NXP Semiconductors NV at TD Cowen Technology, Media & Telecom Conference Transcript

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

Question: Joshua Buchalter - TD Cowen - Analyst : Interesting. So I mean, people think of it -- when people think NXP, they think auto semis.

Question: Joshua Buchalter - TD Cowen - Analyst : And so it sounds like part of the strategic rationale is to bring what Rafael was doing in the industrial side to the auto business. Is that correct?

Question: Joshua Buchalter - TD Cowen - Analyst : Okay. And then let's dive into the auto story as well. So on auto, I mean, we kind of view NXP as a tweener where there's not the huge high content, high-voltage power semis. There's not the huge high-content ADAS processing, but maybe that's changing given your five-nanometer SoC. Can you maybe talk through what are NXP's biggest content opportunities and why you benefit as vehicles electrify and digitize? 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 28, 2025 / NTS, NXPI.OQ - NXP Semiconductors NV at TD Cowen Technology, Media & Telecom Conference

Question: Joshua Buchalter - TD Cowen - Analyst : Got it. And so it sounds like you see the market moving more -- in auto processing, moving more from MCUs to the APs, the crossover products and the NPUs. Like where are we in that evolution? Is that starting to benefit already? I mean, you've talked about, I think, your 5-nanometer SoC shipping in the next year or so. How much can that benefit you and your -- on the content side?

Question: Joshua Buchalter - TD Cowen - Analyst : And can you maybe talk about the competitive dynamics as well? I mean, you guys have been open about -- I would say two things that probably on the surface level looked like headwinds. One, you were very conservative with how you managed the channel -- and that's an auto and non-auto comment. And two, there were some parts that were no longer meeting your margin threshold that you didn't want to go after anymore. How much of that is still impacting your numbers, and are we through both of those headwinds? And when should we see NXP's auto and -- like auto processing and broader auto franchise start to really inflect?

Question: Joshua Buchalter - TD Cowen - Analyst : Okay. But from an inventory standpoint do you --?

Question: Joshua Buchalter - TD Cowen - Analyst : So I guess, what metrics do you need to see to decide it's time to refill the channel? And I guess I'd ask a similar question on the auto side and the Tier 1 specifically, like how do you feel about Tier 1 inventory levels? Are they healthy? Is there still digestion to come on the auto side as well?

Question: Joshua Buchalter - TD Cowen - Analyst : All right. Well, thank you for bringing up the keyword.

Question: Joshua Buchalter - TD Cowen - Analyst : Yeah. So I mean, you and your peers, for the most part, were pretty clear that you're not seeing any evidence of pull-ins or changes in customer behaviors in a meaningful way. What data are you looking at to ensure that, again, you're not seeing pull-ins? And how are your customers behaving? And how do we -- I mean, how does NXP have to change how it operates in this more uncertain environment?

Question: Joshua Buchalter - TD Cowen - Analyst : And do you say that because they give -- they need to give you a multiquarter forecast of demand, you would see it?

Question: Joshua Buchalter - TD Cowen - Analyst : And are there differences by geography? I mean, most companies have said Europe still has work to do in North America and certainly China in better shape. Directionally, is that match with what you're seeing?

Question: Joshua Buchalter - TD Cowen - Analyst : Okay. On the trade friction standpoint, you guys for a while have been moving, I think, partly because of the way your product portfolio has evolved, but moving to more of a fab-light model? Can you talk about some of the JVs that you have and why those are the right approaches for your manufacturing footprint? And again, does anything change? Or were you just early in reacting to the new geopolitical landscape from a manufacturing standpoint? 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 28, 2025 / NTS, NXPI.OQ - NXP Semiconductors NV at TD Cowen Technology, Media & Telecom Conference

Question: Joshua Buchalter - TD Cowen - Analyst : And how does -- I guess, how do you feel about your need to have a China for China facility? What's your strategy there? Because I believe you have partnerships with TSM? And bigger picture, how do you feel about competing with China local vendors for the Chinese auto market, which continues to become more and more of the global auto mix?

Question: Joshua Buchalter - TD Cowen - Analyst : And how do you feel -- I think a lot of semis investors are understandably concerned about China serving -- China accounting for more of global demand. But I think you guys have been clear that, I mean, China autos -- China auto OEMs are good partners of yours. 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 28, 2025 / NTS, NXPI.OQ - NXP Semiconductors NV at TD Cowen Technology, Media & Telecom Conference

Question: Joshua Buchalter - TD Cowen - Analyst : And how much of that is because of the pedigree and software that you're able to bring to auto customers, or is it more at the hardware level where you feel like the local competitors can't keep up?

Question: Joshua Buchalter - TD Cowen - Analyst : And on that note, maybe you could provide an update on you know where the BMS franchise. How much is that contributing today? Any changes in the competitive dynamics there and expectations for the next few years?

Question: Joshua Buchalter - TD Cowen - Analyst : Okay. Per usual, I've over-indexed to autos, but I don't want to neglect your other businesses, even though I did. Maybe you could talk through some of the other -- what are the key growth drivers that you expect within industrial, in particular, that are going to allow you to meet the growth target that you laid out at your Analyst Day in the fall? 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 28, 2025 / NTS, NXPI.OQ - NXP Semiconductors NV at TD Cowen Technology, Media & Telecom Conference

Question: Joshua Buchalter - TD Cowen - Analyst : Easy to ask questions about.

Question: Joshua Buchalter - TD Cowen - Analyst : So I guess in both industrial and auto. The market's moving more towards MPU -- application processor is a crossover family. That's a different competitive set than you traditionally have gone up against like you were just mentioning. How does NXP differentiate against the Qualcomms, the NVIDIAs that are the microprocessor companies that are looking more to service auto and industrial applications?

Question: Joshua Buchalter - TD Cowen - Analyst : Okay. Yeah, on that note, I wanted to ask about gross margins. So you have a few -- you're -- I think you're currently below your target model, and you've got some tailwinds from 200-millimeter, 300-millimeter utilizations increasing, and also I think wafer cost pricing changes matching your ASPs. Can you walk through how meaningful those can be? Where do -- where can we expect the second half gross margins --?

Question: Joshua Buchalter - TD Cowen - Analyst : All right. We're about to run up on time. But one last one I wanted to ask. I mean, Kurt historically made comment about his view that the semis industry still probably has more room to consolidate. And that -- a lot of that has been held up by regulatory headwinds. I'd be curious, do you believe Rafael has a similar view? And you guys have made a few tuck-in acquisitions over the last six months. Should we expect more of those? And how should we think about that from a capital allocation standpoint?

Question: Joshua Buchalter - TD Cowen - Analyst : All right. Well, Jeff, we are out of time, but we appreciate you joining our TMT Conference again this year. Thank you so much. 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 28, 2025 / NTS, NXPI.OQ - NXP Semiconductors NV at TD Cowen Technology, Media & Telecom Conference