Rumors of Qualcomm (QCOM) and NXP (NXPI) in the midst of merger talks has caused NXP to rise 1.33% in early morning trade on Monday. The initial report on the company’s merger talks was posted by WSJ.
As discussions reportedly intensify, there are a few things to know:
1. The Acquisition Will Be More Than $30 Billion
Analysts point to the deal being valued in excess of $30 billion. Qualcomm is known for designing smartphone chips, and an acquisition of NXP would allow the company to be able to produce their own chips, greatly cutting back on costs.
NXP operates factories in five countries, which produce chips from silicon wafers. In total, the company has seven production factories and an additional seven factories that test the chips and package them.
2. NXP is the Leading Automotive Chip Supplier
A major motivator in Qualcomm’s attempt to acquire NXP is NXP’s stronghold on the automotive chip sector. The company is the largest supplier of automotive chips in the world.
Qualcomm is betting on the boom of self-driving cars as a major selling point to shareholders.
3. Qualcomm’s Operations Would Be Greatly Diversified
Qualcomm would be less dependent on the wireless semiconductor industry following a potential acquisition. The industry has begun to slow, and NXP’s operations are less affected by wireless semiconductors.
NXP also has a vast sales force and 25,000 customers, which would be attractive for Qualcomm, which deals primarily with a handful of smartphone manufacturers.
4. NXP’s Revenue is Diverse
NXP gets nearly 41% of its revenue from the automotive industry, and the company’s industrial sector makes up 24% of its revenue. Qualcomm would be acquiring the firth largest semiconductor company in the world.
In terms of expenses, NXP will also be saving money in 2017 to the tune of $500 million after acquiring Freescale Semiconductor.
