In 2015, NXP Semiconductors NV's $11.5 billion acquisition of Texas-based Freescale Semiconductor Ltd. made it the largest automotive chipmaker in the world.
Now, with its pole position under threat from Germany's Infineon Technologies AG, the Dutch company is banking on its recent vehicle communications investments to come good in the 5G-fueled, autonomous driving era.
Its acquisition of OmniPHY Inc. in 2018 and Marvell Technology Group Ltd.'s Wi-Fi and Bluetooth business this year are consistent with NXP's purchases since 2010 in that they are focused on the connected cars space, analysts said. The firm's R&D spend also peaked at €1.48 billion in 2018, with chief technology officer and senior vice president for automotive Lars Reger being promoted to the role at the corporate level in December of that year.
These efforts have paid off. According to IHS Markit analyst Phil Amsrud, NXP's microcontrollers — essentially tiny computers — are lurking within luxury and mainstream cars. Its portfolio, spanning contactless payments and keyless entry systems, betrays its blueprint for the future of shared, autonomous mobility, he said.
Strategy Analytics analyst Kevin Mak agrees, adding NXP's research and development of connectivity and autonomous driving technologies "could support future "robo-taxi" ride-hailing services." Self-driving taxis form part of Uber Technologies Inc. and Alphabet Inc. unit Waymo LLC's plans. Notably, Alphabet's biggest subsidiary Google LLC is already utilizing NXP's MIFARE contactless tech for Google Pay smartphone payments.
But with self-driving cars not expected to arrive for at least another few years, NXP is connecting today's vehicles. Its processors power everything from assisted-safety features, such as automatic emergency braking, to dashboard infotainment systems.
The automotive market is seeing rising demand for tech designed to avoid collisions. By 2022, all new vehicles in Europe will have to be fitted with emergency braking systems and intelligent speed assistance, courtesy of EU rules passed in April. Existing models will have to meet the requirements by 2024.
So it is no wonder NXP is projecting advanced driver assistance systems, or ADAS, growth of up to 25% CAGR. This in spite of an 8% year-over-year dip in its broader automotive business, which generated €1.04 billion in the first quarter.
Within ADAS, the radio detection and ranging, or RADAR, segment holds the most potential, according to NXP. Along with its light detection and ranging, or LiDAR, sensors, these help autonomous vehicles "see." LiDAR sensors measure the distance to an obstacle by calculating how long it takes a pulse of light to travel there and back.
These sensors are also making their way into next-gen ADAS systems such as Nissan Motor Co. Ltd.'s ProPilot 2.0, which allows for hands-off operation within a single lane, itself powered by NXP's 32-bit microcontroller, Mak said.
ADAS accounts for 10% of NXP's automotive revenue and was the only major category not to suffer a decline in the first quarter — a trend that is also reflected more broadly in the industry. Whereas European semiconductor sales have witnessed monthly declines this year, automotive chips are outperforming other segments, according to the European Semiconductor Industry Association.
More recently, NXP has struck partnerships with automotive tech startups in Europe and China in a bid to accelerate vehicle automation and make inroads overseas. NXP is also further pushing into vehicle-to-everything, or V2X, communications, tech that allows cars to communicate with each other and connected infrastructure, off the back of the OmniPHY acquisition.
By the end of 2022, the V2X market is expected to be worth $1.2 billion, with nearly six million V2X-equipped vehicles worldwide, according to SNS Telecom and IT.
The automotive tech industry views V2X as complimentary to ADAS, Mak said. The same could also be said about the other facets of NXP's business, he said, all of which will further augment each other in the 5G era.
With 5G will come faster data transfers and lower latency, providing a boost for the connected smart car, in particular vehicle-to-vehicle communications, wrote Strategy Analytics analyst Roger Lanctot.
Naturally, that explains why NXP's R&D investments are focused on 5G, among other areas, analysts say. The company is supporting the development of multiple-input and multiple-output, or MIMO, networking tech, a core component of 5G, which will enable high-resolution RADAR imaging sensors. MIMO multiplies the capacity of radio links using multiple antennas. It is also pouring cash into developing 5G antennas for connected cars, Mak said, in the hopes of creating high-speed internal networks.
Not only will this boost V2X communications, it will also unlock high-speed film and music downloads on infotainment systems for passengers.
But as NXP spreads its chips to control more parts of a connected vehicle, it will have to keep one eye on its rivals. Consolidation is likely to continue, said Amsrud of the automotive tech sector, as evidenced in Infineon's planned $10 billion acquisition of Cypress Semiconductor Corp. The German firm is set to usurp NXP to become the world's largest automotive chip supplier with "a stronger position in the critical markets for infotainment and ... ADAS," according to Amsrud.