NXP Semiconductors NV, a Dutch semiconductor manufacturer, announced on Thursday that it is selling its RF Power unit for $1.8 billion to Jinguang Asset Manegement Co., a Chinese state-owned investment firm.
The move comes in a bid to win approval for its $11.8 billion acquisition deal with the U.S. chip company, Freescale Semiconductor Ltd.
The said agreement will pave the way for the creation of the world's fourth largest smart chip company, which is worth more than $30 billion, according to NXP, noting that it would help propel the firm's position in the business of the "Internet of Things."
NXP is expecting to close the deal within this year's second half, citing that it will undergo a regulatory review before finally winning the coveted approval from the monitoring agency.
For the recent period, the semiconductor industry has seen a fast consolidation following a slower growth and increasing competition.
According to a Wall Street Journal report, chip maker Avago Technologies Ltd. is working out a plan to acquire rival Broadcom Corp. through a deal amounting to $35 billion. This is the latest addition to the bandwagon of company takeovers.
"The landscape seems to be changing by the day," NXP spokesperson Joon Knapen remarked.
NXP selling its RF Power unit is seen as feasible solution before it could finally acquire Freescale. Both firms have both large market shares in RF Power transistors. If combined, the two would secure an 80- to 90-percent share.
NXP remarked that selling its RF Power unit would provide fund in its move to buy Freescale.
Apparently, Jianguang's ability to buy the said unit was a crucial factor to go ahead with the deal, NXP CEO Richard Clemmer revealed in press statement on Thursday.
Under the deal involving the China state-owned investment firm JIC Capital, around 2,000 NXP employees in the RF Power unit will be transferred to an independent firm, which is incorporated in the Netherlands. Jianguang (JAC Capital) will be acquiring the said company.
All RF Power-related patents and intellectual properties will be transferred in the sale. However, the management team will remain in place.
The NXP-JAC Capital deal will also be subject to regulatory review and approval. It is expected to close before 2015 ends.