Electronics and Semiconductors

NXP's China Automotive Chip JV Begins Operations

24 April 2014

Joint venture automotive chip company Datang NXP Semiconductors Co. Ltd., headquartered in Nantong near Shanghai, China has begun operations.

The formation of the joint-venture is part of a strategy at NXP Semiconductors NV (Eindhoven, The Netherlands) to be more focused on southeast Asia in general and China in particular. However, in this case NXP, despite providing much of the technological and sales base for the company, has agreed to be a minority shareholder with 49 percent. State-owned enterprise Datang Telecom Technology Co. Ltd. (Beijing, China) owns the controlling 51 percent.

NXP is the largest supplier of ICs to the automotive sector in China and the joint venture has been set up to address the electric and hybrid vehicle market in China in-line with Chinese government emphasis on developing energy-efficient and environmentally friendly vehicles.

The Chinese government is extending a subsidy program for the purchase of electric vehicles from 25 to more than 80 cities, and plans to build more than 200,000 charging stations across the country, according to NXP. Partly as a result of this state encouragement Datang NXP expects the number of electric vehicles in China to go from less than 20,000 to over 3 million over the next ten years. This represents a compound annual growth rate of 70 percent.

"This is a very exciting time for NXP in China. With this JV we are in an ideal position to take advantage of the opportunities this diverse market presents. We are confident that the Chinese governments' investment program will be instrumental in driving the private customers' appetite for electric vehicles," said Drue Freeman, senior vice president, global automotive sales & marketing, NXP Semiconductors. "Alongside Datang Telecom we are making a long-term investment in China, and pioneering market-leading automotive solutions. Through these solutions we will be able to drive the industry forward in China and go on to make a positive impact on other markets across the world."

Paul Zhang, CEO of Datang NXP Semiconductors, said the company has begun shipping ICs supporting light leveling systems, which NXP contributed to the JV.

NXP swings to profit

The news of the start of operations at Datang NXP coincided with first quarter financial results from NXP Semiconductors NV. NXP made a net profit of $110 million on sales revenue of $1.246 billion in 1Q14. The profit was up 15 percent sequentially and compared with a loss in the same quarter a year before. The sales revenue was down 4 percent sequentially and up 14 percent compared with the same quarter a year before.

NXP broke its product sales down by application segment and revealed that portable and computing applications were the strongest area for the company with 45 percent annual growth. The largest segment is automotive which turned in 20 percent annual growth. Infrastructure and industrial chipped in 19 percent growth while identification was down at 6 percent.

Richard Clemmer, CEO of NXP, said that the quarter came in better than expected after an exceptionally high fourth quarter leaving the company well placed for the rest of the year.

The forecast for 2Q14 was that sales revenue would be between $1.30 billion and $1.35 billion with a mid-point o $1.326 billion that would represent sequential growth of 6.4 percent.

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