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All things being unequal for NXP and Freescale

All things being unequal for NXP and Freescale
by Don Dingee on 03-02-2015 at 4:00 pm

When I read the news that NXP was buying Freescale, it felt like a part of me – and a big part of the history of high tech industry in Arizona – died. There was a time not that long ago where Motorola was the biggest employer in this state, way before Freescale and ON Semi separated from the mothership. Somehow, even with moving headquarters to Austin and downsizing and changes in leadership, Freescale still felt like an old friend who lived just down the street.

NXP has a small presence here today, courtesy of the VLSI Technology acquisition by Philips in 1999. Soon, a new NXP sign will likely go up a couple miles from where I sit writing this, on a 180nm fab running mostly microcontrollers, and maybe on another facility housing MEMS and RF design and marketing teams a couple more miles away.

It’s been a long, slow fall. Motorola was once #3 in worldwide semiconductor sales, now somewhere in the teens before combining with NXP. What happened?

There was the infamous meeting sometime in the mid-90s between ARM and Motorola, where Hector Ruiz told Tim O’Donnell “and of course, we won’t be able to pay you any license fees, or any royalties.” Good luck with that M-Core thing.

Then there was Steve Jobs 2.0. As related in Walter Issacson’s bio, in one of Jobs’ first official acts in 1997, he calls Chris Galvin asking what is happening with PowerPC laptop processors. He tells Galvin “Motorola chips sucked”, hangs up, yanks the StarMax license, and starts the process of switching to Intel processors. (Yep. I spent 14 years in sales and marketing at the Motorola Computer Group. That was a bad day.)

The box in the upper right hand corner of the PowerPC processor roadmap never did show up. Change was inevitable. PowerPC processors took up like three dots on a slightly up-sloping line, where Intel processors were like 20 dots on three tracks on their roadmap, and ramping up to multicore with performance far beyond anything PowerPC could offer.

We managed to ship a lot of PowerPC parts inside Xerox copiers and Data General/EMC storage systems. I was the poor slob who was tasked to establish a relationship with Intel, as a charter member of the Applied Platform Computing Program (today’s Internet of Things Solutions Alliance). You think your job is fun? Try selling the benefits of your former sworn arch enemy to your sales force. I learned a ton from that experience, losing some friends on both sides.

Motorola took PowerPC to smaller, more embedded cores, and expanded relationships with Cisco, Lucent, Huawei, and other networking infrastructure suppliers. However, they were caught in between Intel at the high-end, and an unstoppable ARM train in embedded RISC.

When “Hector the Sector Wrecker” left Motorola SPS for AMD after three reorgs in three years and starting a move to asset light, things were a hot mess. M-Core went nowhere. The straw that broke the camel’s back was Palm, who until then was all MC68328 DragonBall, said they were going StrongARM. The “ARM killer” posturing stopped; Motorola signed an ARM license that turned into i.MX SoCs.

With Nokia eating the cellular sector’s lunch, Wall Street started pressuring Chris Galvin that the difference of parts was greater than the whole, and he should sell the semiconductor operations. ON Semi went first in 1999, followed by a Freescale spin off in 2004 financed with debt that swelled to nearly $10B. The search was on for a post-Apple, post-Palm identity.

It took a while for things to stabilize at Freescale, with successful efforts in tire pressure monitoring sensors and automotive microcontrollers helping cut debt in half. QorIQ and Qorivva aside, PowerPC may have run its course – not good for the defense electronics community. The boon in IoT solutions and Kinetis ARM-based microcontrollers is certainly helping design wins, which should kick in to revenue that is more significant soon.

NXP is a broader company, more like the old Motorola SPS pre-ON spinoff but without a high-end processor effort. In 2012, they overtook Freescale in size. They have a solid niche in 8051 and ARM microcontrollers and smart cards, and in mixed signal applications for automotive and consumer. Yes, they do have a significant win with Apple for the iPhone 6 with NFC and the M8 sensor processor – but Apple can be fickle, as Freescale acutely understands.

How does the combination work? ARM microcontrollers and automotive efforts fit together, and we are on an up-cycle in automotive and IoT. Other than that, these are two very different companies, both culturally and technologically. How their sales forces mesh, and where and how they decide to compete, will be crucial to success. Product wise, they line up most closely against TI. Culturally, it’s hard to say – a lot will depend on the role Gregg Lowe gets, or if Freescale is subjected to another exodus of talent as integration proceeds.

One thing is for sure: Arizona will never quite look, or feel, the same when it comes to high tech.

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