Some perspective on the size of NXP's NFC related business relative to the size of the company:
NXP CEO Says Google Wallet To Double Its Near-Field Chip Sales
By Archibald Preuschat and Harm Luttikhedde
Of DOW JONES NEWSWIRES
EINDHOVEN, The Netherlands -(Dow Jones)- Google Inc.'s (GOOG) mobile payment system will help to double sales of NXP Semiconductors NV's (NXPI) near-field communication chips in the next couple of years, but other technological developments promise higher growth rates, according to the Dutch firm's chief executive.
NXP is providing the NFC chips for Google Wallet, a service that will allow consumers with Android smartphones to pay for goods and services or receive coupons and offers by waving their device over a special reader.
NFC technology is seen as a growth driver for NXP, but in 2011 NFC will contribute less than 1% of its sales, CEO Richard Clemmer said in a recent interview at the company's headquarters in Eindhoven, in the South of the Netherlands. And despite an expected doubling of its contribution to sales in 2012 and 2013, Clemmer said he doubts that NFC will ever reach a double-digit share of NXP's overall sales which reached $4.4 billion in 2010.
"Google will make NFC a success this time", Clemmer said, adding that all handset makers are looking into a technology that has also drawn the attention of banks and mobile carriers looking to diversify their revenue streams. Finnish mobile phone maker Nokia Corp. (NOK) also uses NXP's NFC chips in some of its devices.
Still, other new technologies promise higher growth rates for NXP, Clemmer said. These include GreenChip--a new product that allows consumers and businesses using devices such as smartphones and personal computers to remotely turn lights on and off and set brightness while also saving on power--and authentication technology, which gives producers the ability to trace and verify the origin of raw materials and is another application layer the company is working on.
Authentication could be a bigger market than NFC, but smaller than the Smart Home market, which includes chips for lighting, home automation, and smart metering, an addressable market expected to reach $4.5 billion by 2015, Clemmer said.
The new technologies have in common that NXP doesn't just deliver chips, but also software and security programs, Clemmer said.
And that is how NXP believes it can outpace the market.
The market growth rate for High Performance Mixed Signal chips is forecast at around 10% this year. The segment, which includes chips used in cars, identification, wireless infrastructure, lighting and mobile applications, will outpace the overall semiconductor market growth rate of an estimated 7% to 8%.
But Clemmer wants to outpace the High Performance Mixed Signal market growth rate by at least 50%.
NXP's standard products, which include transistors and diodes, will have growth rates equal to the industry, Clemmer said, but "standard products are driving volumes, deliver good returns, and give us the scale to keep costs low."
Despite his overall positive view of NXP's markets, Clemmer said he does " worry a lot about the world economy." His concerns focus not so much on Europe but on a potential cooling in Asia including China, a region that contributes about 60% to its overall sales compared with 25% in Europe.
Turning to recent speculation regarding a possible takeover of NXP, Clemmer said he would start negotiations with a potential buyer if they offered a huge premium, but right now he isn't holding talks with any other party.
"If someone offers a premium of 80% we would start negotiations as this would maximize the value for our shareholders", Clemmer said.
In April, Dutch paper De Telegraaf reported that NXP Semiconductors was in takeover negotiations with U.S. chip giant Intel Corp. (INTC), as well as with Qualcomm Inc. (QCOM) and Broadcom Corp. (BRCM), but at the time of NXP's results in May Clemmer said he had held no discussions with the companies mentioned.
Clemmer said he wouldn't expect NXP's major shareholders, mainly private equity firms and pension funds, to reduce their stake in the company in the near term following a secondary share offering in March and with further potential for a rise in the share price. The share has gained 22% so far this year amid high hopes for its latest technology, including NFC chips. Its NASDAQ-traded shares closed Wednesday at $25.45 valuing the company at $6.34 billion.
-By Archibald Preuschat and Harm Luttikhedde, Dow Jones Newswires; +31 20 5715 218; archibald.preuschat@dowjones.com
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