Qualcomm, a powerhouse in smartphone chips, has agreed to acquire NXP Semiconductors for about $38 billion in a move that would make it a leader in the fast-growing automotive-chip market.

The acquisition, announced Thursday, is the biggest semiconductor deal ever, topping Avago Technologies’ purchase of Broadcom for $37 billion. It values NXP at $110 a share, a 34% premium to the price before reports of a potential deal emerged on Sept. 29.

NXP supplies chips for current cars, future self-driving cars, and mobile payment devices, as well as sensors for drones and other smart devices, giving Qualcomm an opportunity to expand not only into automotive chips but also the Internet of Things.

“The pace of innovation in automobile and IoT will increase dramatically and I think we look at it as a tremendous opportunity,” Qualcomm CEO Steven Mollenkopf said in a conference call.

Qualcomm already supplies chips to bring cellular connections to cars, but Mollenkopf sees NXP’s chips and its sales connections with auto makers and their major suppliers as a way to penetrate that business much more quickly. ”Our ability to sell to them expands just incredibly dramatically as a result of the deal,” he told The Wall Street Journal.

The combined entity would have annual revenue of more than $30 billion and Qualcomm would increase revenue from its smart devices segment more than fivefold to more than $10 billion a year. By 2020, some 21 billion IoT devices will be in use worldwide, up from fewer than 5 billion last year, research firm Gartner has estimated.

NXP, based in the Netherlands, became the world’s biggest maker of automotive electronics after it bought U.S.-based Freescale Semiconductor for about $12 billion last December.

Despite its big lead in automotive chips, “NXP was facing several challenges that combining with Qualcomm may help solve,” Fortune noted. “Its smart devices chips were suitable for many current applications, but lacked strong wireless connectivity features that will become increasingly important in the future, especially with the growth of faster 5G networks.”

In trading Thursday, NXP shares rose 0.4% to $99.08, while Qualcomm shares were up 2.7%, at $70.09.

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