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NXP Semiconductors has announced a deal to buy Freescale Semiconductor for $11.8bn in a move that will create a company with a combined market value of $40bn. The deal is expected to close in the second half of 2015.

Dutch company NXP, formerly part of electronics giant Philips, announced the deal on Monday, saying it would create a company with a combined revenue of $10bn that will focus mainly on developing chips for cars and embedded applications.

NXP chief executive Richard Clemmer said the merged company would be well placed to serve the emerging Internet of Things.

“The combination of NXP and Freescale creates an industry powerhouse focused on the high growth opportunities in the smarter world, " he said.

"We fully expect to continue to significantly out-grow the overall market, drive world-class profitability and generate even more cash, which taken together will maximize value for both Freescale and NXP shareholders.”

Gregg Lowe, the CEO of Texas-based Freescale Semiconductor, said the deal would enable the expanded company to really push ahead in the market.

“Our combined scale, size and global reach will position our new company to deliver sustainable above-market growth, ” he said. "It will also serve to accelerate the strategic plans both companies have invested in, enabling us to deliver more complete solutions to customers.”