Also, in the discussion of why their is so much M&A in 2015-6, you forgot the most important thing: the semiconductor market is slowing down, so M&A is just another way for companies to deliver value to the shareholders.
The semiconductor market is only entering a lull as the smartphone growth phase is coming to a close.
This deal is positioned for the next phase, which is the IoT era. Therefore, it is incorrect to paint this as a purely defensive move to shareholders. It's about positioning it for the next growth stage.
Whether it will succeed or not is anyone's guess, but the stated intention of the deal and underlying logic is sound.
The bubble keeps growing, it would have taken qualcomm 1/10 of that to develop an analog to nxp's entire product like from scratch. Wouldn't want to be there when it finally bursts.
I guess they are doing it for the patents rather than the actual technology, as in it would be cheaper to take over rather than pay royalties.
According to this article, Intel's revenues are 51B, and the meged companies revenues are 35B. Intel does not earn 2x 35B, as you suggest.
Personally, I doubt that a 35B vs. 51B revenue matters all that much when it comes to where a company is going, so I'd call those comparable (I'd call a 2x difference comparable too). With the right sales channels, tech, IP etc. a 35B company might easily out-compete a 51B company (and the reverse is obviously true too).
nxp's product line is "lower level" compared to qualcomm, they mostly make micro-controllers, that won't really be bringing qualcomm any closer to smartphones, they are already as close as it gets having numerous complete SOCs with integrated modems in their portfolio.
Hopefully this merger will goes well. Npx is not in a good siuation and sure is not growing, Qualcomm is shrinking with a semiconductor revenue of only 16B, the rest is patents revenue. So yes the agglomeration is exactly half Intel and a lot less than Samsung Semicondutors.
In my mind they paid too much for Npx, epecially they don't have a good FAB to offer, but only little 200mm FABs to be shut down in a short time due obsolescence. Anyway Qualcomm knows that its revenue is going down year after year cause Mediatek and many other companies so this could be a manner to stay alive with a good revenue.
I'm convinced we will see a few companies go under due to the IoT hype not taking off as much as expected. As long as a I can buy appliances as a fridge, Washing machine and so forth without connectivity I will do it. Not to mention that these "devices" are low volume and you keep them for decades.And they don't contain a battery that fails after 2-3 years requiring you to buy a new device.
In fact they need to invent a new device we actually to want or can make good use of. Like the smartphone was or else this will not scale.
It's inevitable, commoditization of good enough tech in consumer has taken its toll even for somebody as big as Qualcomm in an absolutely huge market like smartphones (e.g like who really cares about LTE-A vs" basic LTE?) IoT, VR/AR or whatever next-fad-of-the-year is nowhere close to providing the same real-world utility of smartphones in practice, everybody is hyping all those up to hide the slowly sinking ship.
You are betting against history. The initial stages of every new usage of computing have been full of hype and idiocy. Look at the garbage devices that were shipped in the mid-70s as companies tried to get onto the first PC band wagon. Look at the garbage devices shipped during the calculator boom of the same sort of period, or during the high point of the dumb-phone days.
The point is not that most companies are incompetent and ship garbage; this has always been true, and you'll always find examples to laugh at. The point that matters is that there have also always been a few companies that weren't complete fools, and that shipped devices that were worth owning.
IMHO the wrist computer falls into this category, and soon the speaker computer will become functional enough that it's worth having one for many people. Internet-connected cameras are already useful for many people (and will become even more so once some security standards are agreed upon, along with the equivalent of UL, or perhaps legal standards, that enforce them --- what Apple has done with HomeKit here is an interesting start and I'd love to see Android and MS put together the same sort of APIs and certification requirements). Likewise, one step at a time, health equipment is becoming smarter, starting with things like smart scales. And small items, like Automatic, are adding functionality to our cars.
That's how it happens, one step at a time. Nothing seems to change over six months, but a hell of a lot changes over five years... Pointing out the problems and failures is like mocking early cars breaking down, or pointing out that early planes crashed. Yes, these happened. And so what? Look at the big picture. To assume the problems you have noticed are being ignored by ALL management, and cannot be fixed by ANY engineers, is ridiculous.
