Item 19. Exhibits

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Exhibit Number			Description of Document
3.1			Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of Amendment No. 7 to the Registration Statement on Form F-1 of NXP Semiconductors N.V., filed on August 2, 2010 (File No. 333-166128))
3.2			Articles of Association of NXP Semiconductors N.V. (incorporated by reference to Exhibit 3.2 of Amendment No. 7 to the Registration Statement on Form F-1 of NXP Semiconductors N.V., filed on August 2, 2010 (File No. 333-166128))
4.1			Senior Unsecured Indenture dated as of March 12, 2013 among NXP B.V. and NXP Funding LLC as Issuers, each of the Guarantors named on the signature pages thereto and Deutsche Bank Trust Company Americas as Trustee (incorporated by reference to Exhibit 4.7 of the Form 20-F of NXP Semiconductors N.V. filed on February 28, 2014)
4.2			Senior Unsecured Indenture dated as of May 20, 2013 among NXP B.V. and NXP Funding LLC as Issuers, each of the Guarantors named on the signature pages thereto and Deutsche Bank Trust Company Americas as Trustee (incorporated by reference to Exhibit 4.8 of the Form 20-F of NXP Semiconductors N.V. filed on February 28, 2014)
4.3			Indenture dated as of December 1, 2014 among NXP Semiconductors N.V. as Issuer and Deutsche Bank Trust Company Americas as Trustee (incorporated by reference to Exhibit 4.7 of the Form 20-F of NXP Semiconductors N.V. filed on March 6, 2015)
4.4			Senior Unsecured Indenture dated June 9, 2015 among NXP B.V. and NXP Funding LLC as Issuers, each of the Guarantors named on the signature pages thereto and Deutsche Bank Trust Company Americas as Trustee (incorporated by reference to Exhibit 4.10 of the Form 20-F of NXP Semiconductors N.V. filed on February 26, 2016)
4.5			RCF Agreement dated as of December 7, 2015 among NXP B.V. and NXP Funding LLC as Borrowers, the several lenders from time to time parties thereto, Morgan Stanley Senior Funding, Inc. as Collateral Agent, Morgan Stanley Senior Funding, Inc., as Administrative Agent, Citibank, N.A. as Letter of Credit Issuer, Credit Suisse Securities (USA) LLC, Morgan Stanley Senior Funding, Inc., Barclays Bank PLC, Deutsche Bank Securities Inc. and Bank of America N.A. as Joint Lead Arrangers and Joint Bookrunners, and Goldman Sachs Lending Partners LLC, Citigroup Markets Limited and Coöperative Centrale Raiffeisen-Boerenleenbank B.A. as Co-Managers (incorporated by reference to Exhibit 4 of the Form 6-K of NXP Semiconductors N.V. filed on December 7, 2015)
4.6			RCF Guaranty Agreement dated as of December 7, 2015 among NXP B.V., NXP Funding LLC and each of the subsidiary guarantors listed on the signature pages thereto, Morgan Stanley Senior Funding, Inc. as Collateral Agent and Morgan Stanley Senior Funding, Inc. as Administrative Agent (incorporated by reference to Exhibit 5 of the Form 6-K of NXP Semiconductors N.V. filed on December 7, 2015)
4.7			Supplemental Guaranty dated as of December 7, 2015 to the guarantee dated as of March 4, 2011 among NXP B.V., each of the Guarantors listed on the signature pages thereto, Barclays Bank PLC as Administrative Agent, Morgan Stanley Senior Funding, Inc. as Global Collateral Agent and Mizuho Corporate Ban, Ltd. as Taiwan Collateral Agent (incorporated by reference to Exhibit 10.4 of the Form 8-K of Freescale Semiconductor, Ltd. filed on December 7, 2015)
4.8			Senior Indenture dated as of May 23, 2016, between NXP B.V. and NXP Funding LLC as Issuers, each of the guarantors party thereto and Deutsche Bank Trust Company Americas as Trustee (incorporated by reference to Exhibit 2 of the Form 6-K of NXP Semiconductors N.V. filed on August 2, 2016)
4.9			Senior Indenture dated as of August 11, 2016, among NXP B.V. and NXP Funding LLC as Issuers, each of the guarantors party thereto and Deutsche Bank Trust Company Americas as Trustee (incorporated by reference to Exhibit 4.21 of the Form 20-F of NXP Semiconductors N.V. filed on March 3, 2017)
4.10			2016 New Term Loan Joinder Agreement dated as of September 22, 2016, by and among the Tranche F Lenders defined therein, NXP B.V. and NXP Funding LLC as Borrowers and Credit Suisse AG as Administrative Agent (incorporated by reference to Exhibit 4.22 of the Form 20-F of NXP Semiconductors N.V. filed on March 3, 2017)
4.11			Bridge Term Credit Agreement dated as of September 19, 2018, among NXP B.V. and NXP Funding LLC, as the Borrowers, the several Lenders from time to time parties hereto, and Barclays Bank Plc as Administrative Agent, Barclays Bank Plc, Credit Suisse Loan Funding LLC, Bank of America Merrill Lynch International Limited, Deutsche Bank Securities Inc., and Morgan Stanley Senior Funding, Inc. as Joint Lead Arrangers and Joint Bookrunners (incorporated by reference to Exhibit 1 of the Form 6-K of NXP Semiconductors N.V. filed on September 20, 2018)
4.12			Guaranty Relating to the Credit Agreement dated as of September 19, 2018, made by the Guarantors and Barclays Bank Plc, as administrative agent (incorporated by reference to Exhibit 2 of the Form 6-K of NXP Semiconductors N.V. filed on September 20, 2018)

Exhibit Number			Description of Document
4.13			Senior Indenture dated as of December 6, 2018, among NXP B.V., NXP Funding LLC, each of the guarantors party thereto and Deutsche Bank Trust Company Americas as trustee
10.1			Intellectual Property Transfer and License Agreement dated as of September 28, 2006 between Koninklijke Philips Electronics N.V. and NXP B.V. (incorporated by reference to Exhibit 10.1 of the Amendment No. 3 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 30, 2010 (File No. 333-166128))
10.2			Intellectual Property Transfer and License Agreement dated as of November 16, 2009 among NXP B.V., Virage Logic Corporation and VL C.V. (incorporated by reference to Exhibit 10.2 of the Amendment No. 3 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 30, 2010 (File No. 333-166128))
10.3			Shareholders’ agreement dated as of March 30, 1999, as amended among EBD Investments Pte. Ltd., Koninklijke Philips Electronics N.V. and Taiwan Semiconductor Manufacturing Company Ltd. (incorporated by reference to Exhibit 10.4 of the Amendment No. 3 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 30, 2010 (File No. 333-166128))
10.4			Lease Agreement dated as of December 23, 2004 between Jurong Town Corporation and Systems on Silicon Manufacturing Company Pte. Ltd. for the property at No. 70 Pasir Ris Drive 1, Singapore (incorporated by reference to Exhibit 10.8 of the Amendment No. 2 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 10, 2010 (File No. 333-166128))
10.5			Management Equity Stock Option Plan Terms and Conditions dated August 2010 (incorporated by reference to Exhibit 10.19 of the Form 20-F of NXP Semiconductors N.V. filed on March 13, 2012)
10.6			Management Equity Stock Option Plan Terms and Conditions dated January 2011 (incorporated by reference to Exhibit 10.20 of the Form 20-F of NXP Semiconductors N.V. filed on March 13, 2012)
10.7			Long Term Incentive Plan 2010 Terms and Conditions with regard to the Stock Option Plan, the Performance Stock Unit Plan, Restricted Stock Unit Plan and Share Plan (incorporated by reference to Exhibit 10.21 of the Form 20-F of NXP Semiconductors N.V. filed on March 13, 2012)
10.8			NXP Global Equity Incentive Program (incorporated by reference to Exhibit 10.26 of the Amendment No. 3 to the Registration Statement on Form F-1 of NXP Semiconductors N.V. filed on June 30, 2010 (File No. 333-166128))
10.9			Long Term Incentive Plan 2011 Terms and Conditions with regard to the Stock Option Plan, the Performance Stock Unit Plan, Restricted Stock Unit Plan and Share Plan (incorporated by reference to Exhibit 10.23 of the Form 20-F of NXP Semiconductors N.V. filed on March 13, 2012)
10.10			Long Term Incentive Plan 2012/3 Terms and Conditions with regard to the Stock Option Plan, the Performance Stock Unit Plan, Restricted Stock Unit Plan and Share Plan (incorporated by reference to Exhibit 10.23 of the Form 20-F of NXP Semiconductors N.V. filed on March 1, 2013). Long Term Incentive Plan 2013/4 Terms and Conditions with regard to the Stock Option Plan, the Performance Stock Unit Plan and Restricted Stock Unit Plan (incorporated by reference to Exhibit 10.22 of the Form 20-F of NXP Semiconductors N.V. filed on February 28, 2014). Long Term Incentive Plan 2014/5 Terms and Conditions with regard to the Stock Option Plan, the Performance Stock Unit Plan, the Restricted Stock Unit Plan and the Keep Restricted Stock Unit Plan (incorporated by reference to Exhibit 10.22 of the Form 20-F of NXP Semiconductors N.V. filed on March 6, 2015). Long Term Incentive Plan 2015/6 Terms and Conditions with regard to the Stock Option Plan, the Performance Stock Unit Plan and the Restricted Stock Unit Plan (incorporated by reference to Exhibit 10.22 of the Form 20-F of NXP Semiconductors N.V. filed on February 26, 2016). Long Term Incentive Plan 2016/17 Terms and Conditions with regard to the Restricted Stock Unit Plan (incorporated by reference to Exhibit 10.22 of the Form 20-F of NXP Semiconductors N.V. filed on March 3, 2017). Long Term Incentive Plan 2017/18 Terms and Conditions with regard to the Restricted Stock Unit Plan (incorporated by reference to Exhibit 4.6 of the Form S-8 of NXP Semiconductors N.V. filed on October 25, 2017 (File No. 333-221118)). Long Term Incentive Plan 2018/19 Terms and Conditions with regard to the Performance Stock Units Plan (incorporated by reference to Exhibit 4.11 of the Form S-8 of NXP Semiconductors N.V. filed on September 14, 2018 (File No. 333-227332)). Long Term Incentive Plan 2018/19 Terms and Conditions with regard to the Restricted Stock Units Plan (incorporated by reference to Exhibit 4.12 of the Form S-8 of NXP Semiconductors N.V. filed on September 14, 2018 (File No. 333-227332))
10.11			Employee Stock Purchase Plan Terms and Conditions (incorporated by reference to Exhibit 4.1 of the Form S-8 of NXP Semiconductors N.V. filed on August 8, 2013)
10.12			Agreement and Plan of Merger, dated as of March 1, 2015, by and among NXP Semiconductors N.V., Freescale Semiconductor, Ltd. and Nimble Acquisition Limited (incorporated by reference to Exhibit 1 of the Form 6-K of NXP Semiconductors N.V. filed on March 3, 2015)

Exhibit Number			Description of Document
10.13			Sale and Purchase Agreement, dated June 14, 2016, between NXP B.V., Beijing Jianguang Asset Management Co., Ltd. and Wise Road Capital LTD (incorporated by reference to Exhibit 10.33 of the Form 20-F of NXP Semiconductors N.V. filed on March 3, 2017)
10.14			Amendment No. 1, dated February 20, 2018, to the Purchase Agreement, dated October 27, 2016, by and between Qualcomm River Holdings B.V. and NXP Semiconductors N.V. (incorporated by reference to Exhibit 1 of the Form 6-K of NXP Semiconductors N.V. filed on February 20, 2018)
10.15			Amendment No. 2, dated April 19, 2018, to the Purchase Agreement, dated October 27, 2016, by and between Qualcomm River Holdings B.V. and NXP Semiconductors N.V. (incorporated by reference to Exhibit 1 of the Form 6-K of NXP Semiconductors N.V. filed on April 19, 2018)
12.1				Certification of R.L. Clemmer filed pursuant to 17 CFR 240. 13a-14(a)
12.2				Certification of P. Kelly filed pursuant to 17 CFR 240. 13a-14(a)
13.1				Certification of R.L. Clemmer furnished pursuant to 17 CFR 240. 13a-14(b)
13.2				Certification of P. Kelly furnished pursuant to 17 CFR 240. 13a-14(b)
21.1				List of Significant Subsidiaries of the Registrant
23				Consent of KPMG Accountants N.V.

GLOSSARY

32 bit ARM microcontrollers		Microcontroller based on a 32-bit processor core developed and licensed by ARM Technologies.
AC-DC		Conversion of alternating current to direct current.
Analog		A form of transmission that is a continuous wave of an electrical signal that varies in frequency and/or amplitude in response to variations of physical phenomena such as human speech or music.
ASIL		Automotive Safety Integrity Level, is a risk classification scheme defined by ISO 26262- Functional Safety for Road Vehicles standard. The ASIL is established by performing a risk analysis of a potential hazard by looking at the Severity, Exposure and Controllability of the vehicle operating scenario. The safety goal for that hazard in turn carries the ASIL requirements.
Back-end		The packaging, assembly and testing stages of the semiconductors manufacturing process, which takes place after electronic circuits are imprinted on silicon wafers in the front-end process.
BiCMOS		A process technology that combines bipolar and CMOS processes, typically by combining digital CMOS circuitry with higher voltage or higher speed bipolar circuitry.
Bipolar		A process technology used to create semiconductors for applications involving the use of higher power levels than are possible with a CMOS chip. Due to the geometry of a bipolar circuit, these devices are significantly larger than CMOS devices. The speed of the most advanced bipolar devices exceeds those attainable with CMOS, but only at very large electrical currents. As a result, the number of bipolar devices that can be integrated into a single product is limited.
Bluetooth low energy		Bluetooth low energy (BLE) is a wireless computer network technology that, in comparison with “classic” Bluetooth, requires considerably less power and provides a similar communication range. BLE has been included in the majority of smart phones for the past couple of years, with its initial application as the communication between the smart phone and other personal devices like fitness trackers and head-sets. Recently also other applications like communication with light bulbs are emerging.
CAN		Controller Area Network. A network technology used in automotive network architecture.
CATV		An abbreviation for cable television.
Car access and immobilizers		An automobile technology segment focused on keyless entry and car immobilization applications. An automobile immobilizer is an electronic device fitted to an automobile which prevents the engine from running unless the correct key (or other token) is present.
Chip		Semiconductor device.
CMOS		Complementary Metal Oxide Semiconductor. The most common integrated circuit fabrication technology in the semiconductor industry. The technology is used to make integrated circuits where small size and high speed are important. As a result of the very small feature sizes that can be attained through CMOS technology, however, the ability of these integrated circuits to cope with high electrical currents and voltages is limited.
Coolflux DSP		A low power digital signal processor designed for mobile audio applications.
Digital		A form of transmission where data is represented by a series of bits or discrete values such as 0 and 1.
Diode		A semiconductor that allows currents to flow in one direction only.
Discrete semiconductors		Unlike integrated circuits, which contain up to tens of millions of transistors, discrete semiconductors are single devices, usually with two terminals (diodes) or three terminals (transistors). These are either applied as peripheral components on printed circuit boards, or used for special purposes such as very high power applications.
DMOS		Diffused Metal on Silicon Oxide Semiconductor. A process technology used to manufacture integrated circuits that can operate at high voltage.
DSP		Digital signal processor. A specialized microprocessor optimized to process sequences of numbers or symbols which represent signals.

EMI filtering		Electromagnetic interference (or EMI, also called radio frequency interference or RFI when in high frequency or radio frequency) is disturbance that affects an electrical circuit due to either electromagnetic induction or electromagnetic radiation emitted from an external source.

eMotor		Electric motor.
eNVM		Embedded non-volatile memory (eNVM) offers broad areas of applications for MCU (microcontroller) in Automotive, Mobility, and Security markets with key advantages such as dense board designs with reduced number of parts, reduced system costs, reduced noise, higher system speed due to fast code access, in-system on-board re-programmability of code and data storage, lower power dissipation, improved reliability, and real-time control application.
e-passport		A passport with secure data source chip used in providing personalized information.
ESD		Electrostatic discharge. The sudden and momentary electric current that flows between two objects caused by direct contact or induced by an electrostatic field. This term is used in the context of electronics to describe momentary unwanted currents that may cause damage to electronic equipment.
Fab (or wafer fab)		A semiconductor fabrication facility in which front-end manufacturing processes take place.
Fabless semiconductor company		A semiconductor company that does not have any internal wafer fab manufacturing capacity but instead focuses on designing and marketing its products, while outsourcing manufacturing to an independent foundry.
FlexRay		A new communications protocol designed for the high data transmission rates required by advanced automotive control systems.
Foundry		A semiconductor manufacturer that manufactures chips for third parties.
Front-end		The wafer processing stage of the semiconductors manufacturing process in which electronic circuits are imprinted onto raw silicon wafers. This stage is followed by the packaging, assembly and testing stages, which together comprise the back-end process.
GPIO		General Purpose Input/Output, a standard interface used to connect ICs.
HDTMOS		High cell density TMOS (HDTMOS) is an advancement in power MOSFET technology that reduces power dissipation. This results in lower thermal generation and a reduction in the component’s total part count.
HPRF power amplifier		High power RF (HPRF) system mainly consists of RF power amplifiers and waveguide distribution system. RF power amplifiers produce RF energy and waveguides transmit this RF energy to the accelerator modules.
HSPA+		Evolved High-Speed Packet Access, or HSPA+, is a technical standard for wireless, broadband telecommunication with higher speeds for the end user that are comparable to the newer LTE networks.
I2 C		A multi-master serial single-ended computer bus that is used to attach low-speed peripherals to a motherboard, embedded system or mobile phone.
IC		Integrated Circuit. A miniaturized electronic circuit that has been manufactured in the surface of a thin substrate of semiconductor material.
ICN 8		NXP wafer fab facilities located in Nijmegen, Netherlands, processing 8” diameter wafers.
IGBT		Insulated-Gate Bipolar Transistor – is a three-terminal power semiconductor device primarily used as an electronic switch which, as it was developed, came to combine high efficiency and fast switching.
i.MX		i.MX applications processors are multicore ARM-based solutions for multimedia and display applications with scalability, high performance and low power capabilities.
In-process research and development		The value allocated to incomplete research and development projects in acquisitions treated as purchases.

