At NXP’s Investor Day, CEO Kurt Sievers explained why his company is particularly well-positioned to capitalize on the next semiconductor megatrend. “We’ve been building towards this for many years.”
“This is much more than just a short-term cyclical rebound,” NXP CEO Kurt Sievers said, referring to markets springing back to life – and then some – in the second half of 2020, following the pandemic-caused slowdowns earlier last year. “I believe this is a value reset for the semiconductor industry, which is here to stay.” Having experienced stinging shortages, never again will downstream industries consider semiconductors as a commodity, Sievers added. Semiconductors are essential ingredients for growth, and everybody knows it.
So, good times for chipmakers, then. NXP, too, will share in the bounty. Speaking at his company’s 2021 Investor Day in New York, Sievers revealed that he expects annual revenue to grow to roughly 15 billion dollars in 2024, up 36 percent from the projected 11 billion dollars this year. That’s more than double the revenue growth in the 2018-2021 time frame.
Of the forecasted 4 billion dollars annual revenue increase, about two thirds will come from what NXP calls accelerated growth drivers: a set of carefully selected applications from each of the company’s four business units Automotive, Industrial & IoT, Mobile and Communications Infrastructure. The chipmaker will direct most of its investment towards these applications, projecting them to generate 20-25 percent growth annually (CAGR) in the next few years. Meanwhile, businesses in which NXP is already dominating are expected to grow by about 5 percent per year (CAGR), which is roughly the expected market pace.
Most of the accelerated growth drivers can be linked to what Sievers called “the next megatrend” for the semiconductor industry: the secure edge. “In the next ten years, we’ll see the rise – you could even say explosion – of smart connected devices,” he said. ASML CEO Peter Wennink recently predicted the same thing.
NXP has been preparing to capitalize on connected edge computing for years, Sievers explained. Through the 2016 merger with Freescale, the company gained more powerful processing capabilities. After an acquisition by Qualcomm was blocked by the Chinese in 2018, NXP had to expand its connectivity portfolio on its own and did so by buying some of Marvell’s assets. Combined with its traditional strengths, NXP is now in possession of “the best portfolio in industry for connected edge computing,” Sievers claimed.
Edge applications are about collecting data (sensing), processing it locally to make a decision and perform some sort of actuation (action). Meanwhile, cloud connectivity serves to provide deeper data analysis, firmware updates and so on. In addition, edge computing demands strong cybersecurity, to protect privacy and prevent intrusions, and functional safety, ie resilient system performance to make sure systems can operate safely in proximity to humans.
The latter two elements are where NXP really shines. “Thanks to our history of mobile payments and electronics identification, cybersecurity is in our genes. The same goes for functional safety. We’ve been leaders in automotive safety systems for many years. We’re expanding that engineering know-how to edge applications.”
Execute well on these capabilities by providing customers with scalable solutions that minimize system complexity, and the opportunities to grow revenue are there for the taking. “NXP is in a very prominent and special position with respect to the rise of edge computing. We have the muscle, we have the capabilities. And it didn’t fall from the sky: we’ve been building towards this for many years.”