Dutch chipmaker NXP Semiconductors NV has succeeded where other European chipmakers have struggled by focusing on products for the auto industry and mobile payments.

NXP’s $11.8 billion acquisition of Austin, Texas-based Freescale Semiconductor Ltd., announced today, will make the combined company a close second to Texas Instruments Inc. in making chips that turn everyday items into connected devices. The deal is the biggest in almost nine years for the chip industry, since the last time Freescale was acquired.

“We have two challengers giving birth to a giant,” Charles Bordes, a Paris-based analyst of stock research firm AlphaValue, said by phone. The new company is well-positioned both for the so-called Internet of things and the car industry, he said.

NXP’s progress since its 2006 sale by Royal Philips NV in 2006 is a rare success among European chip spinoffs. By comparison, shares of Infineon Technologies AG have plunged 88 percent from the peak after their initial public offering in 1999 as part of Siemens AG. Infineon, in turn, did an IPO of its memory-chip unit Qimonda AG in 2006, and that company filed for insolvency in 2009.

The future of Eindhoven, Netherlands-based NXP hasn’t always been this bright. In the years following its 2006 sale to KKR & Co. and Bain Capital LLC, the company made consecutive losses and implemented a program to cut annual costs by $650 million. The buyout firms listed NXP on the stock market in 2010 and no longer own shares.

In those years, technology wasn’t the issue, Bordes said -- there just wasn’t a high demand for its applications yet, such as near-field communication chips, which are used in phones, bank cards and public transport cards.

“Now with the payments that are spreading on smartphones there is a demand for much more security,” Bordes said. “NXP has got the knowledge for that.” The increasing use of chips in the automotive industry has been a development of the past few years as well, he said.

Automotive will be the main driver of the new entity as both companies are major suppliers of chips for use in vehicles. NXP supplies chips that enable communication between cars, as well as between cars and their surroundings, among others, while Freescale supplies sensors that support driver assistance systems through, for example, front- and rear-view cameras.

With the expected acceleration in the development of self- driving cars, demand for the company’s processors and electronics is set to grow exponentially.

“Semiconductors are in a new cycle, there’s strong growth in the industry, in automotive. And you have the Internet of things segment,” Bordes said.

Freescale too used to be part of a bigger company -- it was spun off from Motorola Inc. in 2004, and acquired two years later by by private-equity firms led by Blackstone Group LP for $17.6 billion.

Richard Clemmer, NXP’s chief executive officer, will be CEO of the combined company, which will be a larger competitor for Texas Instruments in the markets for analog chips, microcontrollers and other types of semiconductors. Texas Instruments had $13.05 billion in sales last year. NXP’s annual sales will be more than $10 billion the takeover, the company said.

Shares of Infineon, Germany’s largest chipmaker, are up almost 60 percent in the past two years and the company is pursuing acquisitions. The company bought International Rectifier Corp. this year for about $3 billion.

The deal values Freescale at $36.14 a share in cash and stock based on the Feb. 27 price for NXP. While that’s almost no premium to Freescale’s $36.11 closing price last week, the U.S. company’s shares have more than doubled from an October low, in part on takeover speculation.

Including Freescale’s debt, the purchase price is about $16.7 billion.

NXP rose 12 percent to $95.24 at 8:25 a.m. New York time in trading before U.S. exchanges opened, boosting the value of the deal for Freescale shareholders. Freescale jumped 8.7 percent to $39.25.

The offer values Freescale at 1.49 times its sales, compared with a median of 2.24 in similar deals over the past nine years, according to data compiled by Bloomberg.

Freescale’s biggest customer is Continental AG, the auto- parts maker based in Hanover, Germany, according to supply-chain data compiled by Bloomberg, while NXP’s customers include Apple Inc. and Samsung Electronics Co.

--With assistance from Ed Hammond in New York and Jack Clark and Ian King in San Francisco.

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