While there are many different smartphone manufacturers out there, all offering something slightly different from one another, they all have one substantial thing in common; the silicon that keeps them going. English-based ARM Holdings is responsible for the CPU chip designs that power our smartphones and tablets, but it's companies like Qualcomm that bring these designs to live in products like the Snapdragon 820, often adding in their own GPUs and modems to create a complete system-on-chip. Now, San Diego's Qualcomm Technologies looks to purchase NXP Semiconductor for $37.88 Billion in what would be the largest semiconductor deal of its kind.
NXP Semiconductor, similarly to Qualcomm, is a firm that specializes in a particular industry; the automotive world. As cars become more and more connected, getting ever-friendlier with our smartphones, this deal appears to be a well-researched one. NXP Semiconductor, out of Eindhoven, in the Netherlands, purchase Freescale for $12 Billion back in December 2015 to make them the largest automotive electronics manufacturer in the world, which would make Qualcomm the world's largest once the deal goes through. Qualcomm offers NXP $110 per share in cash, which is a premium upwards of 11 percent given NXP's current value. Funding the deal, Qualcomm will be using some of their own cash as well as debt taken on from Goldman Sachs and JPMorgan. The deal is said to create a single company that will make over $30 Billion a year.
While the deal is the largest the industry has seen, it's not much, as Avago's purchase of Broadcom for $37 Billion back in 2015 is a close second. This is the sort of deal that is a big deal for the wider industry, as it will allow Qualcomm to absorb even more patents into a portfolio that it use to make a lot of money each and every year, all the while taking off some of the pressure from competition in the smartphone space from Chinese firms like MediaTek and Huawei. As for NXP, this deal will allow them to better connect with the smartphone world, one which is constantly merging with the automotive one. The deal will need regulatory approval before going ahead, but given the precedent set by the Avago and Broadcom deal, it's unlikely to face many roadblocks.