Dialogue With Kurt Sievers, President And CEO Of NXP, Will Push China'S Business Localization And Promote Globalization With European Companies.

The "disturbance" of the new crown pneumonia epidemic on the global technology industry has not yet ended. Many technology companies have placed the hope of the market out of the doldrums in a number of new technologies and applications including 5G, automatic driving and the Internet of things. At this time of complexity, NXP has ushered in its new "head".

The Holland based semiconductor company recently announced that the appointment of the new CEO Kurt (Kurt Sievers) has been approved and effective immediately at the shareholders' meeting. Richard Kramer Clemmer, a leading CEO company that has been leading the company for 11 years, will continue to serve as a strategic adviser to Richard.

Severus was general manager of NXP automotive division. Automobile electronics is the core business of the company, occupying half of its revenue. However, affected by the epidemic, NXP automotive business revenue fell 4% in the first quarter of this year, and the total revenue of the company declined 3.5% compared to the same period last year.

"We are an important participant in the automotive industry, basically docking all the world's auto companies." In a telephone interview, he told the twenty-first Century economic news reporter that the impact of the epidemic on NXP automotive business is much more obvious than that of other businesses.

But he also pointed out that the current situation is "mixed with joy and sorrow": China has embarked on the road of resumption of work and resumption of production, and the impact of the epidemic on the economies of Europe, America and Japan did not really emerge until the second quarter. But in view of the development of new technology and the growth of demand, the automobile market can make progress in the third quarter. "There is a view that the two quarter will be a low point, and the three and fourth quarter may regain momentum."

In addition to the epidemic, the new CEO problem also has several years of Sino US trade friction. Although he is a European company, the cooperation between NXP and Chinese enterprises has not been affected too much, but it can not be said that it has no influence at all.

"In the long run, our response is to continue to create more intellectual property rights and to develop China's business." "We can only avoid the impact of Global trade friction if we really achieve localization," he told the twenty-first Century economic report.

Dealing with trade frictions with localization

Semiconductor is one of the industries with the highest degree of globalization. However, in recent years, under the background of Sino US trade friction, whether the globalization system of semiconductor industry will become loose has become a hot topic. The controversy over supply chain security caused by the epidemic has increased to some extent.

"Trade friction has had a serious impact on globalization, and the rapid development of the semiconductor industry for many years has been benefited from the continuous development of globalization." "This is why we are working with European companies to promote business globalization," he said.

Severus believes that as a European based company, NXP's cooperation with Chinese companies is relatively far from being affected. But NNP has a business layout in the US and needs to ensure compliance with all export control regulations worldwide.

He said that over the years, NXP has been trying to create more intellectual property rights, develop its business and continuously promote the localization of its business in China. "We will continue to work hard in this regard." He said, "only when enterprises truly achieve localization can they avoid the impact of Global trade friction as far as possible."

In the view of Severus, NXP's advantage lies in its "strong and diversified" global supply chain. Owning factories all over the world makes NXP in a relatively advantageous position in the context of trade friction. On this basis, another strategy of the company is to strengthen cooperation with the third party foundries.

Since the rise of the integrated circuit industry in 1960s, the IDM mode of one-stop product design, mass production and sealing has been the mainstream of the industry for a long time. However, as the scale economy characteristics of semiconductor manufacturing become more and more obvious, the third party OEM mode gradually emerged in 1990s. NXP has taken the lead in this change, and has adopted the way of combining IDM with the third party OEM.

At present, NXP manufactures and entrustes the foundries of foundries for about half. "In the future, we will outsource more wafer production to manufacturers partners, so as to better adapt to the situation and choose the best way to deal with them." Mr Severus believes that this enables NXP to cooperate with manufacturers and foundries around the world in a more flexible way, so that production can meet local requirements and better cope with trade frictions.

"Huge scale, strong momentum and many opportunities" is a summary of China's market by Severus. In his view, there are two opportunities for China's market: one is to supply products to this huge market, the two is to cooperate with Chinese companies in certain areas. The two areas have strong potential for growth.

Severus believes that China has broad prospects in its application. "From the perspective of local investment in China, we will continue to expand our footprint and accelerate the implementation of the strategy to enter the Chinese market." He emphasized that the key areas involved include not only sales and customer management, but also application development.

"So we have to work hard to develop more expertise in localization applications, and turn them into solutions that can bring dividends to ensure that the needs of Chinese customers are met." Severus emphasized that quality problems must also be considered in localization. NXP is also increasing support and protection efforts to ensure that quality problems can respond as quickly as possible.

"Mixed emotions" under the epidemic situation

The outbreak at the beginning of this year has brought great impact on global economic and social life. According to Sievers, at present, NXP has more than 90% employees in the world taking the mode of home office at a specified time. In terms of business, he believes that the good news is that the Chinese market has already passed the "dark stage" of the epidemic. Previously, NXP employees in China began to return to work in early May.

"From the perspective of customers and industry, China's economy and related industries have been rapidly revived." "Thanks to this, from the first quarter to the second quarter, most of our business in the Chinese market continues to grow."

