Sales at record levels and profits at a high, but the price of the NXP share fell almost 5 percent.

What happened?

Stephen Finsterbusch

Editor in Business.

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That was before regular trading started on the stock exchange.

Previously, we presented our results for the past year and gave investors guidance for the first quarter.

It said that for the first time in eight or nine quarters we will not be growing, but will be shrinking – by around 4 percent.

Apparently, that scared some investors away.

Yes.

When we then explained the figures, the price immediately turned positive again.

And what did you say to investors?

I said that the important automotive business that everyone is looking at is also going to grow significantly in the first quarter -- like 15 percent.

That calmed Wall Street down again.

However, the rapid ups and downs show how nervous the markets are.

Where are the greatest uncertainties right now?

Developments in China undoubtedly have an impact.

Beijing's latest steps in corona policy in December have pushed infection rates up significantly.

Many companies simply can no longer work there due to a lack of employees.

With that, we too are going through quite a deep valley of tears.

And how deep is it?

Deep but short.

I assume that this is more of a short-term nature.

In the medium term, we expect a significant recovery.

Nevertheless, we are only giving very cautious forecasts for the time being.

Because we can only predict what we see.

So why are you in a positive mood in the medium term?

Because we think that the number of infections in China will decrease in the foreseeable future, and then business will pick up again.

And are you prepared for that?

We do not deliver to end customers in China, but to distributors.

That means we supply dealers, who in turn supply thousands of small end customers with our chips.

Why this structure?

Because we don't want to set up warehouses in China.

In the current situation, this has the advantage that we can see immediately when demand picks up again, that we have to deliver and that we can record new real sales.

At the moment, however, we have almost no business in China.

How is the disengagement with China being pushed by the Americans going?

In the semiconductor industry, we are very committed to pursuing what is known as de-coupling – in the sense of regionalizing production.

We have three factories in the US, one in Europe, so in Holland, and one as a joint venture in Singapore.

So none in China?

no

It wasn't a strategic decision at the time.

Today, however, it turns out to be positive.

Because our factories are all in the right place.

So we are really well positioned.

But they also have chips delivered.

We buy around 60 percent of the silicon wafers that we process.

Our suppliers have been working hard over the past few months to close the gaps between the huge demand and the scarce supply.

Who is this?

TSMC and Globalfoundries.

That's no secret.

With them we have two major suppliers, and they are currently en route to further diversifying geographically with a great deal of momentum.

That means, if TSMC should come to Europe, will you be there immediately?

Yes.

The observation is correct.

The diversification is distributed between Europe, USA and Taiwan.

TSMC is our most important supplier there.

But the Taiwanese also build in America.

From the new factory in Arizona, USA, we will first obtain 5 and later also 3 nanometer processors from TSMC for our automotive customers.

According to everything one hears and reads, the Taiwanese in Europe want to rely on larger structures larger than 16 nanometers.

If that's the case, we'd definitely be there.

Construction is already underway in America, while in Europe Brussels is still working on the industrial policy framework of the Chips Act.

Is the EU taking too much time here?

That's right, America is one step ahead.

But that doesn't mean I would discredit what Europe is currently initiating with the Chips Act.

That is correct and very, very important.

However, we are a step behind.

I would like to say cautiously that Europe consists of many individual countries.

They always represent their own interests to a certain extent.

Nevertheless, the objective is the same on both sides of the Atlantic and, given the geopolitical background, a Chips Act is absolutely the right step forward.

With their framework, the Europeans are now moving away from absolute cutting-edge technology and also want to promote mature chip technologies.

Is that right?

That is very welcome.

Because these areas are particularly important for European industrial and automotive customers.

Europe is going in the right direction.

If more chips come from plants in the west, it will also be more expensive.

Why?

That is correct.

And here it must be said clearly: the production costs in European and American factories are higher than in Asian factories.

At what time?

That cannot be said in general terms.

It always depends on the processes and technology used.

But it will be more expensive.

And why?

Subsidies provided in America and Europe through the Chips Acts are paid to build factories, not to cover operational costs.

And the personnel costs in the EU and the USA are a lot higher than in Taiwan, for example.

Does that mean you will pass the higher costs on to customers?

We will have to.

We don't have any other choice.

And I'm not talking about a temporary phenomenon.

This won't go away.

But: The independence that we are creating for ourselves from geopolitical quarrels should be worth it to us.