IoT		The Internet of Things (IoT) is the network of physical objects—devices, vehicles, buildings and other items which are embedded with electronics, software, sensors and network connectivity, which enables these objects to collect and exchange data. The Internet of Things allows objects to be sensed and controlled remotely across existing network infrastructure, creating opportunities for more direct integration of the physical world into computer-based systems.
IPv6		Internet Protocol version 6, the most recent version of the Internet Protocol (IP), the communications protocol that provides an identification and location system for computers on networks and routes traffic across the Internet.
LDMOS		Laterally Diffused Metal Oxide Semiconductor. A transistor used in RF/microwave power amplifiers.
LED		Light Emitting Diode. A semiconductor device which converts electricity into light.
LIBOR		London Interbank Offered Rate. The benchmark rate at which interbank term deposits within the leadings banks in London would be charged if borrowing from other banks.
LIN		Local Interconnect Network. A network technology used in automotive network architecture.
LNA		Low-Noise Amplifier. An electronic amplifier used to amplify very weak signals.
LTE		Long Term Evolution (LTE) is a 4G wireless broadband technology standard for wireless communication of high-speed data for mobile phones and data terminals, increasing the capacity and speed using a different radio interface together with core network improvements.
Memory		Any device that can store data in machine readable format. Usually used synonymously with random access memory and read only memory.
Microcontroller		A microprocessor combined with memory and interface integrated on a single circuit and intended to operate as an embedded system.
Micron		A metric unit of linear measure which equals one millionth of a meter. A human hair is about 100 microns in diameter.
MIFARE		Trademarked name, owned by NXP, for the most widely used contactless smart card, or proximity card, technology, for payment in transportation systems.
Mixed-signal		The mixed-signal part of an application solution refers to the devices and sub-system solutions that translate real world analog signals and phenomena such as radio frequency communication and power signals, sound, light, temperature, pressure, acceleration, humidity and chemical characteristics into digital or power signals that can be fed into the central microprocessing or storage devices at the heart of an application system solution.
MOS		Metal Oxide Semiconductor. A metal insulator semiconductor structure in which the insulating layer is an oxide of the substrate material.
MOSFET		Metal Oxide Semiconductor Field Effect Transistor. A device used for amplifying or switching electronic signals.
Nanometer		A metric unit of linear measure which equals one billionth of a meter. There are 1,000 nanometers in 1 micron.
NFC		Near field communication. A technology which allows devices to establish a secure point-to-point wireless connection at very close ranges (within several centimeters), and which is being increasingly adopted in mobile devices and point-of-sale terminals or other devices.
ODM		Original Design Manufacturer. A company which manufactures a product which ultimately will be branded by another firm for sale.
OEM		Original Equipment Manufacturer. A manufacturer that designs and manufactures its products for the end consumer market.
Power MOS		A specific type of metal oxide semiconductor designed to handle large amounts of power.
Process technologies		The technologies used in front-end processes to convert raw silicon wafers into finished wafers containing hundreds or thousands of chips.
QorIQ		QorIQ processing platforms are complete system on chip (SoC) processors for networking applications across carrier, enterprise, military and industrial markets.

RF		Radio Frequency. A high frequency used in telecommunications. The term radio frequency refers to alternating current having characteristics such that, if the current is input to an antenna, an electromagnetic (EM) field is generated suitable for wireless broadcasting and/or communications.
Radio Frequency Identification		An RF chip used for identification.
SBC		System Basis Chip, is an integrated circuit that includes various functions of automotive electronic control units (ECU) on a single die.
Semiconductors		Generic term for devices such as transistors and integrated circuits that control the flow of electrical signals. The most common semiconductor material for use in integrated circuits is silicon.
Silicon		A type of semiconducting material used to make wafers. Silicon is widely used in the semiconductor industry as a base material.
SoC		A system on a chip or system on chip (SoC) is an integrated circuit (IC) that integrates all components of a computer or other electronic system into a single chip. It may contain digital, analog, mixed-signal, and often radio-frequency functions—all on a single chip substrate.
Solid State Lighting		A type of lighting that uses semiconductor light-emitting diodes (LEDs), organic light-emitting diodes (OLED), or polymer light-emitting diodes (PLED) as sources of illumination rather than electrical filaments, plasma or gas.
Substrate		The base material made from silicon on which an integrated circuit is printed.
TD-LTE		Time-division Long-Term Evolution (TD-LTE), is a 4G telecommunications technology and standard. It is one of two variants of the Long Term Evolution (LTE) technology standard.
TD-SCDMA		Time Division Synchronous Code Division Multiple Access (TD-SCDMA) is a 3G format of choice for the national standard of 3G mobile telecommunication in China.
Telematics		The science of sending, receiving and storing information via telecommunication devices.
Thread		An IPv6-based, low-power mesh networking technology for IoT products.
USB		Universal Serial Bus. A standard that provides a serial bus standard for connecting devices, usually to a computer.
Wafer		A disk made of a semiconducting material, such as silicon, usually either 100, 125, 150, 200 or 300 millimeters in diameter, used to form the substrate of a chip. A finished wafer may contain several thousand chips.
White goods		A term which refers to large household appliances such as refrigerators, stoves, dishwashers and other similar items.
Yield		The ratio of the number of usable products to the total number of manufactured products.
ZigBee		ZigBee is a technology of data transfer in wireless networks. It has low energy consumption and is designed for multi-channel control systems, alarm systems, and lighting control. It also has other various home and industry applications.

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

		NXP Semiconductors N.V. (Registrant)
/s/ RICHARD L. CLEMMER		/s/ PETER KELLY
Richard L. Clemmer		Peter Kelly
Chief Executive Officer (Principal Executive Officer)		Chief Financial Officer (Principal Financial and Accounting Officer)

Date: March 1, 2019

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

The following financial statements and related schedules, together with the report of independent registered public accounting firms thereon, are filed as part of this Annual Report:

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm, KPMG Accountants N.V.			F-2
Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016			F-3
Consolidated Statements of Comprehensive Income for the years ended December 31, 2018, 2017 and 2016			F-4
Consolidated Balance Sheets as of December 31, 2018 and 2017			F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016			F-6
Consolidated Statements of Changes in Equity for the years ended December 31, 2018, 2017 and 2016			F-8
Notes to the Consolidated Financial Statements			F-9

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

NXP Semiconductors N.V.:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of NXP Semiconductors N.V. and subsidiaries (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income, cash flows and changes in equity for each of the years in the three-year period ended December 31, 2018, and the related notes (collectively, the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We have served as the Company’s auditor since 2009.

/s/ KPMG Accountants N.V.
Amstelveen, the Netherlands
March 1, 2019

F-2

NXP Semiconductors N.V.

Consolidated Statements of Operations

($ in millions, unless otherwise stated)		For the years ended December 31,
		2018				2017				2016
Revenue			9,407				9,256				9,498
Cost of revenue			(4,556	)			(4,637	)			(5,429	)
Gross profit			4,851				4,619				4,069
Research and development			(1,700	)			(1,554	)			(1,560	)
Selling, general and administrative			(993	)			(1,090	)			(1,141	)
Amortization of acquisition-related intangible assets			(1,449	)			(1,448	)			(1,527	)
Other income (expense)			2,001				1,575				9
Operating income (loss)			2,710				2,102				(150	)
Financial income (expense):
Extinguishment of debt			(26	)			(41	)			(32	)
Other financial income (expense)			(309	)			(325	)			(421	)
Income (loss) before income taxes			2,375				1,736				(603	)
Benefit (provision) for income taxes			(176	)			483				851
Results relating to equity-accounted investees			59				53				11
Net income (loss)			2,258				2,272				259
Less: Net income (loss) attributable to non-controlling interests			50				57				59
Net income (loss) attributable to stockholders			2,208				2,215				200
Earnings per share data:
Net income (loss) per common share attributable to stockholders in $:
– Basic			6.78				6.54				0.59
– Diluted			6.72				6.41				0.58
Weighted average number of shares of common stock outstanding during the year (in thousands):
– Basic			325,781				338,646				338,477
– Diluted			328,606				345,802				347,607

See accompanying notes to the Consolidated Financial Statements.

F-3

NXP Semiconductors N.V.

Consolidated Statements of Comprehensive Income

($ in millions, unless otherwise stated)		For the years ended December 31,
		2018				2017				2016
Net income (loss)			2,258				2,272				259
Other comprehensive income (loss), net of tax:
Change in fair value cash flow hedges *			(11	)			10				-
Change in foreign currency translation adjustment *			(51	)			156				(124	)
Change in net actuarial gain (loss)			5				(16	)			(27	)
Change in net unrealized gains (losses) available-for-sale securities *			3				(7	)			4
Total other comprehensive income (loss)			(54	)			143				(147	)
Total comprehensive income (loss)			2,204				2,415				112
Less: Comprehensive income (loss) attributable to non-controlling interests			50				57				59
Total comprehensive income (loss) attributable to stockholders			2,154				2,358				53

*	Reclassification adjustments included in Cost of revenue, Selling, general and administrative, Research and development and Results relating to equity-accounted investees in the Consolidated Statements of Operations.

See accompanying notes to the Consolidated Financial Statements.

F-4

NXP Semiconductors N.V.

Consolidated Balance Sheets

($ in millions, unless otherwise stated)		As of December 31,
		2018				2017
Assets
Current assets:
Cash and cash equivalents			2,789				3,547
Accounts receivables, net			792				879
Inventories, net			1,279				1,236
Other current assets			365				382
Total current assets			5,225				6,044
Non-current assets:
Other non-current assets			545				981
Property, plant and equipment, net			2,436				2,295
Identified intangible assets, net			4,467				5,863
Goodwill			8,857				8,866
Total non-current assets			16,305				18,005
Total assets			21,530				24,049
Liabilities and equity
Current liabilities:
Accounts payable			999				1,146
Restructuring liabilities - current			60				74
Accrued liabilities			1,219				747
Short-term debt			1,107				751
Total current liabilities			3,385				2,718
Non-current liabilities:
Long-term debt			6,247				5,814
Restructuring liabilities			5				15
Deferred tax liabilities			450				701
Other non-current liabilities			753				1,085
Total non-current liabilities			7,455				7,615
Equity:
Non-controlling interests			185				189
Stockholders’ equity:
Preferred stock, par value €0.20 per share:
Authorized: 645,754,500 (2017: 645,754,500 shares)
Issued: none
Common stock, par value €0.20 per share:
Authorized: 430,503,000 shares (2017: 430,503,000 shares)
Issued and fully paid: 328,702,719 shares (2017: 346,002,862 shares)			67				71
Capital in excess of par value			15,460				15,960
Treasury shares, at cost: 35,913,021 shares (2017: 3,078,470 shares)			(3,238	)		(342)
Accumulated other comprehensive income (loss)			123				177
Accumulated deficit			(1,907	)			(2,339	)
Total Stockholders’ equity			10,505				13,527
Total equity			10,690				13,716
Total liabilities and equity			21,530				24,049

See accompanying notes to the Consolidated Financial Statements.

F-5

NXP Semiconductors N.V.

Consolidated Statements of Cash Flows

($ in millions, unless otherwise stated)		For the years ended December 31,
		2018				2017				2016
Cash flows from operating activities:
Net income (loss)			2,258				2,272				259
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization			1,987				2,173				2,205
Share-based compensation			314				281				338
Excess tax benefits from share-based compensation plans			-				-				(5	)
Amortization of discount on debt			42				40				34
Amortization of debt issuance costs			10				12				16
Net (gain) loss on sale of assets			-				(1,615	)			(11	)
(Gain) loss on extinguishment of debt			26				41				32
Results relating to equity-accounted investees			(54	)			(22	)			(11	)
Deferred tax expense (benefit)			(211	)			(797	)			(925	)
Changes in operating assets and liabilities:
(Increase) decrease in receivables and other current assets			187				31				(51	)
(Increase) decrease in inventories			(65	)			(120	)			568
Increase (decrease) in accounts payable and accrued liabilities			(129	)			225				(156	)
Decrease (increase) in other non-current assets			(22	)			(100	)			5
Exchange differences			14				30				15
Other items			12				(4	)			(10	)
Net cash provided by (used for) operating activities			4,369				2,447				2,303
Cash flows from investing activities:
Purchase of identified intangible assets			(50	)			(66	)			(59	)
Capital expenditures on property, plant and equipment			(611	)			(552	)			(389	)
Proceeds from disposals of property, plant and equipment			1				2				1
Purchase of interests in businesses, net of cash acquired			(18	)			-				(202	)
Proceeds from sale of interests in businesses, net of cash divested			159				2,682				20
Purchase of available-for-sale securities			(9	)			-				-
Proceeds from the sale of securities			2				-				-
Proceeds from return of equity investment			4				-				-
Other			-				6				2
Net cash provided by (used for) investing activities			(522	)			2,072				(627	)
Cash flows from financing activities:
Repayments of short-term debt			(1,000	)			-				(6	)
Proceeds from the issuance of short-term debt			1,000				-				-
Amounts drawn under the revolving credit facility			-				-				200
Repayments under the revolving credit facility			-				-				(200	)
Repurchase of long-term debt			(1,273	)			(2,728	)			(3,295	)
Principal payments on long-term debt			(1	)			(16	)			(38	)
Proceeds from the issuance of long-term debt			1,997				-				3,259
Cash paid for debt issuance costs			(23	)			-				(26	)
Cash paid for terminated acquisition adjustment event			(60	)			-				-
Dividends paid to non-controlling interests			(54	)			(89	)			(126	)
Dividends paid to common stockholders			(74	)			-				-
Cash proceeds from exercise of stock options			39				233				115
Purchase of treasury shares and restricted stock unit withholdings			(5,006	)			(286	)			(1,280	)
Cash paid on behalf of shareholders for tax on repurchased shares			(142	)			-				-
Excess tax benefits from share-based compensation plans			-				-				5
Net cash provided by (used for) financing activities			(4,597	)			(2,886	)			(1,392	)
Effect of changes in exchange rates on cash positions			(8	)			20				(4	)
Increase (decrease) in cash and cash equivalents			(758	)			1,653				280
Cash and cash equivalents at beginning of period			3,547				1,894				1,614
Cash and cash equivalents at end of period			2,789				3,547				1,894

See accompanying notes to the Consolidated Financial Statements.

F-6

NXP Semiconductors N.V.

Consolidated Statements of Cash Flows (Continued)

($ in millions, unless otherwise stated)		For the years ended December 31,
		2018				2017				2016
Supplemental disclosures to the consolidated cash flows
Net cash paid during the period for:
Interest			177				245				348
Income taxes			188				356				67
Net gain (loss) on sale of assets:
Cash proceeds from the sale of assets			-				2,688				21
Book value of these assets			-				(1,073	)			(10	)
			-				1,615				11
Non-cash adjustment related to the adoption of ASC 606:
Receivables			(36	)			-				-
Inventories			22				-				-
Non-cash investing and financing information:
Assets received in lieu of cash from the sale of businesses:
Exchange of Term Loan B for Term Loan F			-				-				1,422

See accompanying notes to the Consolidated Financial Statements.

F-7

NXP Semiconductors N.V.

Consolidated Statements of Changes in Equity

For the years ended December 31, 2018, 2017 and 2016

($ in millions, unless otherwise stated)		Outstanding number of shares (in thousands)				Common stock				Capital in excess of par value				Treasury shares at cost				Accumulated other comprehensive income (loss)				Accumulated deficit				Total stockholders’ equity				Non- controlling interests				Total equity
Balance as of December 31, 2015			342,003				68				15,150				(342	)			181				(3,542	)			11,515				288				11,803
Net income (loss)																							200				200				59				259
Other comprehensive income																			(147	)							(147	)							(147	)
Share-based compensation plans											336																336								336
Excess tax benefits from share-based compensation plans											21																21								21
Shares issued pursuant to stock awards			8,927												707								(592	)			115								115
Treasury shares and restricted stock unit withholdings			(15,538	)											(1,280	)											(1,280	)							(1,280	)
Dividends non-controlling interests																															(126	)			(126	)
Reclassification of Warrants											168																168								168
Other							3				4																7								7
Balance as of December 31, 2016			335,392				71				15,679				(915	)			34				(3,934	)			10,935				221				11,156
Net income (loss)																							2,215				2,215				57				2,272
Other comprehensive income																			143								143								143
Share-based compensation plans											281																281								281
Shares issued pursuant to stock awards			10,054												859								(626	)			233								233
Treasury shares and restricted stock unit withholdings			(2,522	)											(286	)											(286	)							(286	)
Dividends non-controlling interests																															(89	)			(89	)
Cumulative effect adjustments																							6				6								6
Balance as of December 31, 2017			342,924				71				15,960				(342	)			177				(2,339	)			13,527				189				13,716
Net income (loss)																							2,208				2,208				50				2,258
Other comprehensive income																			(57	)							(57	)							(57	)
Share-based compensation plans											311																311								311
Shares issued pursuant to stock awards			4,242												457								(418	)			39								39
Treasury shares and restricted stock unit withholdings			(37,076	)											(3,353	)											(3,353	)							(3,353	)
Treasury shares, retired			(17,300	)			(4	)			(811	)											(838	)			(1,653	)							(1,653	)
Shareholder tax on repurchased shares																							(381	)			(381	)							(381	)
Dividends non-controlling interests																															(54	)			(54	)
Dividends common stock																							(147	)			(147	)							(147	)
Cumulative effect adjustments																			3				8				11								11
Balance as of December 31, 2018			292,790				67				15,460				(3,238	)			123				(1,907	)			10,505				185				10,690

See accompanying notes to the Consolidated Financial Statements.

