TrendForce points out that this deal will allow Qualcomm to quickly establish a foothold in markets related to automotive and industrial applications. Having NXP will also give Qualcomm additional leverage when negotiating prices with semiconductor foundries. Furthermore, NXP’s resources can be used to strengthen Qualcomm’s portfolio of system-level solutions and expand its influence in China’s smartphone market.

In terms of challenges, the incorporation of NXP will significantly raise the difficulty of managing supply chains. Another major issue will be the reorganization of product lines to prevent overlapping of products in particular market segments.

TrendForce notes that Qualcomm as a major fabless chip design enterprise will have different view on supply management compared with NXP, which is an established integrated device manufacturer (IDM). Furthermore, Qualcomm will have to make adjustments in order to take on the automotive and security application markets that used to generate over half of NXP’s annual revenue.

Qualcomm’s expertise is in designing chips for branded smartphone makers. Its products have very short life cycles as smartphone series are refreshed every one or two years with next-generation models. NXP on the other hand focuses on developing automotive and security chips that have much longer product life cycles. Qualcomm’s first task following the acquisition of NXP will be to revamp its supply strategy to compensate for the differences between its main products and NXP’s.

At the same time, Qualcomm and NXP also overlap in a few other product lines and market segments. Both companies have their own lines of audio processors and Bluetooth solutions. Qualcomm has launched its own branded products for automotive and embedded computing applications as well. In the future, Qualcomm will have to reorganize its product lines so that it can take on NXP’s customers while retaining its client base.

TrendForce adds that electronic component markets related to automotive, industrial and infrastructure applications generally have higher entry barriers. Prospective entrants will have to spend a lot of time and resources to become part of the supply chains for these industries. The acquisition of NXP therefore will allow Qualcomm to establish ties with major clients in these application markets in the shortest possible period. Qualcomm will be able to significantly reduce its risks of relying on just the smartphone market for profit, especially considering that the smartphone market is seeing slowing growth and falling average margin.

Other benefits that NXP brings to Qualcomm include its extensive lines of microcontrollers and microprocessors, NXP also has close ties with several foundries, so Qualcomm is expected to have better bargaining position when it needs manufacturing services.

Qualcomm and NXP can also mutually reinforce some of their product lines. For example, NXP is already a leader in the market for secure mobile payment solutions. Qualcomm can therefore integrate its processors into NXP’s security solutions, making them even more complete. Recently, mobile payment has taken off in many countries such as China, and demand for related security technologies has been on the rise. By acquiring NXP, Qualcomm will not only improve its prospect in China’s mobile payment market but also further strengthening its position in the country’s smartphone market.

Another field that Qualcomm and NXP complement each other is electric vehicle (xEV). While their research and development in this field somewhat overlap, both companies have something that each other needs. Qualcomm has invested heavily in wireless charging for xEV, while NXP has worked on power management and other related technologies for a long time. Together they can develop more holistic, system-level solutions. The deal will thus give Qualcomm additional resources to accelerate its advances in the automotive market.