NXP Semiconductors NV (NXPI.US) is preparing for the recovery of automotive chip demand by acquiring TTTech Auto for $625 million.

Netherlands-based automotive chip leader NXP Semiconductors NV (NXPI.US) announced on Tuesday local time that it has agreed to acquire Austrian TTTech Auto, a specialist in automotive software technology, for $625 million, significantly strengthening its automotive business, especially the NXP Semiconductors NV automotive software and hardware ecosystem. NXP Semiconductors NV is the world's largest automotive chip manufacturer, while TTTech Auto focuses on producing "middleware" with a focus on safety software an intermediary software that helps integrate automotive hardware platforms, automotive operating systems, and applications comprehensively, aiding in the rollout of software updates and ensuring that critical functions remain unaffected. Following the announcement of NXP Semiconductors NV's acquisition of TTTech Auto, market analysts believe that through this acquisition, NXP Semiconductors NV not only enhances its capabilities in the automotive software field but also accelerates its strategic layout for automotive software and hardware integration. This move is aimed at addressing the expected resurgence in demand for automotive chips in the near future, as well as the trends in the development of "electric vehicles + AI autonomous driving" and software-defined vehicles, enhancing its competitiveness in the global automotive chip and integrated software and hardware markets. Jens Wanssen, an executive at NXP Semiconductors NV, stated in an official statement, "This acquisition will combine NXP Semiconductors NV's automotive hardware product portfolio with the world's leading provider of safety software solutions." NXP Semiconductors NV's statement also indicates that this acquisition aims to strengthen its product portfolio, as major customers such as global automotive manufacturers increasingly consider the perfect integration of software and hardware ecosystems rather than just hardware products as a key factor in determining vehicle design and overall performance. Jens Wanssen, head of automotive embedded systems at NXP Semiconductors NV, stated that this acquisition will help the company become a global leading supplier of "intelligent automotive edge systems." TTTech Auto excels in "security centric critical middleware" and real-time operating system integration. For NXP Semiconductors NV, combining its own automotive-grade core processors, MCUs, automotive-grade analog chips, etc., with TTTech Auto's middleware solutions can create more complete automotive domain controller systems or central computing platform solutions. By combining NXP Semiconductors NV's automotive chip hardware advantages and TTTech Auto's middleware software solutions, NXP Semiconductors NV will be able to occupy a more favorable position in the smart edge systems field, competing against strong rivals in the automotive chip sector such as STMicroelectronics NV ADR RegS, NVIDIA Corporation, and Qualcomm, and providing more integrated, intelligent software and hardware integrated automotive solutions. If this all-cash transaction receives formal approval from European regulatory authorities, TTTech, headquartered in Vienna, and its management and 1100 employees will collectively join NXP Semiconductors NV's automotive business unit. According to the latest forecast from the World Semiconductor Trade Statistics (WSTS), global demand for automotive chips, which has been weak since 2022, is expected to see the long-awaited "recovery moment" in 2025. In its latest autumn forecast, WSTS significantly raised its forecast for the size of the semiconductor market in 2024 and 2025 compared to the spring forecast, predicting a 19.0% year-on-year growth to $627 billion in the global semiconductor market in 2024. WSTS expects the semiconductor market size in 2025 to increase from 2024, indicating that the global semiconductor market is likely to grow by about 11.2% on top of the already strong recovery trend in 2024, reaching around $697 billion. WSTS predicts that the growth in the semiconductor market size in 2025 will be mainly driven by storage chips and AI logic chips, while it also expects single devices, optoelectronics, sensors, MCUs, and analog chips, as well as the growth rates of all other sub-chip markets, to achieve single-digit growth. According to WSTS expectations, analog chips, which play an important role in modules and systems for electric vehicles (EVs), are expected to slowly enter a recovery cycle in 2025 after two consecutive years of weak demand, while the demand for MCUs, another important chip category required for electric vehicles, is expected to recover at a faster pace on the basis of slow recovery in 2024. Analog chips play an indispensable role in various key functional modules and systems in electric vehicles, including power management, battery management, sensor interfaces, audio and video processing, and core control systems for electric motors.