F-8

NXP Semiconductors N.V.

Notes to the Consolidated Financial Statements

All amounts in millions of $ unless otherwise stated

1 The Company

NXP Semiconductors N.V. (including our subsidiaries, referred to collectively herein as “NXP”, “NXP Semiconductors”, “we”, “our”, “us” and the “Company”) is a global semiconductor company incorporated in the Netherlands as a Dutch public company with limited liability (naamloze vennootschap). We provide leading High Performance Mixed Signal and, up to February 6, 2017, Standard Product solutions that leverage our deep application insight and our technology and manufacturing expertise in radio frequency, analog, power management, interface, security and digital processing products. Our product solutions are used in a wide range of application areas including: automotive, identification, wireless infrastructure, lighting, industrial, mobile, consumer, computing and software solutions for mobile phones.

On December 6, 2018, NXP B.V., together with NXP Funding LLC, issued $1 billion of 4.875% Senior Unsecured Notes due March 1, 2024, $500 million of 5.350% Senior Unsecured Notes due March 1, 2026 and $500 million of 5.550% Senior Unsecured Notes due December 1, 2028. NXP used a portion of the net proceeds from the offering of these notes to repay the Bridge Loan, as described below. NXP intends to use the remaining proceeds for general corporate purposes, which may include the repurchase of additional shares of its stock.

On September 19, 2018, NXP B.V., together with NXP Funding LLC, entered into a $1 billion senior unsecured bridge term credit facility agreement under which an aggregate principal amount of $1 billion of term loans (the “Bridge Loan”) was borrowed. The Bridge Loan was to mature on September 18, 2019 and the interest at a LIBOR rate plus an applicable margin of 1.5 percent. NXP used the net proceeds of the Bridge Loan for general corporate purposes as well as to finance a portion of its announced equity buy-back program. On December 6, 2018, the Bridge Loan was repaid in full, as described above.

On September 10, 2018, NXP announced the initiation of a Quarterly Dividend Program under which the Company will pay a regular quarterly cash dividend. Accordingly, interim dividends of $0.25 per ordinary share were paid on October 5, 2018 and January 7, 2019.

On July 26, 2018, NXP received notice from Qualcomm Incorporated (“Qualcomm”) that Qualcomm had terminated, effective immediately, the purchase agreement between NXP and an affiliate of Qualcomm following the inability to obtain the required approval for the transaction from the State Administration for Market Regulation (SAMR) of the People’s Republic of China prior to the end date stipulated by the parties under the purchase agreement.

On July 26, 2018, NXP received $2 billion in termination compensation per the terms of the purchase agreement. Effective July 26, 2018, subsequent to the termination of the Purchase Agreement, the board of directors of NXP, as authorized by its annual general meeting of shareholders on June 22, 2018 (the “June 2018 AGM”), authorized the repurchase of $5 billion of the Company’s stock. Using the same authorization by the June 2018 AGM, the Board of Directors of NXP authorized the additional repurchase of approximately 15 million shares effective November 1, 2018. As of year-end 2018, NXP repurchased 54.4 million shares, for a total of approximately $5 billion. On November 16, 2018, the Company, as authorized by its June 2018 AGM, cancelled 5% (representing 17,300,143 shares) of the issued number of NXP shares. As a result, the number of issued NXP shares as per November 16, 2018 is 328,702,719 shares.

On June 14, 2016, NXP announced an agreement to divest its Standard Products (“SP”) business to a consortium of financial investors consisting of Beijing JianGuang Asset Management Co., Ltd (“JAC Capital”) and Wise Road Capital LTD (“Wise Road Capital”). On February 6, 2017, we divested SP (subsequently named “Nexperia”), receiving $2.6 billion in cash proceeds, net of cash divested.

2 Significant Accounting Policies

The Consolidated Financial Statements include the accounts of the Company together with its consolidated subsidiaries, including NXP B.V. and all entities in which the Company holds a direct or indirect controlling interest, in such a way that the Company would have the power to direct the activities of the entity that most significantly impact the entity’s economic performance and the obligation to absorb the losses or the right to receive benefits of the entity that could be potentially significant to the Company. Investments in companies in which the Company exercises significant influence but does not control, are accounted for using the equity method. The Company’s share of the net income of these companies is included in results relating to equity-accounted investees in the Consolidated Statements of Operations.

All intercompany balances and transactions have been eliminated in the Consolidated Financial Statements. Net income (loss) includes the portion of the earnings of subsidiaries applicable to non-controlling interests. The income (loss) and equity attributable to non-controlling interests are disclosed separately in the Consolidated Statements of Operations and in the Consolidated Balance Sheets under non-controlling interests.

Certain items previously reported have been reclassified to conform to the current period presentation.

F-9

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Fair value measurements

Fair value is the price we would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. In the absence of active markets for an identical asset or liability, we develop assumptions based on market observable data and, in the absence of such data, utilize internal information that we consider to be consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. Priority is given to observable inputs. These two types of inputs form the basis for the following fair value hierarchy.

	•	Level 1: Quoted prices for identical assets or liabilities in active markets.

	•	Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and valuations based on models where the inputs or significant value drivers are observable, either directly or indirectly.

	•	Level 3: Significant inputs to the valuation model are unobservable.

Foreign currencies

The Company uses the U.S. dollar as its reporting currency. The functional currency of the holding company is the U.S. dollar. As of January 1, 2017, as a result of internal reorganizations, NXP changed the functional currency of the principal Netherlands subsidiary to the U.S. dollar. For consolidation purposes, the financial statements of the entities within the Company with a functional currency other than the U.S. dollar, are translated into U.S. dollars. Assets and liabilities are translated using the exchange rates on the applicable balance sheet dates. Income and expense items in the statements of operations, statements of comprehensive income and statements of cash flows are translated at monthly exchange rates in the periods involved.

The effects of translating the financial position and results of operations from functional currencies to reporting currency are recognized in other comprehensive income and presented as a separate component of accumulated other comprehensive income (loss) within stockholders’ equity. If the operation is a non-wholly owned subsidiary, then the relevant proportionate share of the translation difference is recorded under non-controlling interests.

The following table sets out the exchange rates for U.S. dollars into euros applicable for translation of NXP’s financial statements for the periods specified.

		$ per € 1
		period end				average(1)				high				low
2018			1.1451				1.1794				1.1352				1.2431
2017			1.1932				1.1310				1.0474				1.1932
2016			1.0474				1.1065				1.0474				1.1423

(1)	The average of the noon-buying rate at the end of each fiscal month during the period presented.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of operations, except when the foreign exchange exposure is part of a qualifying cash flow or net investment hedge accounting relationship, in which case the related foreign exchange gains and losses are recognized directly in other comprehensive income to the extent that the hedge is effective and presented as a separate component of accumulated other comprehensive income (loss) within stockholders’ equity. To the extent that the hedge is ineffective, such differences are recognized in the statement of operations. Currency gains and losses on intercompany loans that have the nature of a permanent investment are recognized as translation differences in other comprehensive income and are presented as a separate component of accumulated other comprehensive income (loss) within equity.

Derivative financial instruments including hedge accounting

The Company uses derivative financial instruments in the management of its foreign currency risks and the input costs of gold for a portion of our anticipated purchases within the next 12 months.

F-10

The Company measures all derivative financial instruments based on fair values derived from market prices of the instruments or from option pricing models, as appropriate, and records these as assets or liabilities in the balance sheet. Changes in the fair values are immediately recognized in the statement of operations unless cash flow hedge accounting is applied.

Changes in the fair value of a derivative that is highly effective and designated and qualifies as a cash flow hedge are recorded in accumulated other comprehensive income (loss), until earnings are affected by the variability in cash flows of the designated hedged item. The application of cash flow hedge accounting for foreign currency risks is limited to transactions that represent a substantial currency risk that could materially affect the financial position of the Company.

Foreign currency gains or losses arising from the translation of a financial liability designated as a hedge of a net investment in a foreign operation are recognized directly in other comprehensive income, to the extent that the hedge is effective, and are presented as a separate component of accumulated other comprehensive income (loss) within stockholders’ equity.

To the extent that a hedge is ineffective, the ineffective portion of the fair value change is recognized in the Consolidated Statements of Operations. When the hedged net investment is disposed of, the corresponding amount in the accumulated other comprehensive income is transferred to the statement of operations as part of the profit or loss on disposal.

On initial designation of the hedge relationship between the hedging instrument and hedged item, the Company documents this relationship, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Company makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk.

When cash flow hedge accounting is discontinued because it is not probable that a forecasted transaction will occur within a period of two months from the originally forecasted transaction date, the Company continues to carry the derivative on the Consolidated Balance Sheets at its fair value, and gains and losses that were accumulated in other comprehensive income are recognized immediately in earnings. In situations in which hedge accounting is discontinued, the Company continues to carry the derivative at its fair value on the Consolidated Balance Sheets, and recognizes any changes in its fair value in earnings.

The gross notional amounts of the Company’s foreign currency derivatives by currency were as follows:

		2018				2017
Euro			1,100				696
Chinese renminbi			127				132
Japanese yen			21				29
Malaysian ringgit			82				89
Singapore dollar			57				64
Swiss franc			25				34
Taiwan dollar			102				122
Thai baht			75				68
Other			51				16

Cash and cash equivalents

Cash and cash equivalents include all cash balances and short-term highly liquid investments with a maturity of three months or less at acquisition that are readily convertible into known amounts of cash. Cash and cash equivalents are stated at face value which approximates fair value.

Receivables

Receivables are carried at amortized cost, net of allowances for doubtful accounts and net of rebates and other contingent discounts granted to distributors. When circumstances indicate a specific customer’s ability to meet its financial obligation to us is impaired, we record an allowance against amounts due and value the receivable at the amount reasonably expected to be collected. For all other customers, we evaluate our trade accounts receivable for collectibility based on numerous factors including objective evidence about credit-risk concentration, collective debt risk based on average historical losses, and specific circumstances such as serious adverse economic conditions in a specific country or region.

Inventories

Inventories are stated at the lower of cost or market, less advance payments on work in progress. The cost of inventories is determined using the first-in, first-out (FIFO) method. An allowance is made for the estimated losses due to obsolescence. This allowance is determined for groups of products based on purchases in the recent past and/or expected future demand and market conditions. Abnormal amounts of idle facility expense and waste are not capitalized in inventory. The allocation of fixed production overheads to the inventory cost is based on the normal capacity of the production facilities.

F-11

Property, plant and equipment

Property, plant and equipment are stated at cost, less accumulated depreciation and impairment losses. Depreciation is calculated using the straight-line method over the expected economic life of the asset. Depreciation of special tooling is also based on the straight-line method unless a depreciation method other than the straight-line method better represents the consumption pattern. Gains and losses on the sale of property, plant and equipment are included in other income and expense. Plant and equipment under capital leases are initially recorded at the lower of the fair value of the leased property or the present value of minimum lease payments. These assets and leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the asset.

Goodwill

We record goodwill when the purchase price of an acquisition exceeds the fair value of the net tangible and identified intangible assets acquired. We assign the goodwill to our reporting units based on the relative expected fair value provided by the acquisition. We perform an annual impairment assessment in the fourth quarter of each year, or more frequently if indicators of potential impairment exist, which includes evaluating qualitative and quantitative factors to assess the likelihood of an impairment of a reporting unit’s goodwill. We perform impairment tests using a fair value approach when necessary. The reporting unit’s carrying value used in an impairment test represents the assignment of various assets and liabilities, excluding certain corporate assets and liabilities, such as cash, investments and debt.

Identified intangible assets

Licensed technology and patents are generally amortized on a straight-line basis over the periods of benefit. We amortize all acquisition-related intangible assets that are subject to amortization over their estimated useful life based on economic benefit. Acquisition-related in-process R&D assets represent the fair value of incomplete R&D projects that had not reached technological feasibility as of the date of acquisition; initially, these assets are not subject to amortization. Assets related to projects that have been completed are subject to amortization, while assets related to projects that have been abandoned are impaired and expensed to R&D. In the quarter following the period in which identified intangible assets become fully amortized, we remove the fully amortized balances from the gross asset and accumulated amortization amounts.

We perform a quarterly review of finite-lived identified intangible assets to determine whether facts and circumstances indicate that the useful live is shorter than we had originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances exist, we assess recoverability by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets. If an asset’s useful life is shorter than originally estimated, we accelerate the rate of amortization and amortize the remaining carrying value over the new shorter useful life. We perform an annual impairment assessment in the fourth quarter of each year for indefinite-lived intangible assets, or more frequently if indicators of potential impairment exist, to determine whether it is more likely than not that the carrying value of the assets may not be recoverable. If necessary, a quantitative impairment test is performed to compare the fair value of the indefinite-lived intangible asset with its carrying value. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets.

Dividends to shareholders

Dividends to the Company’s shareholders are charged to retained earnings when the dividends are approved.

Stock repurchases and retirement

For each reacquisition of common stock, the number of shares and the acquisition price for those shares is added to the existing treasury stock count and total value. When treasury shares are retired, the Company's policy is to allocate the excess of the repurchase price over the par value of shares acquired to both Retained Earnings and Capital in Excess of Par. The portion allocated to Capital in Excess of Par is calculated by applying a percentage, determined by dividing the number of shares to be retired by the number of shares issued, to the balance of Capital in Excess of Par as of the retirement date.

Research and development

Costs of research and development are expensed in the period in which they are incurred, except for in-process research and development assets acquired in business combinations, which are capitalized and, after completion, are amortized over their estimated useful lives.

Advertising

Advertising costs are expensed when incurred.

F-12

Debt issuance costs

Direct costs incurred to obtain financings are capitalized and subsequently amortized over the term of the debt using the effective interest rate method. Upon extinguishment of any related debt, any unamortized debt issuance costs are expensed immediately.

Revenue recognition

The Company recognizes revenue under the core principle to depict the transfer of control to customers in an amount reflecting the consideration the Company expects to be entitled. In order to achieve that core principle, the Company applies the following five step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.

The vast majority of the Company’s revenue is derived from the sale of semiconductor products to distributors, Original Equipment Manufacturers (“OEMs”) and similar customers. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the consideration to which the Company expects to be entitled. Variable consideration is estimated and includes the impact of discounts, price protection, product returns and distributor incentive programs. The estimate of variable consideration is dependent on a variety of factors, including contractual terms, analysis of historical data, current economic conditions, industry demand and both the current and forecasted pricing environments. The process of evaluating these factors requires estimates, including, but not limited to, forecasted demand, returns, pricing assumptions and inventory levels. The estimate of variable consideration is not constrained because the Company has extensive experience with these contracts.

Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment. In determining whether control has transferred, the Company considers if there is a present right to payment and legal title, and whether risks and rewards of ownership having transferred to the customer.

For sales to distributors, revenue is recognized upon transfer of control to the distributor. For some distributors, contractual arrangements are in place which allow these distributors to return products if certain conditions are met. These conditions generally relate to the time period during which a return is allowed and reflect customary conditions in the particular geographic market. Other return conditions relate to circumstances arising at the end of a product life cycle, when certain distributors are permitted to return products purchased during a pre-defined period after the Company has announced a product’s pending discontinuance. These return rights are a form of variable consideration and are estimated using the most likely method based on historical return rates in order to reduce revenues recognized. However, long notice periods associated with these announcements prevent significant amounts of product from being returned. For sales where return rights exist, the Company has determined, based on historical data, that only a very small percentage of the sales of this type to distributors is actually returned. Repurchase agreements with OEMs or distributors are not entered into by the Company.

Sales to most distributors are made under programs common in the semiconductor industry whereby distributors receive certain price adjustments to meet individual competitive opportunities. These programs may include credits granted to distributors, or allow distributors to return or scrap a limited amount of product in accordance with contractual terms agreed upon with the distributor, or receive price protection credits when our standard published prices are lowered from the price the distributor paid for product still in its inventory. In determining the transaction price, the Company considers the price adjustments from these programs to be variable consideration that reduce the amount of revenue recognized. The Company’s policy is to estimate such price adjustments using the most likely method based on rolling historical experience rates, as well as a prospective view of products and pricing in the distribution channel for distributors who participate in our volume rebate incentive program. We continually monitor the actual claimed allowances against our estimates, and we adjust our estimates as appropriate to reflect trends in pricing environments and inventory levels. The estimates are also adjusted when recent historical data does not represent anticipated future activity. Historically, actual price adjustments for these programs relative to those estimated have not materially differed.

