispense with old fashioned keys and use electronic key pads (which many already have) for access and engine operation.
The energy-metering IC is rapidly shaping up to be a saturated market and consolidations are beginning already (Teridian acquisition by Maxim six months ago). Even the market analysts are catching up with buzzwords like EnergySOC, not just us geeeks! I don't know what Silver Spring Networks has in its plans, or for that matter, Cisco, all of whom are looking for a stronger presence in the smart energy market.
I also have to agree with @Frank Eory, there are tonnes of opportunities in the 'middle'.
Dr. MP Divakar
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junko.yoshida
5/12/2011 5:07 PM EDT
Dr. MP Divakar, as for car keys for hybrids, hm, you got me there! But for access to an e-car, you still need some sort of a cryptographic transopnder or some sort for the access card, no?
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Luis Sanchez
5/12/2011 4:45 PM EDT
Nice story. Really well written! It is odd though as it seems NXP is challenging the status quo and perhaps it even sounds pretentious. Forgetting about the main chip it seems to me that puts them in a disadvantage. I'd like to be proven wrong as I too like the company that invented I2C and the Compact Disc. I wonder why has it diverged that much?
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Adele.Hars
5/12/2011 5:39 PM EDT
Great piece. And of course they have two excellent SOI-based technologies that they build many of their chips on -- EZ-HV SOI for apps in the 60 to 650V range and ABCD SOI for Smart Power. This makes them well-placed in some very high-volume markets -- like anything with a power plug, lighting, automotive -- that are finally "going green".
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elPresidente
5/12/2011 7:53 PM EDT
Free ad space?
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elPresidente
5/12/2011 7:52 PM EDT
By analog standards, an ARM actually IS a "big chip in the middle". Also, couldn't NXP put their energy metering chip into an SOIC package instead of that schoolbus that Noonan is holding in the picture?
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kdboyce
5/13/2011 2:26 AM EDT
The real world is analog - not digital. Every interaction we have with it involves continuous time signals which tell us something about the physical world we are in, such as temperature, pressure,etc. Likewise, every action we take to modify the physical environment for our purposes is a continuous - but not infinite - time action.
We don't hear, smell, feel, taste, or see 'bits'.
However, you could argue that we process a great deal of information in small chunks perhaps analogous to 'bits'. For example, light impinges upon more than 100M rods and cones in the eye, all of which are necessary to discern shapes and colors of the objects we see. For smell we use millions of sensory neurons with cilia that project into the atmosphere that turn out to have receptors tailored to specific aromatic molecules or groups of molecules.
The 'big chip in the middle' syndrome comes about from the fact that they were originally designed as general purpose computation or data organizational devices.
The future of analog is that if you truly get and understand the signals of what you are sensing, then very focused digital signal processing can be done to extract useful information and, if necessary, translate that into very useful real world physical actions or analysis. The big chip in the middle becomes highly specialized to the task at hand, much like how the body/brain processes data.
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Frank Eory
5/13/2011 10:53 AM EDT
"The future of analog is that if you truly get and understand the signals of what you are sensing, then very focused digital signal processing can be done to extract useful information"
This seems to be what NXP is talking about with their definition of 'high performance mixed signal'. It sounds very similar to Freescale's approach to smart sensors, like the e-compass chip I mentioned above.
But like I mentioned in my earlier post, most systems do have a big chip in the middle, so if you want to offer a complete system solution to customers, you need to be able to make that big chip -- the apps processor. Something like Freescale's i.MX family, for example.
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GREAT-Terry
5/19/2011 12:37 PM EDT
So in general NXP just would like to build more ASSP with specially designed CPU together with necessary analog front-end but my question is how high performance it can be? With high resolution ADC and DAC (say 16 bit or higher), I wonder how the noise from the CPU be separated from the analog circuit that share the same substrate.
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KB3001
5/22/2011 11:35 AM EDT
It looks to me NXP are priming themselves to be in a good position to be bought by a big player (a supplier of the big-chip-in-the-middle!) with a nice price tag.
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