NXP CEO Highlights Growth in 'Physical AI' Demand and Outlook

NXP's Industrial AI Strategy

By Toby Sterling

CEO Insights on Market Trends

AMSTERDAM, Feb 4 (Reuters) - Dutch computer chip maker NXP Semiconductors is benefitting from what it calls "physical AI", as businesses apply artificial intelligence in industrial systems such as logistics automation, workplace safety and robotics, its new CEO told Reuters.

Financial Performance and Projections

"The fastest growing part of our industrial portfolio is the products that have inherent AI capabilities," said Rafael Sotomayor in an interview late Tuesday. Sotomayor became CEO in October.

Impact of Geopolitical Factors

"That's what we call physical AI," Sotomayor said. "The intelligence on the edge and industrial. It is a big, big part of our strategy."

NXP makes industrial chips, like European peers Infineon and STMicroelectronics, but is best known as a supplier of chips and related software used in cars, with strengths in radar, advanced driver assistance, networking and infotainment.

But "all the technology that we developed for automotive, we actually put to work elsewhere in industry," Sotomayor said. 

"Those intelligent systems, in the same products that make an auto function ... they go into drones, they go into robots in the factory." 

NXP reported better-than-expected fourth-quarter earnings late Monday and said it expects first-quarter revenue to rise about 11% year-on-year to $3.15 billion, with its industrial chips segment growing 20%.

Sotomayor said the global data centre buildout was also supporting that business, with strength in energy storage and factory automation.

Despite the outlook, NXP's shares fell 5% on Tuesday. TD Cowen analysts said in a note that the results were "solid overall but after three years of ... (weak sales) investors want to see more evidence of durable growth".

While S&P Global forecasts stable vehicle sales in 2026, Sotomayor said NXP would grow anyway as newer models and electric cars have self-driving and other features that favour its products.

He said that the company had improved its ability to produce regionally amid geopolitical tensions. And carmakers and their top suppliers have stopped cutting chip orders as worries over new AI-driven shortages and supply chain disruptions mount.

"Now that inventory correction is out of the way, we can see the growth prospects of our new products," Sotomayor said. 

(Reporting by Toby Sterling. Editing by Mark Potter)