Restructuring

The provision for restructuring relates to the estimated costs of initiated restructurings that have been approved by Management. When such plans require discontinuance and/or closure of lines of activities, the anticipated costs of closure or discontinuance are recorded at fair value when the liability has been incurred. The Company determines the fair value based on discounted projected cash flows in the absence of other observable inputs such as quoted prices. The restructuring liability includes the estimated cost of termination benefits provided to former or inactive employees after employment but before retirement, costs to terminate leases and other contracts, and selling costs associated with assets held for sale and other costs related to the closure of facilities. One-time employee termination benefits are recognized ratably over the future service period when those employees are required to render services to the Company, if that period exceeds 60 days or a longer legal notification period. However, generally, employee termination benefits are covered by a contract or an ongoing benefit arrangement and are recognized when it is probable that the employees will be entitled to the benefits and the amounts can be reasonably estimated.

Other income (expense)

Other income (expense) primarily consists of gains and losses related to divestment of activities and subsidiaries, as well as gains and losses related to the sale of long-lived assets and other non-core operating items.

F-13

Financial income and expense

Financial income and expense is comprised of interest income on cash and cash equivalent balances, the interest expense on borrowings, the accretion of the discount or premium on issued debt, the gain or loss on the disposal of financial assets, impairment losses on financial assets and gains or losses on hedging instruments recognized in the statement of operations.

Borrowing costs that are not directly attributable to the acquisition, construction or production of property, plant and equipment are recognized in the statement of operations using the effective interest method.

Income taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts. Measurement of deferred tax assets and liabilities is based upon the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax liabilities for income taxes or withholding taxes on dividends from subsidiaries are recognized in situations where the company does not consider the earnings indefinitely reinvested and to the extent that the withholding taxes are not expected to be refundable.

Deferred tax assets, including assets arising from loss carryforwards, are recognized, net of a valuation allowance, if based upon the available evidence it is more likely than not that the asset will be realized.

The income tax benefit from a tax position is recognized only if it is more likely than not that the tax position will be sustained upon examination by the relevant taxing authorities. The income tax benefit recognized is measured based on the largest benefit that is more than 50 percent likely to be realized upon resolution of the uncertainty. A liability for unrecognized tax benefits and the related interest and penalties is recorded under accrued liabilities and other non-current liabilities in the balance sheet based on the timing of the expected payment. Penalties related to income taxes are recorded as income tax expense, whereas interest is reported as financial expense in the statement of operations.

Postretirement benefits

The Company’s employees participate in pension and other postretirement benefit plans in many countries. The costs of pension and other postretirement benefits and related assets and liabilities with respect to the Company’s employees participating in the various plans are based upon actuarial valuations.

Some of the Company’s defined-benefit pension plans are funded with plan assets that have been segregated and restricted in a trust, foundation or insurance company to provide for the pension benefits to which the Company has committed itself.

The net liability or asset recognized in the balance sheet in respect of the postretirement plans is the present value of the projected benefit obligation less the fair value of plan assets at the balance sheet date. Most of the Company’s plans are unfunded and result in a provision or a net liability.

For the Company’s major plans, the discount rate is derived from market yields on high quality corporate bonds. Plans in countries without a deep corporate bond market use a discount rate based on the local government bond rates.

Benefit plan costs primarily represent the increase in the actuarial present value of the obligation for benefits based on employee service during the year and the interest on this obligation in respect of employee service in previous years, net of the expected return on plan assets and net of employee contributions.

Actuarial gains and losses arise mainly from changes in actuarial assumptions and differences between actuarial assumptions and what has actually occurred. They are recognized in the statement of operations, over the expected average remaining service periods of the employees only to the extent that their net cumulative amount exceeds 10% of the greater of the present value of the obligation or of the fair value of plan assets at the end of the previous year (the corridor). Events which invoke a curtailment or a settlement of a benefit plan will be recognized in our statement of operations.

In calculating obligation and expense, the Company is required to select actuarial assumptions. These assumptions include discount rate, expected long-term rate of return on plan assets, assumed health care trend rates and rates of increase in compensation costs determined based on current market conditions, historical information and consultation with and input from our actuaries. Changes in the key assumptions can have a significant impact to the projected benefit obligations, funding requirements and periodic cost incurred.

Unrecognized prior-service costs related to the plans are amortized to the statements of operations over the average remaining service period of the active employees.

Contributions to defined-contribution and multi-employer pension plans are recognized as an expense in the statements of operations as incurred.

The Company determines the fair value of plan assets based on quoted prices or comparable prices for non-quoted assets. For a defined-benefit pension plan, the benefit obligation is the projected benefit obligation; for any other postretirement defined benefit plan it is the accumulated postretirement benefit obligation.

F-14

The Company recognizes as a component of other comprehensive income, net of taxes, the gains or losses and prior service costs that arise during the year but are not recognized as a component of net periodic benefit cost. Amounts recognized in accumulated other comprehensive income, including the gains or losses and the prior services costs are adjusted as they are subsequently recognized as components of net periodic benefit costs.

For all of the Company’s postretirement benefit plans, the measurement date is December 31, our year-end.

Share-based compensation

We recognize compensation expense for all share-based awards based on the grant-date estimated fair values, net of an estimated forfeiture rate. We use the Black-Scholes option pricing model to determine the estimated fair value for certain awards. Share-based compensation cost for restricted share units (“RSU”s) with time-based vesting is measured based on the closing fair market value of our common stock on the date of the grant, reduced by the present value of the estimated expected future dividends, and then multiplied by the number of RSUs granted. Share-based compensation cost for performance-based share units (“PSU”s) granted with performance or market conditions is measured using a Monte Carlo simulation model on the date of grant.

The value of the portion of the award that is ultimately expected to vest is recognized as expense ratably over the requisite service periods in our Consolidated Statements of Operations. For stock options and RSUs, the grant-date value, less estimated pre-vest forfeitures, is expensed on a straight-line basis over the vesting period. PSUs are expensed using a graded vesting schedule. The vesting period for stock options is generally four years, for RSUs is generally three years and PSUs is one to three years.

Earnings per share

Basic earnings per share attributable to stockholders is calculated by dividing net income or loss attributable to stockholders of the Company by the weighted average number of common shares outstanding during the period.

To determine diluted share count, we apply the treasury stock method to determine the dilutive effect of outstanding stock option shares, RSUs, PSUs and Employee Stock Purchase Plan (“ESPP”) shares. Under the treasury stock method, the amount the employee must pay for exercising share-based awards and the amount of compensation cost for future service that the Company has not yet recognized are assumed to be used to repurchase shares.

Concentration of risk

Financial instruments, including derivative financial instruments, that may potentially subject NXP to concentrations of credit risk, consist principally of cash and cash equivalents, short-term investments, long-term investments, accounts receivable and forward contracts.

We sell our products to OEMs and to distributors in various markets, who resell these products to OEMs, or their subcontract manufacturers. One of our distributors accounted for 14% of our revenue in 2018, 15% in 2017 and 13% in 2016. One other distributor accounted for 10% of our revenue in 2018 and less than 10% of our revenue in 2017 and 2016. No other distributor accounted for greater than 10% of our revenue for 2018, 2017 or 2016. One OEM for which we had direct sales to accounted for 11% of our revenue in 2018, 11% in 2017 and less than 10% in 2016. No other individual OEM for which we had direct sales to accounted for more than 10% of our revenue for 2018, 2017 or 2016.

Credit exposure related to NXP’s foreign currency forward contracts is limited to the realized and unrealized gains on these contracts.

NXP is party to certain hedge transactions related to its 2019 Cash Convertible Senior Notes. NXP is subject to the risk that the counterparties to these transactions may not be able to fulfill their obligations under these hedge transactions.

NXP purchased options and issued warrants to hedge potential cash payments in excess of the principal and contractual interest related to its 2019 Cash Convertible Senior Notes, which were issued during fiscal 2014. The 2019 Cash Convertible Senior Note hedges are adjusted to fair value each reporting period and unrealized gains and losses are reflected in NXP’s Consolidated Statements of Operations. Because the fair value of the 2019 Cash Convertible Senior Notes embedded conversion derivative and the 2019 Cash Convertible Senior Notes hedges are designed to have similar offsetting values, there was no impact to NXP’s Consolidated Statements of Operations relating to these adjustments to fair value.

The Company is using outside suppliers or foundries for a portion of its manufacturing capacity.

We have operations in Europe and Asia subject to collective bargaining agreements which could pose a risk to the Company in the near term but we do not expect that our operations will be disrupted if such is the case.

F-15

Accounting standards adopted in 2018

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), as modified by subsequently issued ASUs, which supersedes all existing revenue recognition requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. The Company adopted this standard on January 1, 2018, using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018. Comparative information for prior periods has not been restated and continues to be reported under the accounting standards in effect for those periods. The cumulative effect of initially applying the new standard was recognized as a net increase of $14 million to the opening balance of retained earnings, driven from the acceleration of revenue recognition for contracts with products that have no alternative use and an enforceable right to payment for performance completed to date. We expect the impact of the adoption to be immaterial to our net income on an ongoing basis.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10). The new standard requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The new standard became effective for us on January 1, 2018. The adoption of this guidance did not have a material impact on our financial position or results of operations.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash flow, and other Topics. ASU 2016-15 became effective for us on January 1, 2018. The adoption of this guidance did not have a material impact on our statement of cash flows.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 introduces a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated as a business. ASU 2017-01 became effective for us on January 1, 2018. The adoption of this guidance did not have a material impact on our financial position or results of operations.

In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“net benefit cost”). The ASU requires that the service cost component be presented separately from the other components of net benefit cost. Services costs should be presented with other employee compensation costs within operations or capitalized in inventory or other assets in accordance to the company’s accounting policies. The other components of net benefit costs should be presented separately outside of a subtotal of income from operations, if one is presented. ASU 2017-07 became effective for us on January 1, 2018. The adoption of this guidance did not have a material impact on our financial position or results of operations.

New standards to be adopted after 2018

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. Existing sale-leaseback guidance, including guidance for real estate, is replaced with a new model applicable to both lessees and lessors. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842 Leases, and ASU 2018-11, Leases (Topic 842): Targeted Improvements. ASU 2018-11 clarifies narrow aspects of Topic 842 and is not expected to have a significant effect on entities applying Topic 842. ASU 2018-11 provides entities with an additional transition method to adopt the new leases standard. Under the new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The new standard will be effective for us on January 1, 2019, and the Company will apply the new transition method in ASU 2018-11. The Company elected the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. The most significant impact of adopting ASC 842 will relate to recording lease asset and related liabilities on our balance sheet, which the Company does not expect to have a material impact on our financial position or results of operations.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, the one step quantitative impairment test calculates goodwill impairment as the excess of the carrying value of a reporting unit over its fair value, up to the carrying value of the goodwill. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. The ASU should be applied on a prospective basis. The Company does not expect the adoption of this guidance to have a material impact on our financial position or results of operations.

F-16

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvement to Accounting for Hedging Activities. ASU 2017-12 simplifies certain aspects of hedge accounting and improves disclosures of hedging arrangements through the elimination of the requirement to separately measure and report hedge ineffectiveness. The ASU generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. Entities must apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirements must be applied prospectively. ASU 2017-12 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2018, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on our financial position or results of operations.

In August 2018, the FASB issued ASU 2018-13, Fair Value measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes certain disclosure requirements, including the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 also adds disclosure requirements, including changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2019, with early adoption permitted. The amendments on changes in unrealized gains and losses, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company does not expect the adoption of this guidance to have a material impact on our financial statement disclosures.

In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 removes disclosures that no longer are considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant. ASU 2018-14 should be applied on a retrospective basis to all periods presented and is effective for annual reporting periods beginning after December 15, 2020, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on our financial statement disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 requires a customer in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. Therefore, a customer in a hosting arrangement that is a service contract determines which project stage an implementation activity relates to. Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed as the activities are performed. ASU 2018-15 also requires the customer to expense the capitalized implementation costs over the term of the hosting arrangement, and to apply the existing impairment guidance in Subtopic 350-40 to the capitalized implementation costs as if the costs were long-lived assets. ASU 2018-15 can be applied either retrospectively or prospectively and is effective for annual reporting periods beginning after December 15, 2019, and interim periods therein, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on our financial position or results of operations.

3 Acquisitions and Divestments

2018

There were no material acquisitions during 2018. On July 10, 2018, NXP completed the sale of its 40% equity interest of Suzhou ASEN Semiconductors Co., Ltd. to J&R Holding Limited, receiving $127 million in cash proceeds. The net gain realized on the sale of $51 million is included in the Statement of Operations in the line item “Results relating to equity-accounted investees”.

In June 2018, NXP completed the sale of 24% of its equity interest in WeEn to Tianjin Ruixin Semiconductor Industry Investment Centre LLP, receiving $32 million in cash proceeds. At December 31, 2018, due to the intended sale of the remaining interest in WeEn, NXP transferred the remaining holding to other current assets.

2017

There were no material acquisitions during 2017. On April 19, 2017, we sold our shares in Advanced Semiconductor Manufacturing Corporation Ltd. (ASMC), representing a 27.47 percent ownership, for a total consideration of $54 million. The gain on the sale of $31 million is included in the Statement of Operations in the line item “Results relating to equity-accounted investees”.

On February 6, 2017, we divested our Standard Products (“SP”) business to a consortium of financial investors consisting of Beijing JianGuang Asset Management Co., Ltd (“JAC Capital”) and Wise Road Capital LTD (“Wise Road Capital”), receiving $2.6 billion in cash proceeds, net of cash divested. Prior to February 6, 2017, the results of the SP business were included in the reportable segment SP.

F-17

The gain on the sale of $1,597 million is included in the Statement of Operations in the line item “Other income (expense)” and is composed of the following:

Total cash consideration			2,750
Assets held for sale			(1,117	)
Cash divested			(138	)
Liabilities held for sale			199
Other adjustments			(69	)
Transaction costs			(28	)
Gain							1,597

2016

There were no material divestments during 2016. On August 8, 2016, we acquired a business for $200 million. The total purchase price has been allocated to goodwill ($14 million), other intangible assets ($177 million), inventories ($8 million) and tangible fixed assets ($1 million). The other intangible assets relate to core technology ($172 million) with an amortization period of 7 years and existing technology ($5 million) with an amortization period of 2 years.

4 Supplemental Financial Information

Statement of Operations Information

Disaggregation of revenue

The following table presents revenue disaggregated by sales channel:

		2018				20171)				20161)
Distributors			4,865				4,734				4,644
Original Equipment Manufacturers and Electronic Manufacturing Services			4,157				4,129				4,662
Other 2)			385				393				192
Total			9,407				9,256				9,498

1)	As noted above, prior period amounts have not been adjusted for the impact of adopting ASC 606 under the modified retrospective method.

2)	Represents revenues in Corporate and Other for other services.

Depreciation, amortization and impairment

Depreciation and amortization, including impairment charges, are as follows:

		2018				2017				2016
Depreciation of property, plant and equipment			478				611				609
Amortization of internal use software			8				21				24
Amortization of other identified intangible assets (*)			1,501				1,541				1,572
			1,987				2,173				2,205

(*)	For the period ending December 31, 2017, the amount includes IPR&D impairment charges of $23 million, of which $16 million related to assets acquired from Freescale. For the period ending December 31, 2016, the amount included impairment charges relative to IPR&D acquired as part of the acquisition of Freescale of $89 million.

Depreciation of property, plant and equipment is primarily included in cost of revenue.

Other income (expense)

		2018				2017				2016
Result on disposal of businesses			39				1,572				8
Result on disposal of properties			1				1				1
Other income (expense)			1,961				2			-
			2,001				1,575				9

F-18

Financial income (expense)

		2018				2017				2016
Interest income			48				27				11
Interest expense			(273	)			(310	)			(408	)
Total interest expense, net			(225	)			(283	)			(397	)
Net gain (loss) on extinguishment of debt			(26	)			(41	)			(32	)
Foreign exchange rate results			(14	)			(30	)			(15	)
Miscellaneous financing costs/income, net (*)			(70	)			(12	)			(9	)
Total other financial income (expense)			(110	)			(83	)			(56	)
Total			(335	)			(366	)			(453	)

(*)	For the period ending December 31, 2018, the amount includes one-time charges ($60 million) on certain financial instruments for compensation related to an adjustment event required by the termination of the Qualcomm Purchase Agreement.

Equity-accounted investees

Results related to equity-accounted investees at the end of each period were as follows:

		2018				2017				2016
Company’s share in income (loss)			7				17				11
Other results			52				36			-
			59				53				11

The total carrying value of investments in equity-accounted investees is summarized as follows:

		2018								2017
		Shareholding %				Amount				Shareholding %				Amount
ASEN		-				-					40				66
WeEn			-				-				49				65
Others							13								15
							13								146

Investments in equity-accounted investees are included in Corporate and Other.

In July 2018, we completed the sale of our 40% equity interest in Suzhou ASEN Semiconductors Co., Ltd., receiving $127 million in cash proceeds.

In June 2018, we completed the sale of 24% of our equity interest in WeEn, receiving $32 million in cash proceeds. At December 31, 2018, due to the intended sale of the remaining interest in WeEn, NXP transferred the remaining holding to other current assets.

