Coverage: Qualcomm in talks to acquire NXP for more than $30 billion

San Diego-based Qualcomm Inc. is in talks to acquire NXP Semiconductors NV for more than $30 billion amid consolidation in the semiconductor industry.

Michael de la Merced of the New York Times had the news:

A union of Qualcomm and NXP would be the latest in an industry that has recently experienced big mergers. Earlier this year, SoftBank of Japan struck a takeover deal for ARM Holdings, a British chip designer, for $32 billion.

Last year, Avago Technologies bought Broadcom for $37 billion, while Intel paid nearly $17 billion for Altera.

NXP itself has been part of the trend as well. Less than two years ago, itbought a smaller peer, Freescale Semiconductor, for $11.8 billion to gain scale and negotiating leverage with customers like car companies and phone makers.

NXP, which has its headquarters in the Netherlands but trades on the Nasdaq, has become a major supplier of chips used in near-field communications, which lets phones interact wirelessly with equipment like payment terminals.

Buying NXP would add tremendous scale to Qualcomm, which designs and makes chips primarily for smartphones. Yet the semiconductor company faced pressure from an activist hedge fund last year over its plans to spur growth. It weighed, and later abandoned, a potential split of its businesses.

Mike Freeman of the San Diego Union-Tribune noted the deal would be Qualcomm’s largest ever:

If it happened, the deal would be by far the largest ever for Qualcomm, potentially transforming the company from a mobile chip maker and intellectual property provider to a broad-based semiconductor firm with a slew of products in automotive electronics, Internet of Things, secure payments and other markets.

It also could be a tricky integration, merging the cultures of a high-profile Southern California smartphone chip company with a European firm that supplies technology that’s not often in the public eye.

“This would vault Qualcomm into so many markets, and from a product portfolio standpoint, I think the two companies would be just an awesome match,” said Jim McGregor, head of Tirias Research, a technology consulting firm. “But I would be concerned about the culture. These are two drastically different cultures.”.

Such a deal could return Qualcomm to revenue and earnings growth, however. After three years of fast growth from its lead in 4G LTE technology, Qualcomm has struggled to boost its financial results in the past year or so amid slowing smartphone sales and increased competition in mobile chips.

Greg Roumeliotis and Liana Baker of Reuters say the deal would boost Qualcomm’s business with the auto industry:

NXP closed a nearly $12 billion deal to buy U.S.-based Freescale Semiconductor last December, creating the world’s top maker of automotive electronics and doubling the percentage of its auto-related revenue to 40 percent. It could also attract interest from other large semiconductor companies such as Broadcom and Texas Instruments Inc (TXN.O), analysts have said.

Qualcomm, which supplies Android smartphone makers and Apple Inc (AAPL.O), has been dealing with slowing smartphone sales and stiff competition from Chinese and Taiwanese rivals.

Qualcomm has so far sat out the transformative consolidation sweeping the industry, which has seen mega-deals such as Avago (AVGO.O) buying Broadcom for $37 billion last year.

Qualcomm gets the bulk of its revenue from chip sales but most of its profit comes from wireless patents it licenses to the mobile industry. It explored a plan to break up its chip business from its patent licensing unit after pressure from activist investor Jana Partners but decided to remain whole.

Mizuho Securities analyst Vijay Rakesh said that the deal would give Qualcomm a roadmap for the next decade while moving away from a maturing handset market and toward the faster growing opportunity in automotives.