Is NXP Semiconductor's Growth Driver In China?

In a report published Tuesday, Pacific Crest Securities analysts maintained an Outperform rating on

, with a price target of $135, saying that the company "stands to benefit" from the China bank card opportunity this year. Referring to talks with supply-chain partners, the analysts said that China's secured bank card shipments appear to be on track to record 30% to 40% growth in 2015. This translates to a jump from 500 million in 2014 to about 675 million this year. The growth would be driven by the "continued rollout from tier-2 banks," the analysts added. In the report Pacific Crest Securities noted, "NXP supplied almost 100% of the secured chips to the Chinese market in 2014, and we believe the company will likely secure over 90% market share this year, given its solid relationship with card vendors and strong technology leadership." The new PBOC 3.0 standard recommends the increased use of domestic chip suppliers for better security purposes. The analysts said that there could be limited traction given: "(1) the lack of government mandates, (2) the lack of competitive pricing due to low production yields, and (3) it is unable to support dual-encryption algorithm, which is necessary for international transactions." The supply-chain conversations suggest that NXP Semiconductors "remains competitively advantaged and capable of maintaining dominant market share through 2016." Citing NXP Semiconductors as one of their top picks, the analysts commented that the company is "strongly well positioned for both short- and long-term growth opportunities." Even when the China bank card opportunity tails off, following solid growth in 2015, NXP Semiconductors, now with the addition of FSL, seems "well positioned to capitalize on more sustainable growth opportunities in auto, industrial, and broad-based MCUs, offsetting concerns over Apple customer concentration and competitive share loss in payments," the report added.