On April 19, 2017, we sold our shares in Advanced Semiconductor Manufacturing Corporation Ltd. (ASMC), representing a 27.47 percent ownership, for a total consideration of $54 million. The gain on the sale of $31 million is included in the Statement of Operations in the line item “Results relating to equity-accounted investees”.

Balance Sheet Information

Cash and cash equivalents

At December 31, 2018 and December 31, 2017, our cash balance was $2,789 million and $3,547 million, respectively, of which $140 million and $250 million was held by SSMC, our consolidated joint venture company with TSMC. Under the terms of our joint venture agreement with TSMC, a portion of this cash can be distributed by way of a dividend to us, but 38.8% of the dividend will be paid to our joint venture partner. During 2018, a dividend of $139 million (2017: $228 million) has been paid by SSMC.

5 Restructuring Charges

At each reporting date, we evaluate our restructuring liabilities, which consist primarily of termination benefits, to ensure that our accruals are still appropriate. During 2018 and 2017, there were no new restructuring programs.

During 2016, we recognized $52 million of employee severance costs in our restructuring liabilities, which was primarily related to specific targeted actions.

F-19

The following table presents the changes in the position of restructuring liabilities in 2018 by segment:

		Balance January 1, 2018				Additions				Utilized				Released				Other changes(1)				Balance December 31, 2018
HPMS			86				5				(25	)			-				(4	)			62
Corporate and Other			3				-				-				-				-				3
			89				5				(25	)			-				(4	)			65

(1)	Other changes primarily related to translation differences and internal transfers.

The total restructuring liability as of December 31, 2018 of $65 million is classified in the balance sheet under current liabilities ($60 million) and non-current liabilities ($5 million).

The utilization of the restructuring liabilities mainly reflects the execution of ongoing restructuring programs the Company initiated in earlier years.

The following table presents the changes in the position of restructuring liabilities in 2017 by segment:

		Balance January 1, 2017				Additions				Utilized				Released				Other changes(1)				Balance December 31, 2017
HPMS			148				7				(65	)			(16	)			12				86
SP			3			-				-				-					(3	)		-
Corporate and Other		-				-				-				-					3				3
			151				7				(65	)			(16	)			12				89

(1)	Other changes primarily related to translation differences and internal transfers.

The total restructuring liability as of December 31, 2017 of $89 million is classified in the balance sheet under current liabilities ($74 million) and non-current liabilities ($15 million).

The utilization of the restructuring liabilities mainly reflects the execution of ongoing restructuring programs the Company initiated in earlier years.

The components of restructuring charges less releases recorded in the liabilities in 2018, 2017 and 2016 are as follows:

		2018				2017				2016
Personnel lay-off costs			4				7				52
Other exit costs			2				10				19
Release of provisions/accruals			-				(16	)			(3	)
Net restructuring charges			6				1				68

The restructuring charges less releases recorded in operating income are included in the following line items in the statement of operations:

		2018				2017				2016
Cost of revenue			-				3				18
Selling, general and administrative			7				10				9
Research & development			-				(12	)			41
Other income (expense)			(1	)			-				-
Net restructuring charges			6				1				68

6 Income Taxes

In 2018, NXP generated income before income taxes of $2,375 million (2017: income of $1,736 million; 2016: loss of $603 million). The components of income (loss) before income taxes are as follows:

		2018				2017				2016
Netherlands			2,570				1,679				537
Foreign			(195	)			57				(1,140	)
			2,375				1,736				(603	)

F-20

The components of the benefit (expense) for income taxes are as follows:

		2018				2017				2016
Current taxes:
Netherlands			(296	)			(179	)			(7	)
Foreign			(91	)			(135	)			(67	)
			(387	)			(314	)			(74	)
Deferred taxes:
Netherlands			2				(259	)			205
Foreign			209				1,056				720
			211				797				925
Total benefit (expense) for income taxes			(176	)			483				851

A reconciliation of the statutory income tax rate in the Netherlands as a percentage of income (loss) before income taxes and the effective income tax rate is as follows:

(in percentages)		2018				2017				2016
Statutory income tax in the Netherlands			25.0				25.0				25.0
Rate differential local statutory rates versus statutory rate of the Netherlands			0.8				(4.5	)			24.2
Net change in valuation allowance			0.4				1.1				72.6
Non-deductible expenses/losses			2.7				2.2				(7.0	)
Sale of non-deductible goodwill			-				3.8			-
The U.S. Tax Cuts and Jobs Act			(0.1	)	1)		(42.3	)		-
Tax on gains related to internal corporate reorganization transaction		-				-					(10.3	)
Netherlands tax incentives			(10.6	)			(7.5	)			17.9
Foreign tax incentives			(3.7	)			(4.7	)			13.0
Adjustments of prior years' income taxes			(3.5	)			(0.3	)			0.1
Other differences			(3.6	)			(0.6	)			5.6
Effective tax rate			7.4	%			(27.8	%)			141.1	%
1) This is only relating to the 2017 income tax provision.

We recorded an income tax expense of $176 million in 2018, which reflects an effective tax rate of 7.4% compared to a benefit of $483 million (27.8%) in 2017. The effective tax rate reflects the impact of tax incentives, a portion of our earnings being taxed in foreign jurisdictions at rates different than the Netherlands statutory tax rate, adjustments of prior years’ income taxes and the mix of income and losses in various jurisdictions. The impact of these items results in offsetting factors that attribute to the change in the effective tax rate between the two periods, with the significant drivers outlined below:

	•	The U.S. Tax Cuts and Jobs Act is the primary driver for the change between the two periods as a result of the one-time benefit of $734 million we received in 2017, which only had an impact of an additional income tax benefit of $3 million in 2018.

	•	The Netherlands tax incentives increased in 2018 due to the fact that NXP reached an agreement with the Dutch tax authorities relative to the application of the Dutch innovation box regime to the taxable income attributable to the Netherlands. In addition to this, in 2018, NXP received a break-up fee from Qualcomm of $2,000 million which helped drive a higher income before tax in 2018 than in 2017, even though in 2017 NXP had realized a gain of $1,597 million on the divestment of SP business.

	•	The adjustments to prior years’ income taxes increased in 2018 as a result of the aforementioned agreement which is effective from January 1, 2017. As such, the Company was able to refine its estimate of the Dutch tax liability, recognizing an additional income tax benefit of $67 million in 2018.

	•	The other differences in 2018 relate primarily to a tax benefit on the liquidation of a former investment of $45 million.

On December 22, 2017, the President of the United States signed into law what is informally called the Tax Cuts and Jobs Act, a comprehensive U.S. tax reform package that was effective January 1, 2018. Under the accounting rules, companies are required to recognize the effects of changes in tax laws and tax rates on deferred tax assets and liabilities in the period in which the new legislation is enacted. The effects of the Tax Cuts and Jobs Act on NXP’s 2017 Financial Statements was an income tax benefit of $734 million. In Q4 2018, the analysis of the enactment date impact of the Tax Cuts and Jobs Act was finalized. Accordingly, an additional income tax benefit of $3 million was recorded in the year ended December 31, 2018.

F-21

The Company benefits from income tax holidays in certain jurisdictions which provide that we pay reduced income taxes in those jurisdictions for a fixed period of time that varies depending on the jurisdiction. The predominant income tax holiday is expected to expire at the end of 2026. The impact of this tax holiday decreased foreign income taxes by $21 million in 2018 (2017: $23 million; 2016: $24 million). The benefit of this tax holiday on net income per share (diluted) was $0.06 in 2018 (2017: $0.07; 2016: $0.07).

Deferred tax assets and liabilities

The principal components of deferred tax assets and liabilities are presented below:

		2018				2017
Operating loss and tax credit carryforwards			598				621
Disallowed interest carryforwards			117				156
Other accrued liabilities			83				100
Pensions			83				93
Share-based compensation			18				25
Restructuring liabilities			12				16
Receivables			83				71
Inventories			2				3
Other assets			2				2
Total Gross Deferred Tax Assets			998				1,087
Valuation Allowance			(145	)			(140	)
Total Net Deferred Tax Assets			853				947
Intangible assets (including purchase accounting basis difference)			(867	)			(1,161	)
Undistributed earnings of foreign subsidiaries			(96	)			(109	)
Property, plant and equipment (including purchase accounting basis difference)			(47	)			(54	)
Total Deferred Tax Liabilities			(1,010	)			(1,324	)
Net Deferred Tax Position			(157	)			(377	)

The classification of the deferred tax assets and liabilities in the Company’s Consolidated Balance Sheets is as follows:

		2018				2017
Deferred tax assets within other non-current assets			293				324
Deferred tax liabilities within non-current liabilities			(450	)			(701	)
			(157	)			(377	)

The Company has significant deferred tax assets resulting from net operating loss carryforwards, tax credit carryforwards and deductible temporary differences that may reduce taxable income or income taxes payable in future periods. Valuation allowances have been established for deferred tax assets based on a “more likely than not” threshold. The realization of our deferred tax assets depends on our ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. The valuation allowance increased by $5 million during 2018 (2017: $13 million increase).

We consider all available evidence in forming a judgement regarding the valuation allowance as of December 31, 2018, including events that occur subsequent to year end but prior to the issuance of the financial statements. The deferred tax assets are recognized to the extent that we consider it more likely than not that these assets will be realized. In making such a determination, we consider all available positive and negative evidence, including reversal of existing temporary differences, projected future taxable income and tax planning strategies.

At December 31, 2018 tax loss carryforwards of $795 million (inclusive of $228 million of U.S. state tax losses) will expire as follows:

		Balance		Scheduled expiration
		December 31,
		2018		2019		2020		2021		2022		2023		2024-2028		later		unlimited
Tax loss carryforwards		795		22		6		1		16		3		129		181		437

The Company also has tax credit carryforwards of $571 million (excluding the effect of unrecognized tax benefits), which are available to offset future tax, if any, and which will expire as follows:

		Balance		Scheduled expiration
		December 31,
		2018		2019		2020		2021		2022		2023		2024-2028		later		unlimited
Tax credit carryforwards		571		12		16		1		11		10		186		281		54

F-22

The net income tax payable (excluding the liability for unrecognized tax benefits) as of December 31, 2018 amounted to $154 million (2017: net income tax receivable of $59 million) and includes amounts directly receivable from or payable to tax authorities.

The Company does not indefinitely reinvest the undistributed earnings of its subsidiaries. Consequently, the Company has recognized a deferred tax liability of $96 million at December 31, 2018 (2017: $109 million) for the additional income taxes and withholding taxes payable upon the future remittances of these earnings of foreign subsidiaries.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

		2018				2017				2016
Balance as of January 1,			177				146				149
Translation differences			(4	)			4				1
Decreases from activities which are held for sale			-				-				(7	)
Increases from tax positions taken during prior periods			7				19				1
Decreases from tax positions taken during prior periods			(17	)			-				(3	)
Increases from tax positions taken during current period			7				10				9
Decreases relating to settlements with the tax authorities			(5	)			(2	)			(4	)
Balance as of December 31,			165				177				146

Of the total unrecognized tax benefits at December 31, 2018, $138 million, if recognized, would impact the effective tax rate. All other unrecognized tax benefits, if recognized, would not affect the effective tax rate as these would be offset by compensating adjustments in the Company’s deferred tax assets that would be subject to valuation allowance based on conditions existing at the reporting date.

The Company classifies interest related to an underpayment of income taxes as financial expense and penalties as income tax expense. The total related interest and penalties recorded during the year 2018 amounted to a $3 million benefit (expense 2017: $6 million; 2016: $2 million). As of December 31, 2018 the Company has recognized a liability for related interest and penalties of $14 million (2017: $17 million; 2016: $12 million). It is reasonably possible that the total amount of unrecognized tax benefits may significantly increase/decrease within the next 12 months of the reporting date due to, for example, completion of tax examinations. It is estimated that this reasonably possible change will not be significant.

The Company files income tax returns in the Netherlands, the U.S.A. and in various other foreign jurisdictions. Tax filings of our subsidiaries are routinely audited in the normal course of business by tax authorities around the world. Tax years that remain subject to examination by major tax jurisdictions: the Netherlands (2015-2017), Germany (2004-2017), USA (2005-2017), China (2008-2017), Taiwan (2013-2017), Thailand (2013-2017), Malaysia (2011-2017) and India (2004-2017).

7 Earnings per Share

The computation of earnings per share (EPS) is presented in the following table:

		2018				2017				2016
Net income (loss)			2,258				2,272				259
Less: Net income (loss) attributable to non-controlling interests			50				57				59
Net income (loss) attributable to stockholders			2,208				2,215				200
Weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands)			325,781				338,646				338,477
Plus incremental shares from assumed conversion of:
Options 1)			1,145				4,517				5,582
Restricted Share Units, Performance Share Units and Equity Rights 2)			1,680			2,639				3,548
Warrants 3)			-				-				-
Dilutive potential common share			2,825				7,156				9,130
Adjusted weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands) 1)			328,606			345,802				347,607
EPS attributable to stockholders in $:
Basic net income (loss)		6.78					6.54				0.59
Diluted net income (loss)		6.72					6.41				0.58

1)	Stock options to purchase up to 0.1 million shares of NXP’s common stock that were outstanding in 2018 (2017: 0.1 million shares; 2016: 1.4 million shares) were anti-dilutive and were not included in the computation of diluted EPS because the exercise price was greater than the average fair market value of the common stock or the number of shares assumed to be repurchased using the

F-23

	proceeds of unrecognized compensation expense and exercise prices was greater than the weighted average number of shares underlying outstanding stock options.

2)

Unvested RSU’s, PSU’s and equity rights of 0.9 million shares that were outstanding in 2018 (2017: 0.7 million shares; 2016: 0.9 million shares) were anti-dilutive and were not included in the computation of diluted EPS because the number of shares assumed to be repurchased using the proceeds of unrecognized compensation expense was greater than the weighted average number of outstanding unvested RSU’s, PSU’s and equity rights or the performance goal has not been met.

3)

Warrants to purchase up to 11.2 million shares of NXP’s common stock at a price of $132.55 per share were outstanding in 2018 (2017: 11.2 million shares at a price of $133.32; 2016: 11.2 million shares at a price of $133.32). Upon exercise, the warrants will be net share settled. At the end of 2018, 2017 and 2016, the warrants were not included in the computation of diluted EPS because the warrants’ exercise price was greater than the average fair market value of the common shares.

8 Share-based Compensation

Share-based compensation expense is included in the following line items in our statement of operations:

		2018				2017				2016
Cost of revenue			40				33				49
Research and development			133				122				123
Selling, general and administrative			141				126				166
			314				281				338

The income tax (expense) benefit recognized in net income related to share-based compensation expenses was $27 million (includes $4 million of excess tax benefits), $51 million (includes $27 million of excess tax benefits) and $58 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Long Term Incentive Plans (LTIP’s)

The LTIP was introduced in 2010 and is a broad-based long-term retention program to attract, retain and motivate talented employees as well as align stockholder and employee interests. The LTIP provides share-based compensation (“awards”) to both our eligible employees and non-employee directors. Awards that may be granted include performance shares, stock options and restricted shares. On July 26, 2018, the Company granted PSU awards to certain executives of the Company with a performance measure of Relative Total Shareholder Return (“Relative TSR”). Each PSU, which cliff vests on the third anniversary of the date of grant, entitles the grant recipient to receive from 0 to 2 common shares for each of the target units awarded based on the Relative TSR of the Company's share price as compared to a set of peer companies. The Company estimates the fair value of the PSUs using a Monte Carlo valuation model, utilizing assumptions underlying the Black-Scholes methodology. The grant date fair value was $121.37 per PSU. The fair value of the PSUs is recognized as compensation cost over the service period of 3 years. Awards granted generally will become fully vested upon a termination event occurring within one year following a change in control, as defined. A termination event is defined as either termination of employment or services other than for cause or constructive termination of resulting from a significant reduction in either the nature or scope of duties and responsibilities, a reduction in compensation or a required relocation. The number of shares authorized and available for awards at December 31, 2018 was 2.5 million.

A charge of $307 million was recorded in 2018 for the LTIP (2017: $272 million; 2016: $331 million).

A summary of the activity for our LTIP’s during 2018 is presented below.

Stock options

The options have a strike price equal to the closing share price on the grant date. The fair value of the options has been calculated using the Black-Scholes formula, using the following assumptions:

	•	an expected life varying from 5.76 to 6.25 years, calculated in accordance with the guidance provided in SEC Staff bulletin No. 110 for plain vanilla options using the simplified method, since our equity shares have been publicly traded for only a limited period of time and we do not have sufficient historical exercise data at the grant date of the options;

	•	a risk-free interest rate varying from 0.8% to 2.1% (2017: 0.8% to 2.8%; 2016: 0.8% to 2.8%);

	•	no expected dividend payments; and

	•	a volatility of 40-50% based on the volatility of a set of peer companies. Peer company data has been used given the short period of time our shares have been publicly traded.

F-24

Above assumptions were valid at the moment NXP granted option. Changes in the assumptions can materially affect the fair value estimate.

		Stock options				Weighted average exercise price in USD				Weighted average remaining contractual term				Aggregate intrinsic value
Outstanding at January 1, 2018			2,981,033				48.39
Granted			-				-
Exercised			803,391				37.13
Forfeited			73,554				73.43
Outstanding at December 31, 2018			2,104,088				51.81				4.7				49
Exercisable at December 31, 2018			1,583,001				43.14				4.1				48

No options were granted in 2018 and 2017; the weighted average per share grant date fair value of stock options granted in 2016: $34.59.