Well, today nothing comes after hype and idiocy. That's the final destination. Don't seek parallels with the 70s or 80s or 90s of the previous century, because there ain't any. Two or three decades from now people will be killing each other for drinking water and the only technology mass produced would be death machines. People have had ample amount of technology to make the world a better place for decades, yet none of that has really materialized. One step forward, two steps back, that's how it goes, the only ones getting things in their interests are the corporations, whose sole purpose is to waste precious finite resources for profit at the expense of humanity.
You use the term "think", yet thinkers do not bet, that's a trait typical for believers, and "believe" is the term you should have used in regard to my "capital".
Every environment scientist who is not a "global warming" paid shill will tell you where things are going. From that every half decent economist will tell you the possible business models. Every barely decent statesman would tell you what's the place for the "consumer middle class" in that equation, had something like "barely decent statesman" actually existed.
But feel free to buy the dumdum version - flying cars, weekend trips to Mars, robots that will do all the work without rendering you obsolete and beyond useless - a needless expense. Oh... "quantum entanglement" lol... The future holds great things for believers like you. Trust them ;)
I wouldn't be so sure this will be approved by regulators. If Clinton wins the White house in 10 days, it could well be blocked. At least her VP seems to be at least somewhat anti-consolidation.
Does anyone remember USR (US Robotics)? I remember in the 90s I spent $400 buying one of their 28.8K modems. They were the king of the game, just like Pinnacle for CD writers. They dissapeared once those things got integrated on motherboards just like NICs and soundcards (how many ppl still buy discrete SoundBlaster cards?).
That's what I see with NXP and the IoTs. As devices that I'd actually want networked like appliances, cars, security cameras get cheaper and more advanced, I don't need to settle for low grade microcontrollers, the silicon area and power consumption is so low I can just get a quadcore A7 SoC for pennies, heck there's already Chinese companies like HiSilicon that'll sell you one for $1!
Who knows, Marvell Semi and a bunch of other low grade IC companies are still around making money, so this could work...
And in the future, there'll be a company like Qualcomm that'll sell you one for $1! That's probably the kind of route they're taking: combining the IoT controllers with their non-Application cores. Just stick a cheaper headless device in an appliance, and bam, internet for thing.
As the semiconductor companies merge and become single entities, there is an indirect threat to a type of business models some companies follow. The best example is ARM; ARM licenses its IP to the company itself and then draws royalty based on number of sales. Generally, the royalty is comparatively low compared to the licensing fee (over a long period, royalty takes over, of course)
With companies merging, the licensing fee is going to go down for sure! This calls for these companies to adjust their business model, probably by increasing the royalty per chip- which might translate to increased device costs.
I would be interested to see how ARM responds to this, as Qualcomm, NXP and Freescale are perhaps three very major partners of ARM bringing huge sums in Licensing fee, which would now become 1/3rd of what it used to be.
This entire sector is seeing allot of m & a activity. SofBank buying ARM, Microchip buying Atmel, hey even the two Arduinos appear to be settling their differences and coming together (ok, that last was just for a chuckle). Samsung is scaring folks. They are gigantic and good at almost everything.
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witeken - Friday, October 28, 2016 - link
"with revenues comparable to those of Samsung and Intel."Uh, Intel is still 2x Qualcomm.
witeken - Friday, October 28, 2016 - link
Also, in the discussion of why their is so much M&A in 2015-6, you forgot the most important thing: the semiconductor market is slowing down, so M&A is just another way for companies to deliver value to the shareholders.Mondozai - Saturday, October 29, 2016 - link
The semiconductor market is only entering a lull as the smartphone growth phase is coming to a close.This deal is positioned for the next phase, which is the IoT era. Therefore, it is incorrect to paint this as a purely defensive move to shareholders. It's about positioning it for the next growth stage.
Whether it will succeed or not is anyone's guess, but the stated intention of the deal and underlying logic is sound.
ddriver - Saturday, October 29, 2016 - link
The bubble keeps growing, it would have taken qualcomm 1/10 of that to develop an analog to nxp's entire product like from scratch. Wouldn't want to be there when it finally bursts.I guess they are doing it for the patents rather than the actual technology, as in it would be cheaper to take over rather than pay royalties.
