Automotive, Industrial Segments Drive NXP’s Strong Q2 Numbers

  • Second quarter revenues for NXP were $37 million more than the midpoint of the company’s previous guidance with the automotive and industrial segments performing well while the mobile and communication infrastructure segments were in line with its expectations.
  • Amid the ongoing macroeconomic and supply chain turmoil, the company is banking on its NCNR orders to provide its customers with supply assurances. For 2023, NCNR orders are already more than what the company can supply. Therefore, NXP is focused on de-risking its existing backlog for potential double/stale orders and improving supply capabilities.
  • For the third quarter, the target is to achieve 20% YoY growth at $3.425 billion. The automotive and industrial segments will take the center stage again to provide a safe landing going forward with respect to demand.

Despite macroeconomic headwinds and supply chain constraints, NXP reported healthy Q2 2022 revenues at $3.31 billion, an increase of 27.6% YoY and 5.6% QoQ. Major revenue drivers for this quarter were the automotive and industrial segments, accounting for almost three-fourths of the total revenue. Strong customer demand within these segments is outstripping the company’s improving supply capabilities.

NXP Revenues by Segment, Q2 2022

Sources: Company, Counterpoint


NXP’s automotive segment captured almost 52% of the total revenue and stood at $1.7 billion, rising 35.7% YoY and 10% QoQ respectively. From the supply point of view, the automobile industry is still feeling the effects of factors like COVID-19 lockdowns in China, Ukraine-Russia war and semiconductor shortages, resulting in fewer cars being produced. On the demand side, consumer sentiment is muted due to macroeconomic factors affecting purchasing power. However, despite the production being down, the content within cars is increasing due to increased digitization and the growing penetration of xEVs in the market, which is where NXP benefits a lot.

Products in demand include battery management systems, inverter control, MCU/MPU, Goldbox (service-oriented gateway) and more. The automotive industry is pivoting towards software-defined vehicles, which will be complemented by two parallel architectural evolutions, namely zonal and domain. To support these vehicular functions and accelerate integration, NXP introduced two new processor families, S32Z & S32E, to extend the benefits of its innovative S32 automotive platform. Additionally, the company also announced that it would be working with Hon Hai Technology Group (or Foxconn) to jointly develop platforms for a new generation of connected cars. This collaboration will enable solutions focused on architectural innovation and platforms for electrification, connectivity, and safe automated driving.

Industrial & IoT 

The industrial and IoT segment grew by 25% YoY and 4.5% QoQ to reach $713 million. The segment contributed 21.5% to the total revenue. Use cases for smart and connected applications, like within homes or factories, are evolving and leveraging the potential of IoT. NXP is serving the needs of its customers through secure connected edge solutions in the form of advanced analog solutions, general purpose MCUs and application processors. Its broad portfolio includes scalable compute platforms along with collaborations with multiple cloud players like AWS, Azure, and Baidu, which allows for differentiated software enablement and services. In June, NXP announced the new Arm Cortex-M core-based MCX portfolio (MCX N/A/W/L series) of microcontrollers which are scalable, flexible enough to simplify migration and allow developers to maximize software reuse across the portfolio to minimize total system cost. These MCUs are suitable for smart homes, smart factories, smart cities and across many emerging industrial and IoT edge applications.

The supply chain constraints are evident based on NXP’s channel inventory. Its industrial business, especially in China, is dominated by the distribution channel and is sitting on a channel inventory of 1.6 months, which is still a month below its target of 2.5. However, the Chinese government’s stimulus programs are providing respite for the company’s industrial and automotive market operations. According to NXP, since June, the effects of the stimulus have been significant and would prove to be beneficial for the second half of the year as well.

Communication Infrastructure & Others 

The segment saw a flat sequential growth but an almost 20% YoY increase to reach revenues of $498 million. This capex-driven wireless infrastructure segment accounted for 15% of the revenues. NXP’s increased value proposition stems from its technological leadership (in wireless solutions and RF components & processors catering to applications like enterprise networking, wired/wireless network infrastructure and data center), system expertise and manufacturing scale. Its leadership in accelerated growth driver RF power systems for cellular base stations is witnessing robust demand. Furthermore, as 5G deployments continue to expand globally and carriers optimize power consumption for sustainable 5G networks, NXP is in place to serve all 5G configurations and systems ranging from 5G Macro and 5G mMIMO to 5G mmWave.

