If the products made byNXP Semiconductor (
) were tossed in a salad bowl, it might look like scrap from an
In that bowl would be computer chips known as diodes and
transistors, rectifiers, thyristors, mosfets, microcontrollers,
radio frequency transceivers, mixed signal converters and
As mundane as the products by NXP Semiconductor may seem, they
are likely in your smartphone and car, your laptop and wallet,
and in cell towers and factories all over the place. In 2012, NXP
was listed as the 14th largest semiconductor company by sales, up
from 16th place the year before, according to IHS iSuppli
The company, based in Eindhoven, Netherlands, was spun off in
2006 from Philips Electronics and began a significant
restructuring. In August 2010, it became a publicly traded
company. Since its initial public offering on the Nasdaq 31
months ago, shares of NXP are up about 146%, and up about 25% in
the past year.
Last year, NXP posted sales of $4.4 billion and net income of
$429 million, or $1.70 a share. In the fourth quarter, revenue
rose 20% to $1.1 billion as earnings per share, minus items, rose
About 75% of company revenue last year came from its High
Performance Mixed Signal unit. These chips and systems are
installed by customers into automotive electronic systems, mobile
devices, consumer electronics and computers, lighting, wireless
infrastructure, security products and other industrial
applications. In terms of growth markets, NXP focuses mainly on
the fields of security, mobility, energy efficiency and health
The fastest-growing segment of NXP is its Identification
business unit. It designs and makes chips used for electronic
identification, financial transactions, product tagging and
counterfeit prevention. The ID unit had revenue of $986 million
in 2012, up 41% from the year before and up from $600 million at
the time of its IPO.
NXP expects double-digit growth in its ID unit this year.
Among its biggest opportunities is the emerging field of mobile
payments. In this arena, NXP supports a technology standard
called Near Field Communications, of which NXP is a co-inventor
and holder of many patents.
NFC chips enable the close-range exchange of data via wireless
technology. Its biggest market potential is seen with smartphones
equipped with NFC chips, turning them into electronic wallets
that can be used by consumers to buy products at specially
equipped point-of-sale terminals.
) and its Android mobile platform are key supporters of NFC
technology with their Google Wallet endeavor. Android is now the
dominant smartphone operating-system platform, led by Samsung,
the world's largest smartphone provider.
On Feb. 25, Samsung announced it would incorporateVisa 's (
) payment software, called payWave, on all new Samsung
NFC-equipped phones. These new phones, primarily the Galaxy 4,
are expected to be introduced this month. The Visa/Samsung
agreement is expected to bring more financial institutions
onboard the NFC platform.
"It's a significant agreement that could give NFC a
much-needed boost," wrote Eden Zoller, analyst at research firm
Ovum, in a report.
) has also thrown its support behind NFC technology with its
MasterPass program, an extension of its PayPass Wallet
NFC's position as the leading industry standard in mobile
payment systems is not yet a slam dunk.Apple (
) has not included NFC chips in its iPhone, nor has it announced
any plan to do so. The position of major retailers, likeWal-Mart
(WMT) andTarget (TGT), is also not yet clear. But should NFC use
continue to grow, as expected, NXP is seen as a major
The growth of NFC has drawn in new competitors such asBroadcom
(BCOM) andQualcomm (QCOM). Richard Clemmer, NXP president and
CEO, was asked about these competitive threats after the company
posted fourth-quarter results Jan. 31.
"It's interesting," said Clemmer in the call, "because in some
ways it actually helps the NFC market to have more suppliers."
NXP wants to maintain its leadership position, he said, "but with
the growth of the opportunity and the significant increase of
smartphones that will have NFC included, we think it still
represents a good growth opportunity for us."
Whatever the case, NXP already has a dominant position in some
key markets. In addition to being the lead chip provider in NFC,
it also claims the top position in radio frequency transceivers
for RFID applications, in the auto market for car radios,
in-vehicle networking and electronic key entry, and in select
In 2012, 24% of revenue came from its ID unit. Another 23%
came from the automotive market, 14% in portable and computing,
and 20% in standard products.
Vijay Rakesh, research analyst at Sterne Agee, in a report
last month, put a spotlight on NXP's strong position in
"NXP is the No. 3 automotive supplier to China, now the
largest automotive market in the world," he wrote. He said NXP
derives 36% of revenue from its business with China, with 25%
coming from the automotive field.
40 OEM Customers
In its latest quarterly filing with the SEC, NXP listed 40
"key OEM customers -- companies that use its chips in their
products. The list of customers include Apple,Cisco (CSCO),
Samsung andMotorola (MSI), in addition to Bosch, Delphi, Hyundai
Its competitors includeAnalog Devices (ADI),International
Rectifier (IRF),Linear Technology (LLTC) andTexas Instruments
The most significant challenge in 2012, according to CEO
Clemmer in the conference call on Jan. 31, was an uncertain
economic and demand environment, especially in automotive,
industrial and infrastructure products.
"We do need to increase our execution focus, specifically in
the areas of cost and expense management," he said, "but we
believe we have the programs and actions in place which should
enable NXP to deliver continued positive results. We believe if
we are successful, our actions will result in very good
bottom-line earnings growth."
For the first quarter, consensus estimates of analysts polled
by Thomson Reuters is for revenue of $1.1 billion, up 12.5% from
the same quarter a year ago. EPS, minus special items, is
projected to be 49 cents a share, up 158%.