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Growth in Semiconductors: Microchip's and NXPI's Latest Results
NXPI’s business segments at a glance
In the preceding part of this series, we discussed how the integration of Freescale increased NXP Semiconductors’ (NXPI) exposure to the automotive segment, making it a leader in that space ahead of Renesas Electronics. Now let’s look at the key segments driving the company’s revenue growth in fiscal 4Q15.
NXP has divided its business into the following three segments based on product type:
HPMS (high performance mixed signal) used in automotive, security, connected devices, and communications infrastructure
Standard Products
Corporate Products
High performance
HPMS is NXPI’s core business and accounted for 81% of total revenues in fiscal 4Q15, which topped the 76% it contributed in fiscal 4Q14. The segment’s revenue rose by 11.7% YoY (year-over-year) to $1.3 billion in fiscal 4Q15. While its gross margin fell from 50.9% in fiscal 4Q14 to 40.9% in fiscal 4Q15, its operating margin rose from 23.7% to 76.2% over the same period. The vast difference in profit margins was a result of the cost synergies realized from the Freescale merger.
Automotive
Automotive revenue grew by 45% YoY to $422 million in fiscal 4Q15, increasing its share of total revenues to 26% from 19% in fiscal 4Q14. This segment includes Freescale’s Auto MCU (microcontroller) and most of its analog and sensor products. The company expects the segment’s revenue to double to $790 million–$810 million in fiscal 1Q16.
Even Texas Instruments (TXN), Maxim Integrated (MXIM), and Linear Technology (LLTC), which reported declining revenue in the December 2015 quarter, reported growth in the automotive segment. IC Insights expects automotive semiconductor market to grow at a CAGR (compounded annual growth rate) of 6.7% between 2014 and 2019.
Other HPMS products
SIS (secure identification solutions) revenues grew by 1% YoY to $225 million in fiscal 4Q15. By comparison, SCD (secure connected devices) revenues grew by 9% YoY to $379 million in fiscal 4Q15. This segment includes Freescale’s general purpose MCU products and its revenues are expected to grow to ~$460 million in fiscal 1Q16.
SII (secure interface & infrastructure) revenues fell by 8% YoY to $280 million in fiscal 4Q15. This segment includes Freescale’s digital networking in RF (radio frequency) power business. The segment’s revenue is expected to grow to ~$413 million in fiscal 1Q16.
Other segments
Meanwhile, Standard Products’ revenues fell by 18% YoY to $271 million in fiscal 4Q15. On a non-GAAP basis, this segment’s gross margin improved from 34.1% in fiscal 4Q14 to 35.8% in fiscal 4Q15, and its operating margin improved from 20.8% to 23.6%. By comparison, Corporate Products revenues fell by 22% YoY to $29 million in fiscal 4Q15.
The iShares MSCI EAFE ETF (EFA) has exposure in Australasia, European, and Far Eastern stocks. EFA has 0.09% exposure to NXPI.
Now let’s look at the NXPI’s performance in fiscal 2015.
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