NXP Semiconductors NV at Cantor Fitzgerald Global Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: CJ Muse - Cantor Fitzgerald - Analyst : So maybe to start, Jeff, just to discuss real quickly the current environment, you recently held your Analyst Day in late '24. I thought it would be helpful to start by level setting our conversation by giving us the key financial metrics behind your '27 target model.

Question: CJ Muse - Cantor Fitzgerald - Analyst : And then the required kind of near term question. How have things kind of progressed through the quarter? Any green shoots, any pros, cons worth discussing?

Question: CJ Muse - Cantor Fitzgerald - Analyst : And then maybe hitting on the pricing kind of question that we often get. Considering where we are on the cycle and the strong uplift we saw throughout COVID, how should we think about the current pricing environment?

Question: CJ Muse - Cantor Fitzgerald - Analyst : So maybe Rafael, what's near and dear to you? So maybe starting off with industrial IoT platform approach. One of the key differentiators for NXP is the company's scalable platform approach. Can you explain why you always lead with your processor family and why this delivers customer wins?

Question: CJ Muse - Cantor Fitzgerald - Analyst : And so maybe adding on to that. Within hardware, you're adding security, connectivity, and in turn, delivering scalable platforms and complete systems. I guess can you expand on that and how that positions you competitively and how market share has trended for you?

Question: CJ Muse - Cantor Fitzgerald - Analyst : And I guess if you look at the competitive landscape, are all players kind of attacking the way you are or no, are they kind of more standardized discrete MCU?

Question: CJ Muse - Cantor Fitzgerald - Analyst : So maybe I think near and dear to you and many within NXP, I know you're very excited about the recent acquisition of Kinara announced four weeks ago. Industry leader, low power, high performance programmable discrete neural processing units. So can you discuss why you're so excited, both from a hardware and software perspective? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 11, 2025 / NTS, NXPI.OQ - NXP Semiconductors NV at Cantor Fitzgerald Global Technology Conference

Question: CJ Muse - Cantor Fitzgerald - Analyst : So when do you think you'll be in the market with a fully integrated offering? And I read that there's also kind of the ability to upgrade existing systems in the field. Can you kind of speak to that as well?

Question: CJ Muse - Cantor Fitzgerald - Analyst : And so what's a good use case in terms of an LLM at the Edge that would be ideal for an NXP solution?

Question: CJ Muse - Cantor Fitzgerald - Analyst : Now there's obviously other companies that are attacking this field. And I guess one that naturally comes to mind is Qualcomm, but obviously that's a higher ASP type of solution. So is that kind of the differentiation here in terms of an embedded plus AI capability, low power, low cost, or how else would you describe it?

Question: CJ Muse - Cantor Fitzgerald - Analyst : And you talked about second gen products within Kinara leading customers. I guess is that within kind of your customer purview, those are different end markets? How do you kind of bring them in the fold?

Question: CJ Muse - Cantor Fitzgerald - Analyst : So maybe going back to an earlier comment, in terms of providing kind of a full stack, including software. Can you speak to kind of the transition that we're seeing in the embedded microcontroller world? And what kind of is necessary to bring to the table for success today?

Question: CJ Muse - Cantor Fitzgerald - Analyst : So just broader software.

Question: CJ Muse - Cantor Fitzgerald - Analyst : And maybe a software one on one question. Where does your software start and where does it end and where does your customers kind of begin and is that differ depending on the --

Question: CJ Muse - Cantor Fitzgerald - Analyst : And so maybe going back to the theme that discrete CPU MCU is going away. When you think about bringing software to bear, how sticky are now these wins? Is there kind of a metric where you can compare and contrast maybe today versus 5 or 10 years ago in terms of next generation obviously coming in and sticking with you versus going elsewhere?

Question: CJ Muse - Cantor Fitzgerald - Analyst : Maybe question on collaboration. During the COVID period when many industrial and automotive customers realized that semiconductor lead times are nine plus months and not something you can build overnight, and there were severe shortages led to willingness for much more closer tight collaboration. Curious if you're seeing that today now that we're kind of beyond that issue. And do you think that that trend continues or is it kind of piecemeal where those that are strategically endeavored to think more complex, yes, but for others, less so?

Question: CJ Muse - Cantor Fitzgerald - Analyst : So maybe this takes us to a broader question for the company guiding 57% to 63% gross margins. And the new target model which I think if you had indicated to investors 5, 10 years ago, would not have been believable but now 100% -- 99% believable. And so how important I guess is collaboration in terms of having the right tech roadmap, having the right software stack, having the right time to market in support of that vision?

Question: CJ Muse - Cantor Fitzgerald - Analyst : So maybe taking a step back and thinking about industrial and IoT, holistically, I think Kurt on the last call and talked about it being cloudy up there. Asia, okay, US, bouncing along the bottom, Europe, weak. 60% I think of your business is core industrial, 40% consumer IoT. Are you seeing differing trends across those two end markets?

Question: CJ Muse - Cantor Fitzgerald - Analyst : So maybe isolating to industrials. I think one of the key themes that we're seeing here is that that market segment is starting to act more like the automotive segment in terms of working more closely with our semiconductor partners, moving away from catalog parts, moving to more complete solutions. Maybe you could take a stab in discussing whether you agree with that trend and elaborate on that.

Question: CJ Muse - Cantor Fitzgerald - Analyst : So maybe taking a step back on the whole kind of microcontroller industry, I think there's a perception that it's kind of one size fits all. And I think as we discussed this morning, that's not the case. So maybe isolating specifically to your MX 9 family, could you perhaps talk about some of the innovations there that excite you and why these are unique versus your competitors Infineon and ST, et cetera?

Question: CJ Muse - Cantor Fitzgerald - Analyst : Maybe moving to the consumer and more mass market strategy. It would seem that by using distribution, you can widen the aperture of your sales funnel. So curious is that how you look at it? Is that the right framework, and how should we think about kind of your focus in terms of channel exposure for the company over the coming years, increasing, decreasing, what?

Question: CJ Muse - Cantor Fitzgerald - Analyst : It's hard not to talk about analog without discussing China competition. I think if I could summarize, I think the view from NXP is that you're really seeing it really in kind of low end consumer applications. And so I guess, A, is that the right kind of thought process, but B, how do you see that kind of playing out over time?

Question: CJ Muse - Cantor Fitzgerald - Analyst : Well, it's a great segue with my last kind of section here is next gen technology. So Rafael, as you think about where the puck is going in the industrial market, where are you focusing R&D dollars today?

Question: CJ Muse - Cantor Fitzgerald - Analyst : And if you think about kind of the goals you just outlined, and cognizant of the fact that you just acquired Kinara, are there any other sort of holes that you can see in the product portfolio where you might want to do a tuck in acquisition or technology purchase?

Question: CJ Muse - Cantor Fitzgerald - Analyst : So we've got about thirty seconds left. So last question. How are you thinking about use cases for AI at the Edge? Is it clear to you today? It's still very challenging to know precisely. Would love to hear maybe the first cases where you see adoption, where you see the first kind of $100 million, $200 million incremental revenues.

Question: CJ Muse - Cantor Fitzgerald - Analyst : Well, fantastic. I think we've run out of time, but, Jeff, Rafael, really appreciate you taking the time today.