Wwhat - Sunday, October 30, 2016 - link
There is a difference between slowing down and growth slowing down.The first means a trend downwards, the second is just saturation.
emn13 - Monday, October 31, 2016 - link
According to this article, Intel's revenues are 51B, and the meged companies revenues are 35B. Intel does not earn 2x 35B, as you suggest.Personally, I doubt that a 35B vs. 51B revenue matters all that much when it comes to where a company is going, so I'd call those comparable (I'd call a 2x difference comparable too). With the right sales channels, tech, IP etc. a 35B company might easily out-compete a 51B company (and the reverse is obviously true too).
Lolimaster - Saturday, October 29, 2016 - link
So in the near future we will see Qualcomm branded smartphones.ddriver - Saturday, October 29, 2016 - link
nxp's product line is "lower level" compared to qualcomm, they mostly make micro-controllers, that won't really be bringing qualcomm any closer to smartphones, they are already as close as it gets having numerous complete SOCs with integrated modems in their portfolio.Gondalf - Saturday, October 29, 2016 - link
Hopefully this merger will goes well. Npx is not in a good siuation and sure is not growing, Qualcomm is shrinking with a semiconductor revenue of only 16B, the rest is patents revenue. So yes the agglomeration is exactly half Intel and a lot less than Samsung Semicondutors.In my mind they paid too much for Npx, epecially they don't have a good FAB to offer, but only little 200mm FABs to be shut down in a short time due obsolescence. Anyway Qualcomm knows that its revenue is going down year after year cause Mediatek and many other companies so this could be a manner to stay alive with a good revenue.
emn13 - Monday, October 31, 2016 - link
NXP was nearly bankrupt just a few years ago. Accumulating around 100B in value in a few years certainly doesn't sound like they're doing very poorly.beginner99 - Saturday, October 29, 2016 - link
I'm convinced we will see a few companies go under due to the IoT hype not taking off as much as expected. As long as a I can buy appliances as a fridge, Washing machine and so forth without connectivity I will do it. Not to mention that these "devices" are low volume and you keep them for decades.And they don't contain a battery that fails after 2-3 years requiring you to buy a new device.In fact they need to invent a new device we actually to want or can make good use of. Like the smartphone was or else this will not scale.
StrangerGuy - Saturday, October 29, 2016 - link
It's inevitable, commoditization of good enough tech in consumer has taken its toll even for somebody as big as Qualcomm in an absolutely huge market like smartphones (e.g like who really cares about LTE-A vs" basic LTE?) IoT, VR/AR or whatever next-fad-of-the-year is nowhere close to providing the same real-world utility of smartphones in practice, everybody is hyping all those up to hide the slowly sinking ship.name99 - Saturday, October 29, 2016 - link
You are betting against history. The initial stages of every new usage of computing have been full of hype and idiocy. Look at the garbage devices that were shipped in the mid-70s as companies tried to get onto the first PC band wagon. Look at the garbage devices shipped during the calculator boom of the same sort of period, or during the high point of the dumb-phone days.The point is not that most companies are incompetent and ship garbage; this has always been true, and you'll always find examples to laugh at. The point that matters is that there have also always been a few companies that weren't complete fools, and that shipped devices that were worth owning.
IMHO the wrist computer falls into this category, and soon the speaker computer will become functional enough that it's worth having one for many people. Internet-connected cameras are already useful for many people (and will become even more so once some security standards are agreed upon, along with the equivalent of UL, or perhaps legal standards, that enforce them --- what Apple has done with HomeKit here is an interesting start and I'd love to see Android and MS put together the same sort of APIs and certification requirements). Likewise, one step at a time, health equipment is becoming smarter, starting with things like smart scales. And small items, like Automatic, are adding functionality to our cars.
That's how it happens, one step at a time. Nothing seems to change over six months, but a hell of a lot changes over five years...
Pointing out the problems and failures is like mocking early cars breaking down, or pointing out that early planes crashed. Yes, these happened. And so what? Look at the big picture. To assume the problems you have noticed are being ignored by ALL management, and cannot be fixed by ANY engineers, is ridiculous.
ddriver - Saturday, October 29, 2016 - link
Well, today nothing comes after hype and idiocy. That's the final destination. Don't seek parallels with the 70s or 80s or 90s of the previous century, because there ain't any. Two or three decades from now people will be killing each other for drinking water and the only technology mass produced would be death machines. People have had ample amount of technology to make the world a better place for decades, yet none of that has really materialized. One step forward, two steps back, that's how it goes, the only ones getting things in their interests are the corporations, whose sole purpose is to waste precious finite resources for profit at the expense of humanity.tuxRoller - Saturday, October 29, 2016 - link
.....Wow......I'd take that bet if I didn't think your capital consisted solely of seeds, pur filters and rounds.
