A Dutch Producer of Automotive Chips
J.P. Morgan recently mentioned the possibility of Samsung Electronics’ another M&A deal. According to it, the candidates include NXP, Texas Instruments and Microchip Technology, which are running manufacturing facilities in the United States.
NXP has been mentioned for years as an M&A target of Samsung Electronics. The Dutch company is currently running production lines in Arizona and Texas, where Samsung Electronics is running production lines.
NXP is a leader in the automotive semiconductor industry including the application processor, infotainment and microcontroller unit segments. The company showed the highest share in the global market until Infineon Technologies took over Cypress Semiconductor Corporation in 2018. It was the second-largest in the industry last year.
If Samsung Electronics acquires NXP, the price is estimated to amount to 70 trillion won. The market cap of NXP was approximately 60.58 trillion won on April 23. Samsung Electronics’ cash on hand exceeded 100 trillion won last year and its assets that can be turned into cash within a year amount to 120 trillion won. Samsung Electronics’ current share in the global automotive semiconductor market stands at 2 percent or so. If the deal does occur, synergy can be anticipated between NXP and its subsidiary Harman International Industries in the automotive application processor and infotainment segments.
At present, the automotive semiconductor market is growing rapidly with no one dominating it. According to market research firms, the market is expected to grow from US$38 billion to US$67.6 billion from 2020 to 2026 and the total price of chips per vehicle is estimated to rise from US$400 or so to over US$1,000 from 2018 to 2024.
Still, it is also pointed out that Samsung Electronics will benefit little from the deal. If Samsung Electronics acquires NXP, it can stably expand its automotive electronics business in relation to NXP’s existing clients including BMW and Ford. However, a huge profit is rather unlikely in view of the nature of the business.
Last year, automotive chips accounted for 44 percent of NXP’s annual sales. The rest is divided into IoT-related sales (21 percent), communication infrastructure-related sales (20 percent) and mobile sales (15 percent). These are where both Samsung Electronics and NXP are doing business.
Besides, the governments including the Chinese government may not approve the deal with the importance of the industry continuing to increase in the global hegemonic rivalry. For instance, the United Kingdom recently put the brakes on Nvidia’s Arm acquisition and China recently postponed its examination procedure with regard to the acquisition of Kokusai Electric by Applied Materials.