The intrinsic value of the exercised options was $59 million (2017: $311 million; 2016: $145 million), whereas the amount received by NXP was $30 million (2017: $137 million; 2016: $88 million). The tax benefit realized from stock options exercised during fiscal 2018, 2017, and 2016 was $34 million, $83 million, and $79 million, respectively.

At December 31, 2018, there was a total of $7 million (2017: $25 million) of unrecognized compensation cost related to non-vested stock options. This cost is expected to be recognized over a weighted-average period of 0.8 years (2017: 1.2 years).

Performance share units

Financial performance conditions

		Shares				Weighted average grant date fair value in USD
Outstanding at January 1, 2018			282,938				74.31
Granted			-				-
Vested			41,335				63.53
Forfeited			19,107				86.36
Outstanding at December 31, 2018			222,496				75.28

In 2018, the weighted average grant date fair value of performance share units granted was $121.18 (2017: no PSU’s granted; 2016: $82.53).

Market performance conditions

		Shares				Weighted average grant date fair value in USD
Outstanding at January 1, 2018			37,791				40.28
Granted			1,484,882				121.18
Vested			37,791				40.28
Forfeited			5,896				121.37
Outstanding at December 31, 2018			1,478,986				121.18

The fair value of the performance share units at the time of vesting was $6 million (2017: $39 million; 2016: $147 million).

At December 31, 2018, there was a total of $143 million (2017: $4 million; 2016: $12 million) of unrecognized compensation cost related to non-vested performance share units. This cost is expected to be recognized over a weighted-average period of 2.6 years (2017: 1.3 years; 2016: 1.8 years).

Restricted share units

		Shares				Weighted average grant date fair value in USD
Outstanding at January 1, 2018			6,411,610				101.13
Granted			3,552,823				84.77
Vested			3,083,601				95.61
Forfeited			369,268				102.84
Outstanding at December 31, 2018			6,511,564				94.73

F-25

The weighted average grant date fair value of restricted share units granted in 2018 was $84.77 (2017: $115.05; 2016: $98.16). The fair value of the restricted share units at the time of vesting was $263 million (2017: $328 million; 2016: $334 million).

At December 31, 2018, there was a total of $484 million (2017: $483 million; 2016: $422 million) of unrecognized compensation cost related to non-vested restricted share units. This cost is expected to be recognized over a weighted-average period of 1.5 years (2017: 1.6 years; 2016: 1.6 years).

Management Equity Stock Option Plan (“MEP”)

Awards are no longer available under these plans. Current employees who owned vested MEP Options could have exercised such MEP Options during the five-year period subsequent to September 18, 2013, subject to these employees remaining employed by us and subject to the applicable laws and regulations.

No charge was recorded in 2018, 2017 and 2016 for options granted under the MEP.

The following table summarizes the information about changes during 2018 regarding NXP’s MEP Options.

Stock options

		Stock options				Weighted average exercise price in EUR
Outstanding at January 1, 2018			231,924				35.72
Granted			-				-
Exercised			231,924				35.72
Forfeited			-				-
Expired			-				-
Outstanding at December 31, 2018			-				-

The intrinsic value of exercised options was $16 million (2017: $206 million; 2016: $13 million), whereas the amount received by NXP was $9 million (2017: $60 million; 2016: $7 million).

At December 31, 2018, there were no options outstanding (2017: 231,924 vested options with a weighted average exercise price of €35.72; 2016: 2,534,272 vested options with a weighted average exercise price of €23.67).

9 Accounts Receivable, net

Accounts receivable, net are summarized as follows:

		2018				2017
Accounts receivable from third parties			795				882
Allowance for doubtful accounts			(3	)			(3	)
			792				879

The following table presents accounts receivable, net disaggregated by sales channel:

		2018				2017
Distributors			93				150
Original Equipment Manufacturers and Electronic Manufacturing Services			651				632
Other 1)			48				97
			792				879

	1)	Represents accounts receivable, net in Corporate and Other for other services.

10 Inventories, net

Inventories are summarized as follows:

		2018				2017
Raw materials			74				62
Work in process			949				901
Finished goods			256				273
			1,279				1,236

F-26

The portion of finished goods stored at customer locations under consignment amounted to $52 million as of December 31, 2018 (2017: $69 million).

The amounts recorded above are net of an allowance for obsolescence of $111 million as of December 31, 2018 (2017: $107 million).

11 Property, Plant and Equipment, net

The following table presents details of the Company’s property, plant and equipment, net of accumulated depreciation:

		Useful Life (in years)		2018				2017
Land					165				166
Buildings		9 to 50			1,246				1,200
Machinery and installations		2 to 10			3,509				3,179
Other Equipment		1 to 5			537				453
Prepayments and construction in progress					278				172
					5,735				5,170
Less accumulated depreciation					(3,299	)			(2,875	)
Property, plant and equipment, net of accumulated depreciation					2,436				2,295

Land with a book value of $165 million (2017: $166 million) is not depreciated.

There was no significant construction in progress and therefore no related capitalized interest.

12 Identified Intangible Assets

The changes in identified intangible assets were as follows:

		Total
Balance as of January 1, 2017:
Cost			9,512
Accumulated amortization/impairment			(2,169	)
Book value			7,343
Changes in book value:
Acquisitions/additions			78
Amortization			(1,539	)
Impairment			(23	)
Translation differences			4
Total changes			(1,480	)
Balance as of December 31, 2017:
Cost			9,335
Accumulated amortization/impairment			(3,472	)
Book value			5,863
Changes in book value:
Acquisitions/additions			114
Amortization			(1,509	)
Translation differences			(1	)
Total changes			(1,396	)
Balance as of December 31, 2018:
Cost			9,183
Accumulated amortization/impairment			(4,716	)
Book value			4,467

F-27

Identified intangible assets as of December 31, 2018 and 2017 respectively were composed of the following:

		December 31, 2018								December 31, 2017
		Gross carrying amount				Accumulated amortization				Gross carrying amount				Accumulated amortization
IPR&D 1)			276				-				687				-
Marketing-related			81				(50	)			82				(34	)
Customer-related			964				(301	)			1,155				(437	)
Technology-based			7,862				(4,365	)			7,411				(3,001	)
Identified intangible assets			9,183				(4,716	)			9,335				(3,472	)

1)	IPR&D is not subject to amortization until completion or abandonment of the associated research and development effort.

The estimated amortization expense for these identified intangible assets, excluding software, for each of the five succeeding years is:

2019			1,533
2020			1,308
2021			504
2022			418
2023			230

All intangible assets, excluding IPR&D and goodwill, are subject to amortization and have no assumed residual value.

The expected weighted average remaining life of identified intangibles is 4 years as of December 31, 2018.

13 Goodwill

The changes in goodwill in 2018 and 2017 were as follows:

		2018				2017
Balances as of January 1
Cost			9,020				9,029
Accumulated impairment			(154	)			(186	)
Book value			8,866				8,843
Changes in book value:
Acquisitions			11				-
Purchase accounting and other adjustments related to Freescale acquisition			-				(28	)
Translation differences			(20	)			51
Total changes			(9	)			23
Balances as of December 31
Cost			8,971				9,020
Accumulated impairment			(114	)			(154	)
Book value			8,857				8,866

No goodwill impairment charges were required to be recognized in 2018 or 2017.

The fair value of the reporting units substantially exceeds the carrying value of the reporting units.

See note 22, “Segments and Geographical Information”, for goodwill by segment and note 3, “Acquisitions and Divestments”.

14 Postretirement Benefit Plans

Pensions

Our employees participate in employee pension plans in accordance with the legal requirements, customs and the local situation in the respective countries. These are defined-benefit pension plans, defined-contribution plans and multi-employer plans.

The Company’s employees in The Netherlands participate in a multi-employer plan, implemented for the employees of the Metal and Electrical Engineering Industry (“Bedrijfstakpensioenfonds Metalektro or PME”) in accordance with the mandatory affiliation to PME effective for the industry in which NXP operates. As this affiliation is a legal requirement for the Metal and Electrical Engineering Industry it has no expiration date. This PME multi-employer plan (a career average plan) covers 1,376 companies and 625,000 participants. The plan monitors its risk on an aggregate basis, not by company or participant and can therefore not be accounted for as a defined benefit plan. The pension fund rules state that the only obligation for affiliated companies will be to pay the annual plan

F-28

contributions. There is no obligation for affiliated companies to fund plan deficits. Affiliated companies are also not entitled to any possible surpluses in the pension fund.

Every participating company contributes the same fixed percentage of its total pension base, being pensionable salary minus an individual offset. The Company’s pension cost for any period is the amount of contributions due for that period.

The contribution rate for the mandatory scheme will decrease from 25.35% (2018) to 25.02% (2019).

PME multi-employer plan		2018				2017				2016
NXP’s contributions to the plan		34					35				36
(including employees’ contributions)		4					4				4
Average number of NXP’s active employees participating in the plan			2,183				2,271				2,415
NXP’s contribution to the plan exceeded more than 5 percent of the total contribution (as of December 31 of the plan’s year end)		No				No				No

The amount for pension costs included in the statement of operations for the year 2018 was $105 million (2017: $97 million; 2016: $102 million) of which $49 million (2017: $42 million; 2016: $44 million) represents defined-contribution plans and $30 million (2017: $31 million; 2016: $32 million) represents the PME multi-employer plans.

Defined-benefit plans

The benefits provided by defined-benefit plans are based on employees’ years of service and compensation levels. Contributions are made by the Company, as necessary, to provide assets sufficient to meet the benefits payable to defined-benefit pension plan participants.

F-29

These contributions are determined based upon various factors, including funded status, legal and tax considerations as well as local customs. The Company funds certain defined-benefit pension plans as claims are incurred.

The total cost of defined-benefit plans amounted to a cost of $26 million in 2018 (2017: a benefit of $1 million; 2016: a cost of $26 million) consisting of $26 million ongoing cost (2017: $24 million; 2016: $27 million and in 2017 a gain of $25 million from special events resulting from restructurings, divestments, curtailments and settlements; 2016: $1 million).

The table below provides a summary of the changes in the pension benefit obligations and defined-benefit pension plan assets for 2018 and 2017, associated with the Company’s dedicated plans, and a reconciliation of the funded status of these plans to the amounts recognized in the Consolidated Balance Sheets.

		2018				2017
Projected benefit obligation
Projected benefit obligation at beginning of year			651				564
Service cost			16				15
Interest cost			12				11
Actuarial (gains) and losses			(12	)			15
Curtailments and settlements			-				(1	)
Benefits paid			(31	)			(22	)
Exchange rate differences			(19	)			69
Projected benefit obligation at end of year			617				651
Plan assets
Fair value of plan assets at beginning of year			195				172
Actual return on plan assets			4				8
Employer contributions			38				18
Curtailments and settlements			-				(1	)
Benefits paid			(31	)			(21	)
Exchange rate differences			(5	)			19
Fair value of plan assets at end of year			201				195
Funded status			(416	)			(456	)
Classification of the funded status is as follows
– Accrued pension cost within other non-current liabilities			(407	)			(443	)
– Accrued pension cost within accrued liabilities			(9	)			(13	)
Total			(416	)			(456	)
Accumulated benefit obligation
Accumulated benefit obligation for all Company-dedicated benefit pension plans			578				613
Plans with assets less than accumulated benefit obligation
Funded plans with assets less than accumulated benefit obligation
– Fair value of plan assets			197				190
– Accumulated benefit obligations			348				375
– Projected benefit obligations			376				401
Unfunded plans
– Accumulated benefit obligations			226				233
– Projected benefit obligations			236				243
Amounts recognized in accumulated other comprehensive income (before tax)
Total AOCI at beginning of year			113				91
– Net actuarial loss (gain)			(16	)			9
– Exchange rate differences			(3	)			13
Total AOCI at end of year			94				113

The weighted average assumptions used to calculate the projected benefit obligations were as follows:

		2018				2017
Discount rate			2.0	%			1.9	%
Rate of compensation increase			1.8	%			1.8	%

F-30

The weighted average assumptions used to calculate the net periodic pension cost were as follows:

		2018				2017				2016
Discount rate			1.9	%			2.0	%			2.5	%
Expected returns on plan assets			3.0	%			3.1	%			3.5	%
Rate of compensation increase			1.8	%			1.9	%			2.2	%

For the Company’s major plans, the discount rate used is based on high quality corporate bonds (iBoxx Corporate Euro AA 10+).

Plans in countries without a deep corporate bond market use a discount rate based on the local sovereign rate and the plans maturity (Bloomberg Government Bond Yields).

Expected returns per asset class are based on the assumption that asset valuations tend to return to their respective long-term equilibria. The Expected Return on Assets for any funded plan equals the average of the expected returns per asset class weighted by their portfolio weights in accordance with the fund’s strategic asset allocation.

The components of net periodic pension costs were as follows:

		2018				2017				2016
Service cost			16				15				17
Interest cost on the projected benefit obligation			12				11				14
Expected return on plan assets			(6	)			(6	)			(6	)
Amortization of net (gain) loss			4				4				2
Curtailments & settlements			-				(25	)			(1	)
Net periodic cost			26				(1	)			26

A sensitivity analysis shows that if the discount rate increases by 1% from the level of December 31, 2018, with all other variables held constant, the net periodic pension cost would decrease by $3 million. If the discount rate decreases by 1% from the level of December 31, 2018, with all other variables held constant, the net periodic pension cost would increase by $3 million.

The estimated net actuarial loss (gain) and prior service cost that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next year (2019) are $3 million and nil respectively.

Plan assets

The actual pension plan asset allocation at December 31, 2018 and 2017 is as follows:

		2018				2017
Asset category:
Equity securities			33	%			32	%
Debt securities			44	%			47	%
Insurance contracts			7	%			7	%
Other			16	%			14	%
			100	%			100	%

We met our target plan asset allocation. The investment objectives for the pension plan assets are designed to generate returns that, along with the future contributions, will enable the pension plans to meet their future obligations. The investments in our major defined benefit plans largely consist of government bonds, “Level 2” Corporate Bonds and cash to mitigate the risk of interest fluctuations. The asset mix of equity, bonds, cash and other categories is evaluated by an asset-liability modeling study for our largest plan. The assets of funded plans in other countries mostly have a large proportion of fixed income securities with return characteristics that are aligned with changes in the liabilities caused by discount rate volatility. Total pension plan assets of $201 million include $179 million related to the German and Japanese pension funds.

The following table summarizes the classification of these assets.

		2018												2017
		Level I				Level II				Level III				Level I				Level II				Level III
Equity securities			-				63				-				-				62				-
Debt securities			9				64				-				10				72				-
Insurance contracts			-				14				-				-				13				-
Other			1				16				12				2				16				8
			10				157				12				12				163				8

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The Company currently expects to make $12 million of employer contributions to defined-benefit pension plans and $8 million of expected cash payments in relation to unfunded pension plans.

Estimated future pension benefit payments

The following benefit payments are expected to be made (including those for funded plans):

2019		21
2020		18
2021		19
2022		23
2023		23
Years 2024-2028		137

Postretirement health care benefits

In addition to providing pension benefits, NXP provides retiree healthcare benefits in the US which are accounted for as defined-benefit plans. In 2016, NXP also provided retiree healthcare benefits in the U.K. The liability associated with the U.K. benefits was divested in association with the sale of Standard Products during 2017.

The accumulated postretirement benefit obligation at the end of 2018 equals $11 million (2017: $14 million).

15 Debt

Short-term debt

		2018				2017
Short-term bank borrowings			-			-
Current portion of long-term debt (*)			1,107				751
Total			1,107				751

(*)	Net of adjustment for debt issuance costs.

Long-term debt

The following table summarizes the outstanding long-term debt as of December 31, 2018 and 2017:

				2018								2017
		Maturities		Amount				Effective rate				Amount				Effective rate
Fixed-rate 3.75% senior unsecured notes		Jun, 2018		-					3.750				750				3.750
Fixed-rate 4.125% senior unsecured notes		Jun, 2020			600				4.125				600				4.125
Fixed-rate 4.125% senior unsecured notes		Jun, 2021			1,350				4.125				1,350				4.125
Fixed-rate 4.625% senior unsecured notes		Jun, 2022			400				4.625				400				4.625
Fixed-rate 3.875% senior unsecured notes		Sep, 2022			1,000				3.875				1,000				3.875
Fixed-rate 5.75% senior unsecured notes		Mar, 2023		-					5.750				500				5.750
Fixed-rate 4.625% senior unsecured notes		Jun, 2023			900				4.625				900				4.625
Fixed-rate 4.875% senior unsecured notes		Mar, 2024			1,000				4.875			-				-
Fixed-rate 5.35% senior unsecured notes		Mar, 2026			500				5.350			-				-
Fixed-rate 5.55% senior unsecured notes		Dec, 2028			500				5.550			-				-
Fixed-rate 1% cash convertible notes		Dec, 2019			1,150				1.000				1,150				1.000
Floating-rate revolving credit facility		Dec, 2020		-				-				-				-
Total principal					7,400								6,650
Liabilities arising from capital lease transactions					27								29
Unamortized discounts, premiums and debt issuance costs					(31	)						(28)
Fair value of embedded cash conversion option					(42	)							(86	)
Total debt, including unamortized discounts, premiums, debt issuance costs and fair value adjustments					7,354								6,565
Current portion of long-term debt					(1,107	)							(751	)
Long-term debt					6,247								5,814

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		Range of interest rates				Average rate of interest				Principal amount outstanding 2018				Due in 2019				Due after 2019				Due after 2023				Average remaining term (in years)				Principal amount outstanding 2017
USD notes		3.9%-5.8%					4.5	%			6,250				-				6,250				2,000				4.3				5,500
2019 Cash Convertible Senior Notes			1.0	%			1.0	%			1,150				1,150				-				-				0.9				1,150
Revolving Credit Facility (1)		-				-					-				-				-				-				-				-
Bank borrowings		-				-					-				-				-				-				-				-
Liabilities arising from capital lease transactions		4.5%-13.8%					4.6	%			27				2				25				19				13.2				29
							4.0	%			7,427				1,152				6,275				2,019				3.8				6,679

(1)	We do not have any borrowings under the $600 million Revolving Credit Facility as of December 31, 2018 and 2017.

