Qualcomm Inc.'s bid to acquire NXP Semiconductors would give it control of the auto industry's biggest chip supplier, but it's going to find itself in the middle of a dogfight.
Competitor producers aren't planning to give ground.
On Sept. 29, The Wall Street Journal reported that cellphone chip supplier Qualcomm, of San Diego, was considering an offer for the Dutch chipmaker -- a deal that could be worth more than $30 billion.
At a time when smartphone sales are leveling off, the auto sector provides better growth prospects for Qualcomm, says Chris Webber, an analyst for Strategy Analytics, a consulting firm in suburban Boston.
But deep-pocketed rivals such as Infineon Technologies AG, Renesas Electronics Corp., STMicroelectronics NV and Texas Instruments Inc. all are fighting for a share of the fast-growing markets for infotainment and self-driving cars.
Even with NXP under its wing, Qualcomm would have to fight for market share, Webber says. "They are up against some fairly tough incumbents that have worked in automotive much longer," he cautioned. "These companies have established relationships with automakers."
To be sure, the NXP acquisition would give Qualcomm an instant presence in the automotive market.
Qualcomm does produce automotive chips for Wi-Fi, Bluetooth and GPS-based navigators, but the auto industry generated just 2 percent of its semiconductor sales last year, Webber says.
By contrast, NXP commands a 14 percent share of global automotive semiconductor sales. As a Tier 2 supplier, it enjoys a big share of sales for keyless access, infotainment and in-vehicle computer networks.
Moreover, NXP's $12 billion acquisition of Freescale last year gave it a strong portfolio of microcontrollers, especially for radar. That has strengthened NXP's foothold in the market for self-driving cars.
With NXP's help, Qualcomm could cultivate a market for Snapdragon, the high-performance chip that Qualcomm produces for Android smartphones.
A Qualcomm acquisition of NXP would create a corporate behemoth with combined annual sales of $31 billion. But there is a competitive hurdle: Qualcomm's four largest automotive rivals are armed with products for self-driving vehicles. Infineon supplies microprocessors for radar; Texas Instruments and ST both produce chips to process camera images; and Renesas has a portfolio of chips for collision avoidance.
Meanwhile, Nvidia Corp. -- a major chipmaker for the computer gaming industry -- has established a niche in the self-driving car segment with its high-performance Tegra chips.
NXP already is preparing to muscle in on the market for driverless cars. To showcase its technology, NXP is working with a suburban Chicago startup -- AutonomouStuff -- that is developing software for self-driving vehicles.
In May, the company entered a retrofitted Lincoln sedan in speed trials at Thunderhill Raceway in California. "We feel we have the processing and sensing capability to make [self-driving cars] a success," said Leland Key, NXP's vice president of sales.
"It's not clear yet what will be the optimal combination" of radar, cameras and lidar. "But we're in a position to design the system the way our customers want."
Given NXP's status as the industry's top semiconductor vendor, it seems certain to claim a significant share of chip sales for self-driving vehicles. But it won't necessarily dominate, says Webber.
"You can't predict that any one company is going to win," he said.