Acquisition of NXP Semiconductors triggers wave of consolidation

This comes not long after the March 2015 merger of Freescale Semiconductor with NXP, making it the largest chipmaker for the automotive industry, an accolade now held by the augmented Qualcomm.

This forms part of a long-term strategic move from Qualcomm towards the Internet of Things (IoT) and away from a reliance on the smartphone market, which has encountered difficulties in the face of a weakening demand for Android phones. 

Qualcomm’s IoT strategy is a significant one, reaching $1bn in revenue in 2014, and comprising of 20m automotive devices and 120m devices in smart home. Its acquisition of NXP gives it an immediate market-leading position in the automotive sector where it expects to expand revenues due to the business’ mobility synergies.

Frost & Sullivan predicts the number of IoT connections in connected cars globally to grow at 12.6% each year to 2020.

Chipmakers from Intel and Qualcomm to Nvidia have all been targeting IoT applications and specifically the Connected Car- Intel missed out on a large part of the smartphone industry’s ascendancy and Nvidia’s GPU expertise translates well to the Machine Learning challenges of advanced applications like machine vision in cars.

Yiru Zhong, Senior Industry Analyst, Frost & Sullivan commented: “Qualcomm’s acquisition is likely to trigger a new wave of consolidation in the market, with its competitors acquiring vertical expertise in IoT’s fastest growing sectors like Healthcare, Asset Management and Smart Cities.”

Importantly, Frost & Sullivan's hypothesis has always been that hardware will be commoditised and revenue will be driven by platforms and software.  Qualcomm’s quest for hardware scale must translate to scale in intellectual strength in IP, R&D, vibrancy & active application developer forums.