Stock Analysis & Ideas

NXP Semiconductors Stock: Well Positioned to Grow

NXP Semiconductors (NXPI) is a Dutch multinational semiconductor manufacturer specializing in the automotive industry.

The company focuses on high-performance mixed-signal solutions primarily for the automotive sector, but has expanded to a few other areas such as mobile, wireless infrastructure, lighting, and industrial applications as well.

The company has significant exposure to the fast-growing auto industry, and its Automotive segment accounts for 50% of the company’s sales.

The auto industry suffered a massive setback last year when factories were forced to close due to the pandemic. The industry, however, is coming back strong along with the recovery of the global economy.

NXP Semiconductors seems primed for growth as the EV industry is predicted to blossom in the next few years. I am bullish on NXP Semiconductors stock based on this optimism.

Auto Segment Driving Growth

On November 1, the NXP Semiconductors earnings report for the third quarter was released, and the company reported better-than-expected earnings, with revenue rising 26% year-over-year to $2.86 billion, aided by the improved supply of components and strong performance in the Auto, Industrial, and Communication Infrastructure segments.

The Automotive segment performed exceptionally well, with revenue reaching $1.46 billion, up 51% year-over-year. Although the unbalanced supply-demand situation in the chip industry is expected to hurt the performance of vehicle manufacturers through the end of this year, chip manufacturers are poised to become big winners as the demand for chips used in vehicles remains elevated.

The rapid acceleration of fully electric and hybrid vehicles is a secular content driver for the auto semiconductor industry. These changes have had a significant impact on the industry, resulting in an increase in content per vehicle.

NXP, to make the most of this development, is continually growing content with the introduction of advanced solutions such as 77 gigahertz radar safety systems, electrification systems beyond battery management, and new domain and zonal processing solutions.

These innovative solutions will help automakers upgrade their service offerings, and on the other hand, will help NXP become an important player in this fast-growing market.

Industrial & IoT revenue increased 18% year-over-year to $607 million in the third quarter, supported by the growing demand for connected edge processing solutions.

The demand for the company’s new products, as well as across end markets, are at all-time highs. NXP generated $724 million in free cash flow in the third quarter, and the company is on track to improve operating margins. notably as a result of favorable pricing trends in the market and effective cost-management techniques introduced by the management.

New Partnership to Strengthen Automotive Portfolio

NXP Semiconductors and Foxconn Industrial Internet, a Foxconn Group subsidiary, announced a strategic alliance to drive automotive innovation on December 16.

Foxconn is the world’s leading intelligent manufacturing integration solutions provider, offering a wide range of technology services based on automation, network, and platform to help companies make the transition from traditional to intelligent manufacturing.

NXP will provide Foxconn with its entire portfolio of automotive technology products as part of this agreement. The first phase of the collaboration will focus on the development of a fully digital cockpit solution based on the NXP i.MX 8 QuadMax, which will include digital clusters and a heads-up display system, allowing leading global automotive OEMs and Tier Ones to provide their customers with vivid in-vehicle experiences.

This partnership is likely to be a game-changer for both companies as the market for automotive digital cockpit solutions continues to rise. In-vehicle telematics, better entertainment systems, safety and pollution sensors, navigation, and infotainment systems are the primary growth drivers of this market segment.

According to Grand View Research, this market was valued at $19.8 billion in 2020 and is expected to grow at a compounded annual growth rate of 8.8% through 2028.

Under this partnership, NXP plans to begin mass production of the digital cockpit solution in 2023. The companies hope to broaden their partnership to include UWB-based secure car access and safe automated driving solutions as well, supported by NXP’s industry-leading radar technologies.


The fast-growing EV industry, the increasing adoption of NFC mobile payments, and increasing content-per-vehicle resulting from technological advancements are likely to help NXP Semiconductors grow in the next five years.

The company has already identified this opportunity and is focused on maximizing this opportunity to create long-term shareholder wealth.    

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