As of December 31, 2018, the following principal amounts of long-term debt are due in the next 5 years:

2019			1,152
2020			601
2021			1,351
2022			1,402
2023			902
Due after 5 years			2,019
			7,427

As of December 31, 2018, the book value of our outstanding long-term debt was $6,247 million, less debt issuance costs of $32 million and plus original issuance/debt premium of $3 million.

As of December 31, 2018, we had no aggregate principal amount of variable interest rate indebtedness under our loan agreements. The remaining tenor of secured debt is on average 3.8 years.

Accrued interest as of December 31, 2018 is $31 million (December 31, 2017: $35 million).

2018 Financing Activities

2024, 2026 and 2028 Senior Unsecured Notes

On December 6, 2018, NXP B.V., together with NXP Funding LLC, issued $1 billion of 4.875% Senior Unsecured Notes due March 1, 2024, $500 million of 5.35% Senior Unsecured Notes due March 1, 2026 and $500 million of 5.55% Senior Unsecured Notes due December 1, 2028. NXP used a portion of the net proceeds of the offering of these notes to repay in full the Bridge Loan on December 6, 2018, as described below. The remaining proceeds will be used for general corporate purposes, which may include the repurchase of additional shares of NXP’s common stock.

2019 Bridge Loan

On September 19, 2018, NXP B.V., together with NXP Funding LLC, entered into a $1 billion senior unsecured bridge term credit facility agreement under which an aggregate principal amount of $1 billion of term loans (the “Bridge Loan”) were borrowed. The Bridge Loan was to mature 364 days following the closing date of September 19, 2018 and the interest at a LIBOR rate plus an applicable margin of 1.5 percent. NXP used the net proceeds of the Bridge Loan for general corporate purposes as well as to finance parts of the announced equity buy-back program. The repayment occurred on December 6, 2018, as described above.

2018 Senior Notes

On March 8, 2018, NXP B.V. together with NXP Funding LLC, delivered notice that it would repay to holders of its 3.75% Senior Notes due 2018 (the “2018 Notes”) $750 million of the outstanding aggregate principal amount of the 2018 Notes, which represented all of the outstanding aggregate principal amount of the 2018 Notes. The repayment occurred in April 2018 using available surplus cash.

2023 Senior Notes

On March 2, 2018, NXP B.V. together with NXP Funding LLC, delivered notice that it would repay to holders of its 5.75% Senior Notes due 2023 (the “2023 Notes”) $500 million of the outstanding aggregate principal amount of the 2023 Notes, which represented all of the outstanding aggregate principal amount of the 2023 Notes. The repayment occurred in April 2018 using available surplus cash.

Certain terms and Covenants of the notes

The Company is not required to make mandatory redemption payments or sinking fund payments with respect to the notes.

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The indentures governing the notes contain covenants that, among other things, limit the Company’s ability and that of restricted subsidiaries to incur additional indebtedness, create liens, pay dividends, redeem capital stock or make certain other restricted payments or investments; enter into agreements that restrict dividends from restricted subsidiaries; sell assets, including capital stock of restricted subsidiaries; engage in transactions with affiliates; and effect a consolidation or merger. The Company has been in compliance with any such indentures and financing covenants.

No portion of long-term and short-term debt as of December 31, 2018 and December 31, 2017 has been secured by collateral on substantially all of the Company’s assets and of certain of its subsidiaries.

Each series of the Senior Unsecured Notes are fully and unconditionally guaranteed jointly and severally, on a senior basis by certain of the Company’s current and future material wholly owned subsidiaries (“Guarantors”).

Pursuant to various security documents related to the $600 million committed revolving credit facility, the Company and each Guarantor has granted first priority liens and security interests in, amongst others, the following, subject to the grant of further permitted collateral liens:

(a)	all present and future shares of capital stock of (or other ownership or profit interests in) each of its present and future direct subsidiaries, other than SMST Unterstützungskasse GmbH, and material joint venture entities;

(b)	all present and future intercompany debt of the Company and each Guarantor;

(c)

all of the present and future property and assets, real and personal, of the Company, and each Guarantor, including, but not limited to, machinery and equipment, inventory and other goods, accounts receivable, owned real estate, leaseholds, fixtures, general intangibles, license rights, patents, trademarks, trade names, copyrights, chattel paper, insurance proceeds, contract rights, hedge agreements, documents, instruments, indemnification rights, tax refunds, but excluding cash and bank accounts; and

(d)	all proceeds and products of the property and assets described above.

Notwithstanding the foregoing, certain assets may not be pledged (or the liens not perfected) in accordance with agreed security principles, including:

	•	if the cost of providing security is not proportionate to the benefit accruing to the holders; and

	•	if providing such security requires consent of a third party and such consent cannot be obtained after the use of commercially reasonable efforts; and

	•	if providing such security would be prohibited by applicable law, general statutory limitations, financial assistance, corporate benefit, fraudulent preference, “thin capitalization” rules or similar matters or providing security would be outside the applicable pledgor’s capacity or conflict with fiduciary duties of directors or cause material risk of personal or criminal liability after using commercially reasonable efforts to overcome such obstacles; and

	•	if providing such security would have a material adverse effect (as reasonably determined in good faith by such subsidiary) on the ability of such subsidiary to conduct its operations and business in the ordinary course as otherwise permitted by the indenture; and

	•	if providing such security or perfecting liens thereon would require giving notice (i) in the case of receivables security, to customers or (ii) in the case of bank accounts, to the banks with whom the accounts are maintained. Such notice will only be provided after the secured notes are accelerated.

Subject to agreed security principles, if material property is acquired by the Company or a Guarantor that is not automatically subject to a perfected security interest under the security documents, then the Company or relevant Guarantor will within 60 days provide security over this property and deliver certain certificates and opinions in respect thereof as specified in the indenture governing the notes.

2019 Cash Convertible Senior Notes

In November 2014, NXP issued $1,150 million principal amount of its 2019 Cash Convertible Senior Notes (the “Notes”). The 2019 Cash Convertible Senior Notes have a stated interest rate of 1.00%, matures on December 1, 2019 and may be settled only in cash. The indenture for the 2019 Cash Convertible Senior Notes does not contain any financial covenants. Contractual interest payable on the 2019 Cash Convertible Senior Notes began accruing in December 2014 and is payable semi-annually each December 1st and June 1st. The initial purchasers’ transaction fees and expenses totaling $16 million were capitalized as deferred financing costs and are amortized over the term of the 2019 Cash Convertible Senior Notes using the effective interest method.

Prior to September 1, 2019, holders may convert their 2019 Cash Convertible Senior Notes into cash upon the occurrence of one of the following events:

	•	the price of NXP’s common stock reaches 130% of the conversion price on each applicable trading day during certain periods of time specified in the 2019 Cash Convertible Senior Notes;

	•	specified corporate transactions occur; or

F-34

	•	the trading price of the 2019 Cash Convertible Senior Notes falls below 98% of the product of (i) the last reported sales price of NXP’s common stock and (ii) the conversion rate on the date.

On or after September 1, 2019, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2019 Cash Convertible Senior Notes into cash at any time, regardless of the foregoing circumstances. NXP may not redeem the 2019 Cash Convertible Senior Notes prior to maturity.

The initial cash conversion rate for the 2019 Cash Convertible Senior Notes is 9.7236 shares of NXP’s common stock per $1,000 principal amount of 2019 Cash Convertible Senior Notes, equivalent to a cash conversion price of $102.84 per share of NXP’s common stock, with the amount due on conversion payable in cash. Upon cash conversion, a holder will receive the sum of the daily settlement amounts, calculated on a proportionate basis for each day, during a specified observation period following the cash conversion date.

If a “fundamental change” (as defined below in this section) occurs at any time, holders will have the right, at their option, to require us to repurchase for cash all of their 2019 Cash Convertible Senior Notes, or any portion of the principal thereof that is equal to $1,000 or a multiple of $1,000 (provided that the portion of any global note or certified note, as applicable, not tendered for repurchase has a principal amount of at least $200,000, on the fundamental change repurchase date. A fundamental change is any transaction or event (whether by means of an exchange offer, change of common stock, liquidation, consolidation, merger, reclassification, recapitalization or otherwise) in which more than 50% of NXP’s common stock is exchanged for, converted into, acquired for or constitutes solely the right to receive, consideration. A transaction or transactions described above will not constitute a fundamental change, however, if at least 90% of the consideration received or to be received by our common shareholders, excluding cash payments for fractional shares, in connection with such transaction or transactions consists of shares of common equity that are listed or quoted on any permitted exchange or will be so listed or quoted when issued or exchanged in connection with such transaction or transactions and as a result of such transaction or transactions such consideration becomes the reference property for the 2019 Cash Convertible Senior Notes.

As of December 31, 2018, none of the conditions allowing the holders of the 2019 Cash Convertible Senior Notes to convert the 2019 Cash Convertible Senior Notes into cash had been met.

The requirement that NXP must settle the conversion of the Notes in cash gives rise to a derivative instrument that must be bifurcated from the debt host. The embedded cash conversion option within the Cash Convertible Notes is required to be separated from the Cash Convertible Notes and accounted for separately as a derivative liability, with changes in fair value reported in our Consolidated Statements of Income in other (expense) income, net until the cash conversion option settles or expires. The initial fair value liability of the embedded cash conversion option simultaneously reduced the carrying value of the Cash Convertible Notes (effectively an original issuance discount). The embedded cash conversion option is measured and reported at fair value on a recurring basis, within Level 3 of the fair value hierarchy. The fair value of the embedded cash conversion option at December 31, 2018 was $24 million (2017: $301 million) which is recorded in other long-term liabilities in the accompanying balance sheet. For the year ended December 31, 2018, the change in the fair value of the embedded cash conversion option resulted in a profit of $277 million (2017: a loss of $43 million).

Concurrently with the pricing of the 2019 Cash Convertible Senior Notes, NXP entered into hedge transactions, or the Notes Hedges, with various parties whereby NXP has the option to receive the cash amount that may be due to the Notes holders at maturity in excess of the $1,150 million principal amount of the notes, subject to certain conversion rate adjustments in the Notes Indenture. These options expire on December 1, 2019, and must be settled in cash. The aggregate cost of the Notes Hedges was $208 million. The Notes Hedges are accounted for as derivative assets, and are included in Other assets in NXP’s Consolidated Balance Sheet. As of December 31, 2018, the estimated fair value of the Notes Hedges was $24 million (2017: $301 million).

The Notes Embedded Conversion Derivative and the Notes Hedges are adjusted to fair value each reported period and unrealized gains and losses are reflected in NXP’s Consolidated Statements of Operations. Because the fair values of the Notes Embedded Conversion Derivative and the Notes Hedges are designed to have similar offsetting values, there was no impact to NXP’s Consolidated Statements of Operations relating to these adjustments to fair value during fiscal 2018 (2017: no impact).

In separate transactions, NXP also sold warrants, to various parties for the purchase of up to 11.18 million shares of NXP’s common stock at an initial strike price of $133.32 per share in a private placement pursuant to Section 4(2) of the Securities Act of 1933, as amended, or the Securities Act. The Warrants expire on various dates starting from March 2, 2020, and will be net share settled. Under the terms of the warrants, any Option Counterparty may adjust certain terms of its warrants upon the announcement, termination or occurrence of certain events. The warrant transactions may also be terminated if the Option Counterparty determines that no such adjustment will produce a commercially reasonable result, and that the relevant event is reasonably likely to occur. In particular, each Option Counterparty may adjust the terms of its warrants to compensate it for the economic effect of the announcements relating to the proposed acquisition of NXP by Qualcomm (including announcements of consummation, cancellation, withdrawal or discontinuance of the proposed acquisition), taking into account changes in volatility, expected dividends, stock loan rate or liquidity and any stock price discontinuity relevant to our common stock or the warrants. There have been no adjustments made at this time. Any such adjustment in the future may increase our delivery obligations upon expiration and settlement of the warrants or our obligations upon their cancellation, termination or unwinding, which would be settled using shares of our stock. NXP received $134 million in cash proceeds from the sale of the Warrants, which were at the time of issuance recorded in Other non-current liabilities. As of January 1, 2016, as of result of the acquisition of Freescale, NXP has concluded that the functional currency of the holding company is USD. Consequently, beginning from January 1, 2016, the Warrants with a carrying value of $168 million were reclassified to stockholders’ equity, and mark-to-market accounting is no longer applicable. The Warrants are included in diluted earnings per share to the extent the impact is dilutive. As of December 31, 2018, the Warrants were not dilutive.

F-35

The principal amount, unamortized debt discount and net carrying amount of the liability component of the 2019 Cash Convertible Senior Notes as of December 31, 2018 and 2017 was as follows:

		As of December 31
(in millions)		2018				2017
Principal amount of 2019 Cash Convertible Senior Notes			1,150				1,150
Unamortized debt discount of 2019 Cash Convertible Senior Notes			45				91
Net liability of 2019 Cash Convertible Senior Notes			1,105				1,059

The effective interest rate, contractual interest expense and amortization of debt discount for the 2019 Cash Convertible Senior Notes for fiscal 2018 and 2017 were as follows:

(in millions, except percentage)		2018				2017
Effective interest rate			5.14	%			5.14	%
Contractual interest expense			12				12
Amortization of debt discount			44				42

As of December 31, 2018, the if-converted value of the 2019 Cash Convertible Senior Notes exceeded the principal amount of the Notes. The total fair value of the 2019 Cash Convertible Senior Notes was $1,327 million.

Impact of Conversion Contingencies on Financial Statements

At the end of each quarter until maturity of the 2019 Cash Convertible Senior Notes, NXP will reassess whether the stock price conversion condition has been satisfied. If one of the early conversion conditions is satisfied in any future quarter, NXP would classify its net liability under the 2019 Cash Convertible Senior Notes as a current liability on the Consolidated Balance Sheet as of the end of that fiscal quarter. If none of the early conversion conditions have been satisfied in a future quarter prior to the one-year period immediately preceding the maturity date, NXP would classify its net liability under the 2019 Cash Convertible Senior Notes as a non-current liability on the Consolidated Balance Sheet as of the end of that fiscal quarter. If the holders of the 2019 Cash Convertible Senior Notes elect to convert their 2019 Cash Convertible Senior Notes prior to maturity, any unamortized discount and transaction fees will be expensed at the time of conversion.

16 Commitments and Contingencies

Lease Commitments

At December 31, 2018 and 2017, there were no material capital lease obligations. Long-term operating lease commitments totaled $156 million as of December 31, 2018 (2017: $132 million). The long-term operating leases are mainly related to the rental of buildings and tools. These leases expire at various dates during the next 30 years. Future minimum lease payments under operating leases are as follows:

2019		43
2020		35
2021		24
2022		13
2023		11
Thereafter		30
Total future minimum leases payments		156

Rent expense amounted to $57 million in 2018 (2017: $63 million; 2016: $68 million).

Purchase Commitments

The Company maintains purchase commitments with certain suppliers, primarily for raw materials, semi-finished goods and manufacturing services and for some non-production items. Purchase commitments for inventory materials are generally restricted to a forecasted time-horizon as mutually agreed upon between the parties. This forecasted time-horizon can vary for different suppliers. As of December 31, 2018, the Company had purchase commitments of $333 million, which are due through 2032.

Litigation

We are regularly involved as plaintiffs or defendants in claims and litigation relating to a variety of matters such as contractual disputes, personal injury claims, employee grievances and intellectual property litigation. In addition, our acquisitions, divestments and financial transactions sometimes result in, or are followed by, claims or litigation. Some of these claims may possibly be recovered from insurance reimbursements. Although the ultimate disposition of asserted claims cannot be predicted with certainty, it is our belief that the outcome of any such claims, either individually or on a combined basis, will not have a material adverse effect on our consolidated

F-36

financial position. However, such outcomes may be material to our Consolidated Statement of Operations for a particular period. The Company records an accrual for any claim that arises whenever it considers that it is probable that it is exposed to a loss contingency and the amount of the loss contingency can be reasonably estimated. Legal fees are expensed when incurred.

Based on the most current information available to it and based on its best estimate, the Company also reevaluates at least on a quarterly basis the claims that have arisen to determine whether any new accruals need to be made or whether any accruals made need to be adjusted. Based on the procedures described above, the Company has an aggregate amount of $123 million accrued for potential and current legal proceedings pending as of December 31, 2018, compared to $104 million accrued (without reduction for any related insurance reimbursements) at December 31, 2017. The accruals are included in “Accrued liabilities” and “Other non-current liabilities”. As of December 31, 2018, the Company’s balance related to insurance reimbursements was $65 million (2017: $61 million) and is included in “Other current assets” and “Other non-current assets”.

