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NXP Semiconductors (NXPI) Boosts R&D Efforts Across Europe

NXP Semiconductors N.V. NXPI plans to bring advancement in its research and development (R&D) operations in Europe, on the back of the latest grant.

Notably, the company is about to receive grants from the 2nd Important Project of Common European Interest on Microelectronics and Communication Technologies (IPCEI ME/CT).

The funding will support NXPI’s core technology innovation in automotive, industrial, and cybersecurity end markets across Austria, Germany, the Netherlands and Romania.

This apart, NXP Semiconductors plans to invest in the abovementioned countries, demonstrating its commitment to the European Union's (EU) goal of digital and green transition.

We note that these endeavors are expected to strengthen NXPI’s research work on key microelectronics technologies across four European countries, namely Austria, Germany, the Netherlands and Romania.

NXP Semiconductors N.V. Price and Consensus

NXP Semiconductors N.V. Price and Consensus
NXP Semiconductors N.V. Price and Consensus

NXP Semiconductors N.V. price-consensus-chart | NXP Semiconductors N.V. Quote

Growing Focus in Europe

The latest announcement bodes well for the company’s growing focus to strengthen its presence across the EU.

This apart, NXP Semiconductors announced a joint venture agreement with TSMC, Robert Bosch GmbH and Infineon Technologies AG to invest in European Semiconductor Manufacturing Company, a 300mm fab to meet the future capacity demands of the rapidly expanding automotive and industrial sectors in Europe.

Further, NXP Semiconductors has signed a Memorandum of Understanding with Eindhoven University of Technology in the Netherlands to jointly develop a revolutionary wireless communication technology above 300 GHz.

We believe that the abovementioned endeavors will aid the company in its efforts to bolster the European semiconductor ecosystem.

This, in turn, will enable the company to strengthen its footing in the European semiconductor market.

Per a Statista report, the European semiconductors market is expected to hit $37.34 billion in revenues in 2023 and reach $68.62 billion by 2027, witnessing a CAGR of 6.6% between 2023 and 2027.

Growing prospects in the promising market will likely instill investor optimism in the stock.

Notably, NXPI shares have gained 23.4% in the year-to-date period, outperforming the industry’s growth of 16.4%.

Wrapping Up

We believe that the latest move is in sync with NXP Semiconductors’ increasing focus on R&D activities.

With increased R&D investments, the company plans to increase its focus on 5nm, advanced driving assistance and battery management systems in automotive, 6G and Ultra-Wideband and artificial intelligence, RISC-V and post-quantum cryptography innovations.

Our model estimates third-quarter 2023 non-GAAP R&D expenses to reach $523.5 million, indicating a year-over-year rise of 4.3%.

Strong momentum in R&D will, in turn, help the company to bolster its overall portfolio offerings across various end markets.

Notably, NXP Semiconductors has introduced a suite of top-side cooled RF amplifier modules, which enable thinner and lighter radios for 5G infrastructure, reducing radio thickness and weight by more than 20% and carbon footprint.

Further, the company partnered with TSMC to deliver the first automotive-embedded Magnetic Random Access Memory in 16 nm FinFET technology, enabling automakers to support multiple software upgrades on a single hardware platform.

We note that strength in the overall portfolio offerings will likely aid its financial performance in the upcoming period.

However, mounting expenses, supply-chain constraints and sluggish industrial & IoT and mobile markets are concerns.

For third-quarter 2023, NXP Semiconductors expects revenues of $3.3-$3.5 billion, suggesting a decline of 1% year over year at the midpoint.

Zacks Rank and Stocks to Consider

Currently, the company carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Dell Technologies DELL, Badger Meter BMI and Arista Networks ANET. While Dell Technologies sports a Zacks Rank #1 (Strong Buy), Badger Meter and Arista Networks carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dell Technologies shares have gained 71.4% in the year-to-date period. DELL’s long-term earnings growth rate is currently projected at 12%.

Badger Meter shares have gained 44.7% in the year-to-date period. BMI’s long-term earnings growth rate is currently projected at 15.05%.

Arista Networks shares have gained 50.6% in the year-to-date period. The long-term earnings growth rate for ANET is currently projected at 18.75%.

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