NXP and the CEO's cuts: Join the conversation

10/12/2009 1:47 PM EDT

NXP, as it was, was and is simply not competitive as a whole. Consistently over many years, its Multi Market Segment BU has been making healthy profit. Its Identity BU is in the black because of the unique encription technologies. Its Home BU has not been competitive for a long time, so was its wireless. Perhaps a good yardstick to measure the right and wrong is: pitch any of the business units to the corresponding ones of equal nature within MediaTek or Broadcom. For instance, is the TV/STP business of NXP gaining or losing versus that of MediaTek or Broadcom, are the technology (existing and upcoming) of NXP in that segment competitive versus that of MediaTek or Broadcom, is the solution cost of NXP in that segment better or worse than that of MediaTek or Broadcom? If most of the answers were 'NOT', then it probably makes sense for NXP to get rid of the BU. Otherwise, those business will be 'eliminated' by the competition one day anyway.

What we are seeing of NXP perhaps exemplify the consequences when a business establishment become too bloat, not competitive because of organizational structure or cost structure. The other aspect which not many people talked about is: are the VPs let go or the current management being rewarded either handsomely (in relative terms) while the employees are being laid off and the company is being down-sized?

And, it would be interesting to see if Virage Logic keeps the group of 160-plus engineers two to three years from now.

10/13/2009 5:19 AM EDT

Accidently, in the weekend I looked up an email I wrote about 3 years ago. The bottom-line of this email was that there are three choices for NXP: A. sell MMS and A&I, B. sell Home, M&P, Corporate R&D, C. get stuck in the middle as Porter says.

My preferred scenario was and is B. because it gets NXP back to the roots of the company - manufacturing centric around 'difficult' AMS/RF products. Also due to risk: the average investment per product is much lower. NXP's ambition was for years scenario A. but it requires to efficiently manage a large organisation of R&D professionals. NXP has in my opinion a bad track record in this due to a miss alignement with its genes.

Rick did something important Frans has not achieved: NXP has now a profile build around a core competence. The target market segment is considerable - thus there is an opportunity to move out of the Niche.

If someone asks me, "well done Rick, you took the right and harsh road. Good luck with growing the high performance AMS NXP".

10/14/2009 9:56 AM EDT

Imodu's comments on manufacturing are intriguing. NXP has lot of wafer fabs, either wholly-owned or in JVs, and six IC assembly and test facilities. A leaner, focused NXP could have scope to get rid of a lot of manufacturing while still staying in the high-performance mixed-signal IC manufacturing game. It then becomes of a matter of time and finding buyers such as X-Fab who have made their way by absorbing non-strategic manufacturing plants.

10/20/2009 5:05 AM EDT

For sure the LBO has not gone as well as either the investors ot the investees would have liked (see "http://www.eetimes.com/215600194" target="_new" >KKR writes NXP down to 10% of purchase price published in March 2009).

And prior to that LBO was a time when Philips Semiconductors was vertically integrated within Philips Electronics.

But Philips Electronics eventually perceived that it was subsidizing a semiconductor operation that was no longer a strategic resource. This was somewhat later than Siemens and Infineon concluded the same thing. So Philips Semiconductors HAD to find a home somewhere else and HAD to adjust its costs.

It is not clear that any other purchaser would have kept up the payments to be part of Crolles collaborative research or would wish to maintain such a broad product portfolio, or so many manufacturing sites.

10/20/2009 5:05 AM EDT

For sure the LBO has not gone as well as either the investors ot the investees would have liked (see "http://www.eetimes.com/215600194" target="_new" >KKR writes NXP down to 10% of purchase price published in March 2009).

And prior to that LBO was a time when Philips Semiconductors was vertically integrated within Philips Electronics.

But Philips Electronics eventually perceived that it was subsidizing a semiconductor operation that was no longer a strategic resource. This was somewhat later than Siemens and Infineon concluded the same thing. So Philips Semiconductors HAD to find a home somewhere else and HAD to adjust its costs.

It is not clear that any other purchaser would have kept up the payments to be part of Crolles collaborative research or would wish to maintain such a broad product portfolio, or so many manufacturing sites.

10/23/2009 10:29 AM EDT

Even TI plans to go fabless for new CMOS nodes. Given their product portfolio, NXP would not have been able to fill a fab in the most recent technology node. Any owner being aware of it would have ended sinking money in propriertary mainstream CMOS technology developments.

Siemens reason to get out the Semiconductors business was mainly driven by the money sink, which was later called Quimonda.

For Philips the decision was not that obvious due to the lack of a memory business. Divesting Semiconductors was indeed preceeded by a year-long internal strategic dispute. As far as I can judge, the divestment decision was influenced by a new direction towards medical as well as Frans catalysing the process.