The Company also estimates the aggregate range of reasonably possible losses in excess of the amount accrued based on currently available information for those cases for which such estimate can be made. The estimated aggregate range requires significant judgment, given the varying stages of the proceedings (including the fact that many of them are currently in preliminary stages), the existence of multiple defendants (including the Company) in such claims whose share of liability has yet to be determined, the numerous yet-unresolved issues in many of the claims, and the attendant uncertainty of the various potential outcomes of such claims. Accordingly, the Company’s estimate will change from time to time, and actual losses may be more than the current estimate. As at December 31, 2018, the Company believes that for all litigation pending its potential aggregate exposure to loss in excess of the amount accrued (without reduction for any amounts that may possibly be recovered under insurance programs) could range between $0 and $289 million. Based upon our past experience with these matters, the Company would expect to receive insurance reimbursement on certain of these claims that would offset the potential maximum exposure of up to $205 million.

In addition, the Company is currently assisting Motorola in the defense of personal injury lawsuits due to indemnity obligations included in the agreement that separated Freescale from Motorola in 2004. The Company is also defending a suit related to semiconductor operations that occurred prior to NXP’s separation from Philips. The multi-plaintiff Motorola lawsuits are pending in Cook County, Illinois, and the legacy NXP suit is pending in Santa Fe, New Mexico. These claims allege a link between working in semiconductor manufacturing clean room facilities and birth defects in 45 individuals. The Motorola suits allege exposures between 1965 and 2006. Each claim seeks an unspecified amount of damages for the alleged injuries; however, legal counsel representing the plaintiffs has indicated they will seek substantial compensatory and punitive damages from Motorola for the entire inventory of claims which, if proven and recovered, the Company considers to be material. In the Motorola suits, a portion of any indemnity due to Motorola will be reimbursed to NXP if Motorola receives an indemnification payment from its insurance coverage. Motorola has potential insurance coverage for many of the years indicated above, but with differing types and levels of coverage, self-insurance retention amounts and deductibles. We are in discussions with Motorola and their insurers regarding the availability of applicable insurance coverage for each of the individual cases. Motorola and NXP have denied liability for these alleged injuries based on numerous defenses.

Environmental remediation

In each jurisdiction in which we operate, we are subject to many environmental, health and safety laws and regulations that govern, among other things, emissions of pollutants into the air, wastewater discharges, the use and handling of hazardous substances, waste disposal, the investigation and remediation of soil and ground water contamination and the health and safety of our employees. We are also required to obtain environmental permits from governmental authorities for certain of our operations.

As with other companies engaged in similar activities or that own or operate real property, the Company faces inherent risks of environmental liability at our current and historical manufacturing facilities. Certain environmental laws impose liability on current or previous owners or operators of real property for the cost of removal or remediation of hazardous substances. Certain of these laws also assess liability on persons who arrange for hazardous substances to be sent to disposal or treatment facilities when such facilities are found to be contaminated.

Soil and groundwater contamination has been identified at our properties in Nijmegen, the Netherlands and near Phoenix, Arizona, United States. The remediation processes at these locations are expected to continue for many years.

As of December 31, 2018, we have recorded $88 million for environmental remediation costs, which are primarily included in other non-current liabilities in the accompanying Consolidated Balance Sheet. This amount represents the undiscounted future cash flows of our estimated share of costs incurred in environmental cleanup sites without considering recovery of costs from any other party or insurer, since in most cases potentially responsible parties other than us may exist and be held responsible.

17 Stockholders’ Equity

The share capital of the Company as of December 31, 2018 and 2017 consists of 1,076,257,500 authorized shares, including 430,503,000 authorized shares of common stock, and 645,754,500 authorized but unissued shares of preferred stock.

On November 16, 2018, the Company, as authorized by the June 2018 AGM, cancelled 5% (representing 17,300,143 shares) of the issued number of NXP shares. As a result, the number of issued NXP shares as per November 16, 2018 is 328,702,719 shares. At December 31, 2018, the Company has issued and paid up 328,702,719 shares (2017: 346,002,862 shares) of common stock each having a par value of €0.20 or a nominal stock capital of €66 million (2017: €69 million).

F-37

Cash dividends

On September 10, 2018, NXP announced the initiation of a Quarterly Dividend Program under which the company will pay a regular quarterly cash dividend. Accordingly, interim dividends of $0.25 per ordinary share were paid on October 5, 2018 and January 7, 2019.

Share-based awards

The Company has granted share-based awards to the members of our board of directors, management team, our other executives, selected other key employees/talents of NXP and selected new hires to receive the Company’s shares in the future. See note 8, “Share-based Compensation”.

Treasury shares

From time to time, last on June 22, 2018, the General Meeting of Shareholders authorize the Board of Directors to repurchase shares of our common stock. On that basis, for the first time in 2011 and latest effective November 1, 2018, the Board of Directors executed various share repurchase programs. In accordance with the Company’s policy to provide share-based awards from its treasury share inventory, shares which have been repurchased and are held in treasury for delivery upon exercise of options and under restricted and performance share programs, are accounted for as a reduction of stockholders’ equity. Treasury shares are recorded at cost, representing the market price on the acquisition date. When issued, shares are removed from treasury shares on a first-in, first-out (FIFO) basis.

Differences between the cost and the proceeds received when treasury shares are reissued, are recorded in capital in excess of par value. Deficiencies in excess of net gains arising from previous treasury share issuances are charged to retained earnings.

The following transactions took place resulting from employee option and share plans:

		2018				2017				2016
Total shares in treasury at beginning of year			3,078,470				10,609,980				3,998,982
Total cost			342				915				342
Shares acquired under repurchase program			54,376,181				2,522,589				15,537,868
Average price in $ per share			92.07				113.36				82.36
Amount paid			5,006				286				1,280
Shares delivered			4,241,487				10,054,099				8,926,870
Average price in $ per share			107.75				85.42				79.25
Amount received			39				233				115
Shares retired			17,300,143			-				-
Total shares in treasury at end of year			35,913,021				3,078,470				10,609,980
Total cost			3,238				342				915

Shareholder tax on repurchased shares

Under Dutch tax law, the repurchase of a company’s shares by an entity domiciled in the Netherlands results is a taxable event. The tax on the repurchased shares is attributed to the shareholders, with NXP making the payment on the shareholders’ behalf. As such, the tax on the repurchased shares is accounted for within stockholders’ equity.

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18 Accumulated Other Comprehensive Income (Loss)

Total comprehensive income (loss) represents net income (loss) plus the results of certain equity changes not reflected in the Consolidated Statements of Operations. The after-tax components of accumulated other comprehensive income (loss) and their corresponding changes are shown below:

		Currency translation differences				Change in fair value cash flow hedges				Net actuarial gain/(losses)				Unrealized gains/losses available-for sale securities				Accumulated Other Comprehensive Income (loss)
As of December 31, 2016			113				(2	)			(81	)			4				34
Other comprehensive income (loss) before reclassifications			156				29				(20	)			(3	)			162
Amounts reclassified out of accumulated other comprehensive income (loss)			-				(15	)			-				(6	)			(21	)
Income tax effects			-				(4	)			4				2				2
Other comprehensive income (loss)			156				10				(16	)			(7	)			143
As of December 31, 2017			269				8				(97	)			(3	)			177
Other comprehensive income (loss) before reclassifications			(51	)			(10	)			9				-				(52	)
Amounts reclassified out of accumulated other comprehensive income (loss)			-				(4	)			-				3				(1	)
Income tax effects			-				3				(4	)			-				(1	)
Other comprehensive income (loss)			(51	)			(11	)			5				3				(54	)
As of December 31, 2018			218				(3	)			(92	)			-				123

19 Related-party Transactions

The Company’s related parties are the members of the board of directors of NXP Semiconductors N.V., the members of the management team of NXP Semiconductors N.V. and equity-accounted investees and, up to July 26, 2018, Qualcomm Incorporated. As of the divestment of the SP business on February 6, 2017, the newly formed Nexperia has become a related party.

Other

We have a number of strategic alliances and joint ventures. We have relationships with certain of our alliance partners in the ordinary course of business whereby we enter into various sale and purchase transactions, generally on terms comparable to transactions with third parties. However, in certain instances upon divestment of former businesses where we enter into supply arrangements with the former owned business, sales are conducted at cost.

The following table presents the amounts related to revenue and other income and purchase of goods and services incurred in transactions with these related parties:

		2018				2017				2016
Revenue and other income			133				130				59
Purchase of goods and services			106				144				116

The following table presents the amounts related to receivable and payable balances with these related parties:

		2018				2017
Receivables			25				54
Payables			49				77

As part of the divestment of the SP business, we entered into a lease commitment and related services to Nexperia, that is $28 million as of December 31, 2018, and committed $50 million to an investment fund affiliated with Nexperia’s owners.

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20 Fair Value of Financial Assets and Liabilities

The following table summarizes the estimated fair value and carrying amount of our financial instruments measured on a recurring basis:

						December 31, 2018								December 31, 2017
		Fair value hierarchy				Carrying amount				Estimated fair value				Carrying amount				Estimated fair value
Assets:
Notes hedges			3				24				24				301				301
Other financial assets			2				32				32				29				29
Derivative instruments-assets			2				6				6				10				10
Liabilities:
Short-term debt			2				(2	)			(2	)			(2	)			(2	)
Short-term debt (bonds)			2				-				-				(749	)			(755	)
Short-term debt (2019 Cash Convertible Senior Notes)			2				(1,105	)			(1,327	)			(1,059	)			(1,418	)
Long-term debt (bonds)			2				(6,222	)			(6,191	)			(4,728	)			(4,879	)
Other long-term debt			2				(25	)			(25	)			(27	)			(27	)
Notes Embedded Conversion Derivative			3				(24	)			(24	)			(301	)			(301	)
Derivative instruments-liabilities			2				(2	)			(2	)			-				-

The following methods and assumptions were used to estimate the fair value of financial instruments:

Other financial assets and derivatives

For other financial assets and derivatives the fair value is based upon significant other observable inputs depending on the nature of the other financial asset and derivative.

Notes hedges and Notes Embedded Conversion Derivative

At December 31, 2018, the Notes hedges and the Notes Embedded Conversion Derivative are measured at fair value using level 3 inputs. The instruments are not actively traded and are valued at the measurement date using an option pricing model that uses observable inputs for the share price of NXP’s common stock, risk-free interest rate, dividend yield and the term, in combination with a significant unobservable input for volatility. Volatility has historically been determined by a hypothetical market place. During the second quarter of 2017, an adjustment was made to this factor where we utilized the hypothetical marketplace and also considered the implied volatility in actively traded call options with a similar term. Subsequent to the termination of the Qualcomm purchase agreement, we returned to determining volatility by utilizing a hypothetical marketplace. The volatility factor utilized at December 31, 2018 was 34.8% and at December 31, 2017 the volatility factor utilized was 29%. The change in the fair value of the Notes hedges and Notes Embedded Conversion Derivative was solely the gain and loss, respectively for each instrument that was recognized.

Debt

The fair value is estimated on the basis of observable inputs other than quoted prices in active markets for identical liabilities for certain issues, or on the basis of discounted cash flow analyses. Accrued interest is included under accrued liabilities and not within the carrying amount or estimated fair value of debt.

Assets and liabilities recorded at fair value on a non-recurring basis

We measure and record our non-marketable equity investments (non-marketable equity method and cost method investments) and non-financial assets, such as intangible assets and property, plant and equipment, at fair value when an impairment charge is required.

21 Other Financial Instruments, Derivatives and Currency Risk

We conduct business in diverse markets around the world and employ a variety of risk management strategies and techniques to manage foreign currency exchange rate and interest rate risks. Our risk management program focuses on the unpredictability of financial markets and seeks to minimize the potentially adverse effects that the volatility of these markets may have on our operating results. One way we achieve this is through the active hedging of risks through the selective use of derivative instruments.

Derivatives are recorded on our Consolidated Balance Sheets at fair value which fluctuates based on changing market conditions.

The Company does not purchase or hold financial derivative instruments for trading purposes.

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Currency risk

The Company’s transactions are denominated in a variety of currencies. The Company uses financial instruments to reduce its exposure to the effects of currency fluctuations. Accordingly, the Company’s organizations identify and measure their exposures from transactions denominated in other than their own functional currency. We calculate our net exposure on a cash flow basis considering balance sheet items, actual orders received or made and anticipated revenue and expenses. The Company generally hedges foreign currency exposures in relation to transaction exposures, such as receivables/payables resulting from such transactions and part of anticipated sales and purchases. The Company generally uses forwards to hedge these exposures. As of January 1, 2016, as a result of the acquisition of Freescale, NXP has concluded that the functional currency of the holding company is USD. Beginning from January 1, 2016, our U.S. dollar-denominated notes and short term loans will no longer need to be re-measured. Prior to January 1, 2016, the U.S. dollar-denominated debt held by our Dutch subsidiary (which had at that time a euro functional currency) could have generated adverse currency results in financial income and expenses depending on the exchange rate movement between the euro and the U.S. dollar. This exposure was partially mitigated by the application of net investment hedge accounting, which had been applied since May 2011. The U.S. dollar exposure of the net investment in U.S. dollar functional currency subsidiaries was hedged by certain of our U.S. dollar denominated debt. The hedging relationship was assumed to be highly effective. Foreign currency gains or losses on this U.S. dollar debt that were recorded in a euro functional currency entity that were designated as, and to the extent they were effective, as a hedge of the net investment in our U.S. dollar foreign entities, were reported as a translation adjustment in other comprehensive income within equity, and offset in whole or in part the foreign currency changes to the net investment that were also reported in other comprehensive income. Absent the application of net investment hedging, these amounts would have been recorded as a loss within financial income (expense) in the statement of operations.

22 Segments and Geographical Information

Prior to February 6, 2017, NXP was organized into two market oriented reportable segments, High Performance Mixed Signal (“HPMS”) and Standard Products (“SP”). As of February 6, 2017, the SP reportable segment was divested and HPMS remains as the sole reportable segment. Corporate and Other represents the remaining portion to reconcile to the Consolidated Financial Statements. Effective January 1, 2019, NXP removed the reference to HPMS in its organizational structure in acknowledgment of the one reportable segment representing the entity as a whole.

Our HPMS business segment delivers high performance mixed signal solutions to our customers to satisfy their system and sub-systems needs across eight application areas: automotive, identification, mobile, consumer, computing, wireless infrastructure, lighting and industrial, and software solutions for mobile phones. Our SP business segment offered standard products for use across many application markets, as well as application-specific standard products predominantly used in application areas such as mobile handsets, computing, consumer and automotive. The segments each include revenue from the sale and licensing of intellectual property related to that segment.

Because the Company meets the criteria for aggregation set forth under ASC 280 “Segment Reporting”, and the operating segments have similar economic characteristics, the Company aggregates the results of operations of the Automotive, Secure Identification Solutions, Secure Connected Devices and Secure Interfaces and Infrastructure operating segments into one reportable segment, HPMS, and prior to February 6, 2017, the Standard Products and General Purpose Logic operating segments into another reportable segment, SP.

Our Chief Executive Officer, who is our CODM, regularly reviews financial information at the reporting segment level in order to make decisions about resources to be allocated to the segments and to assess their performance. Segment results that are reported to the CODM include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Asset information by segment is not provided to our CODM as the majority of our assets are used jointly or managed at corporate level. Arithmetical allocation of these assets to the various businesses is not deemed to be meaningful and as such total assets per segment has been omitted.

Detailed information by segment for the years 2018, 2017 and 2016 is presented in the following tables.

Revenue		2018				2017				2016
HPMS			9,022				8,745				8,086
SP			-				118				1,220
Corporate and Other (1)			385				393				192
			9,407				9,256				9,498

Operating income (loss)		2018				2017				2016
HPMS			807				656				(302	)
SP			-				31				268
Corporate and Other (1)			1,903				1,415				(116	)
			2,710				2,102				(150	)

(1)	Corporate and Other is not a reporting segment under ASC 280 “Segment Reporting”. Corporate and Other includes revenue related to manufacturing operations, unallocated expenses not related to any specific business segment and corporate restructuring charges. The gain on the sale of the divestment of SP business is included in the operating income of Corporate and Other.

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Goodwill assigned to segments		Cost at January 1, 2018				Acquisitions				Translation differences and other changes				Cost at December 31, 2018
HPMS			8,750				11				(60	)			8,701
Corporate and Other (1)			270				-				-				270
			9,020				11				(60	)			8,971

		Accumulated impairment at January 1, 2018				Translation differences and other changes				Accumulated impairment at December 31, 2018
HPMS			(154	)			40				(114	)
Corporate and Other (1)			-				-				-
			(154	)			40				(114	)

(1)	Corporate and Other is not a reporting segment under ASC 280 “Segment Reporting”.

Geographical Information

		Revenue (1)												Property, plant and equipment, net
		2018				2017				2016				2018				2017				2016
China			3,430				3,640				3,882				287				281				251
Netherlands			349				304				285				214				198				183
United States			919				922				906				782				770				922
Singapore			1,220				1,082				984				298				211				166
Germany			531				570				623				55				57				52
Japan			735				750				550				-				-				1
South Korea			357				356				369				-				-				-
Malaysia			112				103				231				373				369				378
Other countries			1,754				1,529				1,668				427				409				399
			9,407				9,256				9,498				2,436				2,295				2,352

(1)	Revenue attributed to geographic areas is based on the customer’s shipped-to location (except for intellectual property license revenue which is attributable to the Netherlands).

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