Analysts question NXP's survival

Anne-Francoise Pele, EE Times
(09/24/2008 5:14 AM EDT)

PARIS -- A major restructuring plan announced by NXP BV (Eindhoven, The Netherlands), the chip company formed by a spin-off from Royal Philips Electronics, has left analysts pondering the company's future and dusting off age-old European chip company merger ideas. The plan is expected to cost about $800 million but it is hoped it will save $550 million annually.

At one level the cuts " up to 4,500 people across four manufacturing sites as well as from head office " could be seen as NXP catching up operationally with its fab-lite policy. However, the reasoning given for the cuts " the sell-off of the wireless business unit to STMicroelectronics and a credit crunch bearing down on end markets and financiers alike " left analysts asking whether NXP is at risk of entering a downward spiral where it's decreasing size forces it to sell off more divisions, potentially leading to an ultimate merger.

Away from manufacturing sheer volume may not be so important to margins and profits but dropping out of the world's semiconductor top ten, as NXP has done, has consequences. In an interview with EE Times NXP's CEO Frans van Houten, stated: "Our strategy has not changed but we have to take the consequences of creating the wireless JV as well as the consequences of the weak economy into account. Therefore, we have to make adjustments in our cost base so that we can be profitable again next year."

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