Automotive semiconductor is one of NXP's most important businesses. Taking the first quarter of this year as an example, its revenue accounted for 49.2%. According to market research firm IHS Markit data, according to 2018 revenue, NXP is the largest manufacturer of automotive semiconductor market, occupying 12% of the market share. Closely related to the automotive industry also makes NXP more vulnerable to the impact of the automotive market.

During the epidemic period, automobiles have become one of the most seriously affected industries in the world. A well-known market research firm predicted that global auto production could decline by 40% in the second quarter. "This is a very serious reduction." "We have directed the auto business sector to reduce production to a certain extent in the second quarter," he said.

However, according to the China Association of automobile manufacturers, the output and sales volume of automobiles in China increased by 2.3% and 4.4% respectively in April, and the sales volume of single month ended 21 months continuously. In May data released recently, output and sales volume continued to grow 18.2% and 14.5% over the same period.

"China's auto industry has maintained a year-on-year growth trend in the second quarter, and after several consecutive quarters of decline, such data is really inspiring." "Unlike the Chinese market, the negative effects of the epidemic in the European, Japanese and US markets have been fully apparent in the second quarter," she said.

However, Severus also stressed that for NXP, it is important to continuously upgrade the electrification level of vehicles. This is not only related to the sales of cars, but also to the number of electronic equipment in a car, that is, the semiconductor equipment that NXP can sell. "I think the focus of mid term business should be shifted from increasing car sales solely to increasing the number of electronic devices in cars." He said, "the development of electrification, safety and automatic driving trend will continue to drive the increase of vehicle electronic equipment."

The mobile industry is also seriously affected by the epidemic. For example, Counterpoint Research, an industry analyst, showed that global smartphone shipments fell by 13% in the first quarter. However, according to the earnings report, NXP mobile business revenue in the first quarter was $247 million, an increase of 2% over the same period last year. Severus believes that NXP is in a leading position in mobile wallet and mobile ticketing applications, which is closely related to the penetration of related technologies in mobile phones.

"Mobile phone sales are not the decisive factor, and the growth of permeability is what we are more concerned about." He said that by 2021, the penetration of related technology could reach about 50%, so the epidemic actually had limited impact on NXP's mobile business. "In view of the fact that users want to use more contactless technology, this has a certain impetus to our business."

Another opportunity for NXP is in 5G. He believes that NXP is in a leading position in the 5G network base station RF power solution. After the outbreak, as a measure of the government's stimulus plan, the deployment of 5G infrastructure has been significantly accelerated around the world. "China has speeded up the pace of 5G infrastructure layout," he said. He said, "this is obviously good news for us."

NXP's departure

In July 2018, Qualcomm failed to buy NXP for nearly two years, with a total price of US $44 billion, because it failed to get approval from Chinese regulators before the deadline expired. NXP was at a critical time node. Analysts once worried about whether NXP's management was ready to lead the company's independent operation. And he quickly took management restructuring and held an investor and analyst conference in New York in September of that year. At this point, NXP chose the "re" deep tillage vehicle market, which has been its core strategy for a long time.

When he was the general manager of NXP automotive business department, he was appointed president of NXP at this time of management reorganization. He was fully responsible for the company's business lines. In 1995, he joined NXP (at that time as PHILPS semiconductor), and then entered NXP's executive management team in 2009 and played an important role in the acquisition of Freescale Carle (former Motorola semiconductor). After formally becoming CEO, Sievers will continue to be president of NXP.

In the interview, Severus said that NXP's current business priorities include the digital dashboards, battery management systems and radar systems in the automotive field, the edge processing of security connections in the field of industrial and Internet of things, the combination of ultra wideband and security and software in the field of mobile devices, and the combination of 5G base station millimeter wave technology in the field of communication infrastructure.

Turning to the trend and layout of the longer term technology, Severus said that safe and reliable edge computing will be the main driving force for the development of semiconductor industry in the next ten years. Twenty years ago, the growth of the semiconductor industry depended on the development of computers, laptops and mainframes. Ten years ago, it began to rely on smart phones, tablet terminals and cloud computing. "I believe that the next ten years will be the world of Internet of things and edge computing."

In the view of Severus, NXP has a strong product portfolio in the field of secure and reliable edge computing, which has the highest level of infrastructure in the industry. Its low-power microcontroller and application processor and digital media processor combination are already "first-class quality and widely used".

"NXP is committed to becoming a safe and reliable leader in the field of edge computing in the next ten years." "We will also provide solutions for partners and customers in this field," said Severus. He emphasized that NXP not only wants to provide product components for customers, but also hopes to become a strong partner to provide system solutions. "This is our goal in the next ten years."

Compared with other semiconductor companies such as Qualcomm and Intel, NXP is characterized by broader business scope and more complex and diverse customers. Speaking of this, Severus pointed out that NXP has an independent customer and partner network in its contribution to about half of its revenue, which is the unshakable core business of the company.

However, the industry and the Internet of things are indeed a relatively fragmented market. "Our solution is to work with distributors." "We are entering various market segments through distributors' partners, especially when customers come from different sectors," says Severus.

He has worked with many powerful distributors for a long time, which has become a tradition of NXP's development of China's business. "I think this provides a successful model for us to develop business in other countries or regions." "We will also try to continue this pattern in China," he said.

?