ddriver - Saturday, October 29, 2016 - link
You use the term "think", yet thinkers do not bet, that's a trait typical for believers, and "believe" is the term you should have used in regard to my "capital".Every environment scientist who is not a "global warming" paid shill will tell you where things are going. From that every half decent economist will tell you the possible business models. Every barely decent statesman would tell you what's the place for the "consumer middle class" in that equation, had something like "barely decent statesman" actually existed.
But feel free to buy the dumdum version - flying cars, weekend trips to Mars, robots that will do all the work without rendering you obsolete and beyond useless - a needless expense. Oh... "quantum entanglement" lol... The future holds great things for believers like you. Trust them ;)
Murloc - Wednesday, November 2, 2016 - link
death machines are IoT, checkmate.danjw - Saturday, October 29, 2016 - link
I wouldn't be so sure this will be approved by regulators. If Clinton wins the White house in 10 days, it could well be blocked. At least her VP seems to be at least somewhat anti-consolidation.Michael Bay - Saturday, October 29, 2016 - link
If this monstrosity wins, it doesn`t matter, because we all die in a nuclear fire.TesseractOrion - Sunday, October 30, 2016 - link
Whereas if the other thing wins, everything will be rosy I guess?ddriver - Saturday, October 29, 2016 - link
u crazy? this is consolidation of monopoly, killary is their loyal pawnzodiacfml - Saturday, October 29, 2016 - link
Yep. I don't see any synergy here.webdoctors - Saturday, October 29, 2016 - link
Does anyone remember USR (US Robotics)? I remember in the 90s I spent $400 buying one of their 28.8K modems. They were the king of the game, just like Pinnacle for CD writers. They dissapeared once those things got integrated on motherboards just like NICs and soundcards (how many ppl still buy discrete SoundBlaster cards?).That's what I see with NXP and the IoTs. As devices that I'd actually want networked like appliances, cars, security cameras get cheaper and more advanced, I don't need to settle for low grade microcontrollers, the silicon area and power consumption is so low I can just get a quadcore A7 SoC for pennies, heck there's already Chinese companies like HiSilicon that'll sell you one for $1!
Who knows, Marvell Semi and a bunch of other low grade IC companies are still around making money, so this could work...
mkozakewich - Monday, October 31, 2016 - link
And in the future, there'll be a company like Qualcomm that'll sell you one for $1! That's probably the kind of route they're taking: combining the IoT controllers with their non-Application cores. Just stick a cheaper headless device in an appliance, and bam, internet for thing.Murloc - Wednesday, November 2, 2016 - link
makes sense, this is why they're doing the acquisition, it's even in one of the slides.karthik.hegde - Sunday, October 30, 2016 - link
A very interesting thing to observe:As the semiconductor companies merge and become single entities, there is an indirect threat to a type of business models some companies follow. The best example is ARM; ARM licenses its IP to the company itself and then draws royalty based on number of sales. Generally, the royalty is comparatively low compared to the licensing fee (over a long period, royalty takes over, of course)
With companies merging, the licensing fee is going to go down for sure! This calls for these companies to adjust their business model, probably by increasing the royalty per chip- which might translate to increased device costs.
I would be interested to see how ARM responds to this, as Qualcomm, NXP and Freescale are perhaps three very major partners of ARM bringing huge sums in Licensing fee, which would now become 1/3rd of what it used to be.
HardwareDufus - Sunday, October 30, 2016 - link
This entire sector is seeing allot of m & a activity. SofBank buying ARM, Microchip buying Atmel, hey even the two Arduinos appear to be settling their differences and coming together (ok, that last was just for a chuckle). Samsung is scaring folks. They are gigantic and good at almost everything.Wwhat - Sunday, October 30, 2016 - link
Sad day.Pessimism - Monday, October 31, 2016 - link
I'm surprised that legislation against monopolies allowed this to happen.mkozakewich - Monday, October 31, 2016 - link
They aren't really competitors, so that might make all the difference. At any rate, it's not completely decided, yet.