NXP has expanded its massive multiple input, multiple output (mMIMO) product portfolio by launching a new series of RF power discrete solutions for 32T32R active antenna systems, employing its proprietary Gallium Nitride technology (GaN). This new series complements its existing portfolio of discrete GaN power amplifiers for 64T64R radios. These 5G mMIMO systems were produced in NXP’s own advanced GaN manufacturing facility and it now has the largest offerings for the RF GaN portfolio for massive MIMO 5G radios. For 5G rollouts in densely populated areas, 64T64R solutions are appropriate and for less dense urban/suburban areas, 32T32R solutions are suited best.


This is the only segment that saw its revenues going down QoQ (-3.2%). But they grew 11.8% on a yearly basis. Revenues reached $388 million, a decline of $13 million from the previous quarter. The segment witnessed a QoQ decline due to macroeconomic weakness in China where the company is exposed to low-end Android players. NXP has faced supply issues in this segment in the past quarters as well, hence it has been very careful to not grow any inventory down the chain. Furthermore, it is shifting its supply from mobile to other segments like auto and IoT as the demand in these segments is more robust and consistent. However, its strong hold in the secure mobile wallet (which includes technologies like NFC, eUICC and MIFARE 2GO), embedded power solutions, and UWB ecosystem solutions (accelerated growth driver) has experienced continued strong adoption. UWB technology is gaining traction and seeing an increased installed base across different verticals like IoT, cars and mobile, and NXP is well-positioned to drive this ecosystem.

NXP has collaborated with ING and Samsung for innovations in payment services by bringing forth the industry’s first UWB-enabled peer-to-peer payment application. Project NEAR will leverage UWB-based Samsung Galaxy smartphones with an ING bank application to allow consumers to send money directly to peers when two Galaxy phones are in proximity. Instead of inputting bank details, the sender can simply be in close range of the recipient and a swift transaction can happen, made possible via NXP’s Trimension SR100T UWB chips. Further, the company’s SN110 convergence eSIM solution (which integrates eSIM, NFC and secure element) is used in Xiaomi’s Redmi Note 10T and HONOR’s Magic4 Pro models for remote SIM provisioning with multiple MNO subscriptions, along with advanced features like smart access, payment, and secure mobile transit.

Future Guidance and Capex Overview

For the upcoming quarter, the company expects to attain $3.425 billion in revenue, plus or minus about $75 million at the midpoint. This is up 20% YoY and about 3% QoQ. The non-GAAP gross margin is expected to be about 57.8%, plus or minus 50 basis points. NXP has attempted to de-risk its Q3 outlook keeping in mind the macroeconomic conditions that are already affecting its mobile and consumer end markets. But the auto and IoT segments will continue to perform well due to strong customer demand. Both auto and IoT segments are expected to be in the low 20% range YoY and in the mid-single digit range QoQ.

The capex for Q2 was $268 million, a decline of $11 million from the previous quarter. The company is focused on improving its supply capabilities by employing a hybrid manufacturing model and making sure no excess inventory is being built down the chain in any of its major end markets. NXP is remodeling its factories (all are 200 millimeter) to focus on manufacturing proprietary specialty processes unique to the company. Furthermore, it is transferring more of the CMOs to its foundry partners to create more internal space for its facilities, allowing it to work on advanced products catering to the ever-growing needs of different industries. Currently, 60% of the wafer supply is coming from the foundry process, most of which is turned into CMOs logic processes (especially for the ones below 90 nanometers and pertaining to 300 millimeter).


The automotive and industrial segments continue to be NXP’s strong suit where most of the recurring revenue is generated. The company remains bullish on these segments for the second half as well. This is evident as the company is already sold out for the rest of the year with respect to these segments and there are ever-growing content increases in these underlying sectors. The automotive sector will see more xEVs produced in the second half and by the end of the year, the share of green vehicles will be 26% of the global car production. Higher EV penetration means more semiconductor content (higher ASP for silicon content as well) and ultimately more revenue growth for the company.

Going forward, NXP is aiming to improve inventories and supplies for its major end markets because for the foreseeable period, it estimates its supply capabilities to cover 80% of the underlying demand. Based on its aforementioned new product launches, design win commitments and healthy NCNR order book, NXP is confident that its future growth and investments are well-aligned with the long-term market requirements.

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