NXP Semiconductors NV at JPMorgan Global Technology, Media and Communications Conference Transcript

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

Question: Harlan Sur - J.P. Morgan - Analyst : Yeah. Maybe that is a great place to start, Kurt, is maybe you can kick us off with reflecting on your 30-year career at NXP, last five years as CEO, your views on the significant and positive transformation, right, of the company under your leadership; and maybe Rafael, a brief overview of yourself, the 10 years thus far at NXP, and then we'll go ahead and kick off the Q&A.

Question: Harlan Sur - J.P. Morgan - Analyst : Great. Well, again, Kurt, thanks for all the support over the past few years. Rafael, I look forward to the leadership at NXP going forward. I'm going to start off with just a couple of the sort of near to mid-term focused questions, and we're going to focus on strategy and product execution. The team had their earnings call two weeks ago, the NXP team. And some of your peers in the analog and embedded MCU space have talked about current trends that point to early the innings of a cyclical recovery of the industry downturn that started in 2022, turns orders, increasing higher backlog carry of distant customers, stabilization of orders from your direct customers. But many investors argue that this uptick in orders and near-term demand activity is no different than a demand

Question: Harlan Sur - J.P. Morgan - Analyst : Perfect. If we look at the value chain side of tariff and trade, geopolitical dynamics, looking at your US wafer manufacturing footprint, three out of your four internal 200-millimeter fabs are based in the US. Given the push by the Trump administration for more domestic manufacturing, has that motivated the NXP team to maybe rethink or modify your 200-millimeter consolidation strategy?

Question: Harlan Sur - J.P. Morgan - Analyst : Part of the other -- I appreciate the answer there. Part of the other dynamic on supply chain diversification strategy that you outlined at the Analyst Day in November, particularly your China for China strategy, right, Kurt, you mentioned that, on the last earnings call, that roughly 35% of your revenues that you ship to China. Of that amount, roughly 30% is covered by wafers that are manufactured in China, and that number should expand, right? You've got strong foundry partnerships in China with TSMC, SMIC, Grace. What's the team's longer-term plan, China revenue manufacturing as a percent of your total China revenues?

Question: Harlan Sur - J.P. Morgan - Analyst : Yeah. On that differentiation, innovation, let's focus on your end markets, product leadership, mid- to long-term strategy. The team, I thought, delivered a very strong message at your Analyst Day last year, right, focusing on bringing more system-level solutions to the edge, semiconductors, hardware systems, software, services, right, helping customers drive faster time to market, lower cost of ownership, and helping them to deal with the complexity of integrating new features like artificial intelligence and machine language and within -- particularly within your industrial and IoT segments, I mean I see this as a pretty significant opportunity for NXP. We all know NXP has a very strong number one position in automotive semiconductors, but in industrial, you're a top 10 supplier, number five, number six globally, but still definitely large opportunity to capture more share, right? Rafael at Analyst Day, he took us through the system level strategy for industrial and IoT, leveraging, I think, something like 3,000-plus MCU and microprocessor SKUs, broad portfolio of analog, power management, connectivity capabilities, combined that with strong software stack targeted for large markets like factory automation, building automation, healthcare. Can you just give us an update on the scorecard? And what percentage of your current design wins today are more system-level solutions, integrating a whole bunch of your connectivity, analog products, attached to your processor products with integrated software from your partners or developed by NXP?

Question: Harlan Sur - J.P. Morgan - Analyst : One of your strategy -- other strategies in industrial and IoT here is to expand your presence in the distribution channel focused on broad market, mass market focus, right? More focus here will definitely help, I think, to drive a higher gross margin profile. Team has been adding more, to its family of general purpose, high-performance MCUs like your MCX A Series family of microcontrollers. In addition to expanding the mass market portfolio, what is the team doing go-to-market wise to drive solutions to that long tail of small to medium-sized customers?

Question: Harlan Sur - J.P. Morgan - Analyst : Yeah. And you have a very strong breadth of portfolio, which is a strong differentiator. Lots of focus on machine learning and AI at the Analyst Day. You did talk about more of these machine learning capabilities in the edge and endpoints. You've been offering integrated neural processing engines, what we call NPUs, for a number of years, well before the pickup and focus on AI, right? These are integrated into your processors, your crossover family, your MCU families. What type of design win traction have you been seeing with embedded MPUs? Are these organically developed in PU engines? Or are you licensing them from ARM via their ethos family of MPUs? Like what's the strategy here? And of your embedded business, what percentage is AI and machine learning sort of focused these days?

Question: Harlan Sur - J.P. Morgan - Analyst : Perfect. Before I move on to automotive, does anybody have any questions in the audience? If you do, raise your hand, and we'll get a mic over to you. Anyone? Okay. Let's turn over to the automotive segment of your business. Automotive, down 4% in calendar '24, slightly lower than total auto production at flat. But the team was, like many of your peers, under-shipping consumption for the better part of last year as the Tier 1 auto OEMs continue to drive their internal levels of inventory lower. But your accelerated growth drivers, S32 software-defined vehicle, radar, electrification, connectivity as a group grew year-over-year last year. If you hit your guidance for the June quarter, on auto revenues, your auto business will be down 3%, 4% year-over-year through the first half of this year. But are the four accelerated product categories still growing in the first half of this year? And how do you see that playing out for full calendar year '25? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2025 / 12:50PM, NXPI.OQ - NXP Semiconductors NV at JPMorgan Global Technology, Media and Communications Conference

Question: Harlan Sur - J.P. Morgan - Analyst : Yeah. And what -- within automotive, I mean, the exemplification of intelligent systems to the edge, right? A big focus at the Analyst Day in terms of driving that. Was the focus on your CoreRide software-defined vehicle platform, leveraging strong platform across MCU, crossover MCU, full-blown embedded processors with partner and NXP developed software, middleware, library of application software. Can you quantify the traction that you've had so far with CoreRide SDV reference platforms and when do you expect CoreRide-based wins to start to ramp?

Question: Harlan Sur - J.P. Morgan - Analyst : So many more questions, not enough time. I really appreciate the team's participation today. Thank you very much.