Liberated from its cash-cow yoke, Nexperia has been growing healthily since it was divested from NXP in 2017. Now, the semiconductor company has cranked up the ambition level, venturing out beyond standard products.
“When I present an investment proposal to our CEO Xuezheng Zhang these days, I don’t just get an approval, I get asked: can you do more? Can you do this faster? Can you double it? In the 30 years I’ve been working in the semiconductor industry, it has never happened to me that I want to hire 15 new engineers, only to be suggested that 20 or 30 might be better,” says Dan Jensen, general manager of Nexperia’s business group Analog & Logic ICs (A&L).
To be fair, Jensen adds, that go-getter mentality has been there ever since Nexperia was divested from NXP in 2017. Formerly a cash cow, the Standard Products division grabbed its newfound freedom with both hands and started to invest heavily. Last year, the construction of a brand-new 1.85-billion-dollar power semiconductor fab in China was announced. R&D expenditure went up from 7.1 percent of sales in 2017 to 9.0 percent in 2020 – and that’s with sales climbing from 1.1 billion dollars in 2017 to 1.4 billion dollars in 2019 (the 2020 financial results haven’t been published yet).
The current owner – Chinese semiconductor and communications company Wingtech Technology acquired a majority stake in Nexperia in 2019 – is taking it up another notch, however. Last February, an additional set of investments in R&D, people and manufacturing were made public. “We’re in the process of transforming the A&L organization,” says Jensen. “We have a history of over 50 years with standard logic parts, which by nature are very digital. We’re still very much focused on that, in fact, we aspire to become market leader over the next three to four years. But we want to grow faster and there’s a limit to what we can do in standard logic. That’s why we’re expanding into new territories.”
And so Nijmegen-headquartered Nexperia is moving up the value chain. Its traditional offerings may be the ‘nuts and bolts’ of the electronics industry, within a couple of years, we can expect the company to start releasing increasingly sophisticated semiconductor products. Looking to monetize on trends such as the electrification of cars and the adoption of 5G, the company has gone in overdrive.
Jensen’s A&L group took its first steps beyond standard logic when it was still part of NXP. “We started investing in interface ICs, primarily voltage translators and level shifters. This is an extension out of logic, but a similar technology. We’ve released 50-60 new devices of this type over the last three years.” The investment has been paying off handsomely. “This business segment has shown a compound annual growth rate of 25-30 percent over the past 5 years. It’s now responsible for 20-25 percent of A&L’s sales.”
A bit further along the road, A&L increased its focus on the analog switch market, another natural extension of its portfolio. “This could add as much as a billion dollars in addressable market.” And then, as a part of the investment push following the acquisition by Wingtech, A&L moved into the power management IC business. These devices are a bit more revolutionary, considering Nexperia’s historical bread and butter. The parts are still in development, though the first ones – a series of battery management ICs – were taped out a few weeks ago.
“This is a step-wise process. We’re starting with basic building blocks, such as gate drivers, load switches and e-fuses. These are basically similar to our existing devices with some additional intelligence wrapped around them. As we develop this kind of core IP, we’ll venture into more integrated and sophisticated solutions. The long-term growth prospects for these kinds of devices are very attractive: it’s an addressable market of more than 5 billion dollars,” says Jensen.
To lay claim to a sizable chunk of that, A&L has hired 45 new engineers since the start of 2020 – two-thirds of the company’s total local personnel increase in that period. Most of the new hires are working at the Nijmegen headquarters, where most of A&L’s pre-manufacturing activities are stationed. The company has also opened a new design center in Penang, Malaysia, and is in the process of starting one in Shanghai, China. A fourth center in the US is being considered.
“This speaks to the aggressive posture we’re taking about investing in the power management IC market. We’re ramping up and hiring talent as fast as we can, in Nijmegen and around the world. That’s equally true for our other two business groups, by the way. We’re really turning into a company that’s focused on growth. In fact, under the Wingtech ownership, I’d say we’re pursuing a hyper-aggressive growth trajectory.”
Jensen’s customers have hailed the course change enthusiastically. “I’ve literally had dozens of meetings explaining this new strategy, and every customer applauds it. They want us to move into these areas. They’re very much aware that, because of our history as a supplier of standard products, we know how to squeeze out costs. We typically have long-standing relations with them, so they’re familiar with our quality standards, the reliability of our supply chain and our customer support.”
The new path is also changing the relationship with customers, Jensen explains. “To deepen our insight into the customer’s needs and the market in general, we’re also making big investments in what I call system engineers, which were traditionally called product managers. They have an understanding of the market and the applications, and work directly with the customer base. After finding out what the key specs and parameters are, they work out the design definition. In the past, Nexperia invested in a very limited amount of that kind of skill set, but now we’re looking all over the world for it.”
“Customers don’t just want us to make the parts, they want to work with us to get the best parts made. This kind of access to the customer is new to us. In the NXP days, it was much more difficult to get that kind of information, because of where the company was focused. We would typically be talking to purchasing, maybe to component engineering. Now, we’re having discussions at a much deeper level, with design architects and R&D leads. And the great thing about these meetings is that we came to talk about product A, but soon we’re talking about product B, C and D. We’re always walking away with fresh ideas. That’s why I’m very confident that our growth strategy will be very successful.”