NXP sets its sights on becoming No. 2

NXP Semiconductors aims to replace Texas Instruments Inc as the second-largest chipmaker in the Greater China region by 2011, partly through mergers and acquisitions (M&As), a NXP executive said in Taipei yesterday.

The Eindhoven, Netherlands-based chipmaker has set a goal of becoming one of the world's top five semiconductor companies since it separated from Royal Philips Electronics NV last year.

"NXP, ranked No.3 chipmaker in the Greater China area now, wants to lift its ranking to the second spot," said Mike Yeh (葉昱良), NXP's new Greater China regional executive, during a group interview yesterday.

More than 30 percent of NXP's overall revenues of 5 billion euros (US$7.33 billion) last year came from the Greater China area and the contribution is expected to increase, Yeh said.

The expansion in the Greater China area, if realized, would help NXP reach the No. 5 spot by boosting its annual revenue to more than 9 billion euros by 2011, Yeh said.

To expand its revenue base and market share, NXP has been busy with mergers and acquisitions since it was spun off, including buying Silicon Laboratories and BlueStreak as well as a chip testing and packaging venture with Advanced Semiconductor Engineering Inc (日月光半導體) in Suzhou, China.

NXP said it has formed a 50-50 chip joint venture -- Moversa GmbH -- with Sony Corp to promote the use of contactless smart card application for mobile phones.

Yeh said NXP saw new players entering China's TV chip industry, adding that some Taiwanese chip designers have made good progress in the market.

But most of these entrants supplied chips for liquid-crystal-display (LCD) TVs with screens smaller than 32 inches, while NXP has retained its lead in the large-screen TV market, Yeh said.

Local chip designer MediaTek Inc (聯發科), the biggest handset chip supplier in China, said earlier this month that it planned to start shipping TV chips to Chinese TV brands this quarter and that the volume would increase next year.

Yeh said NXP was not too worried that its customers might switch suppliers just to save a little money, because they would risk supply shortages in the peak season or risk picture quality.

TV chips account for about 10 percent of an LCD TV's total cost.

NXP supplies TV chips to a numerous brands including Sony, Samsung Electronics Co and China's major consumer electronics brands Konka Group Co (康佳) and TCL Corp. It holds a 40 percent share of China's traditional cathode-ray-tube (CRT) TV chip market.

Yeh also said NXP was on track to outsource more production to contract chipmakers such as Taiwan Semiconductor Manu-facturing Co (台積電) because next-generation factory investments were too big for most semiconductor companies to afford.

NXP plans to farm out half of its production in the near future, compared with the current 40 percent and 30 percent in the past, Yeh said.

"Every semiconductor company is taking this approach," Yeh said, adding that NXP would focus its spending on M&A and developing new patents rather than capacity expansion.