The semiconductor industry took off in the 1960s, when most companies were still IDMs (integrated device manufacturers) who designed, manufactured, packaged, tested and sold ICs (integrated circuits). IDM enterprises such as Intel and Samsung have accumulated years of large-scale and comprehensive technology and know-how. With the increasing cost of technology upgrades and higher production efficiency requirements, the market saw the emergence of fabless companies like Qualcomm and Broadcom which only focused on IC design and sales; and foundry companies which only manufactured, packaged and tested IC (e.g., TSMC, SMIC). Fabless, foundry and IDM companies became the three major business models in the semiconductor industry.
The semiconductor industry is capital and R&D intensive, greatly affected by the ups and downs in the global economic cycle. According to IC Insights, semiconductor industry M&A agreements fell to US$23.2 billion in 2018, with Broadcom failing in its bid to take over Qualcomm, and Qualcomm gave up on buying NXP Semiconductors. It was the third consecutive annual decline. Many companies were still undergoing post-merger integration and reorganization after their M&A activities back in 2015 and 2016, when the market peaked and over US$100 billion in deals were announced.
The semiconductor industry is primarily driven by the continuous innovative acceleration of AI systems, 5G, the Internet of things (IoT), and automotive. Fast growth and development in these areas would bring medium and long term benefits to the semiconductor industry. However, considering the high dependency on industrial ecology and the high uncertainty of commercial success due to cost and R&D productivity challenges, many small-cap companies and startups prefer seeking acquisition by a bigger semiconductor company to ensure steady future business growth.
Synced has ranked the top 10 semiconductor industry M&A deals in 2018, based on value and industry influence.
NO.10 Alibaba And c-sky microsystems
Value: Not Disclosed
On April 20th 2018, Alibaba Group announced its full acquisition of C-sky Microsystems, China’s only homegrown embedded CPU IP Core company. This was seen as a key step for Alibaba’s chip layout.
Previously, the Alibaba DAMO Academy built up a research team for independent development of AI chips. Alibaba Group has also invested in chip companies such as Cambrian, DeePhi Tech, Kneron, and ASR Microelectronics.
NO.9 Naura Technology Group And Akrion Systems
Value: US$15 million
On January 16th 2018, Beijing-based NAURA Microelectronics Equipment successfully acquired the surface preparation business of Pennsylvania-based Akrion Systems. Upon completion of the transaction, the new entity NAURA Akrion Inc. became a subsidiary of NAURA in the United States.
Post-acquisition NAURA has a more comprehensive business layout from downstream to upstream, and an opportunity to break into the international market as a Electronic device and semiconductor provider.
NO.8 Xilinx and DeePhi Tech
Value: Industry estimate US$300 million
On July 17th, 2018, Xilinx Inc.announced it would acquire Beijing-based startup DeePhi Technology.
As the inventor of the FPGA, Xilinx previously had a strong partnership with DeePhi Technology on development of two FPGA-based DPUs: the Aristotle Architecture and the Descartes Architecture. This business acquisition will make Xilinx more competitive among world leading AI chipmakers.
NO.7 Lumentum and Oclaro
Value: US$1.8 billion in cash and stock
In December 2018, leading optical products manufacturer Lumentum announced it had completed the acquisition of Oclaro, a leader in optical components and modules.
According to Lumentum’s President and CEO Alan, “Oclaro brings its leading Indium Phosphide laser and Photonic Integrated Circuit and coherent component and module capabilities to Lumentum. The combined company will drive innovation faster and accelerate the development of products to enable our customers to win.”
NO.6 Wingtech Technology and Nexperia
Value: US$3.97 billion
On Dec 3rd, 2018, China’s Wingtech Technology announced plans to jointly acquire a controlling stake of Dutch semiconductor company Nexperia, with investors including Gree Electric Appliances.
As one of the world’s largest phone ODMs, Wingtech’s move towards the upstream in semiconductors not only ensures its supply chain stability on key semiconductor parts, but also enhances the company’s core business competitiveness.
NO.5 Marvell and Cavium
Value: US$6 billion
On July 6th, 2018, Marvell Technology announced the completion of its acquisition of Cavium. As a leading semiconductor company focusing on the upstream chain, the purchase of its competitor Cavium enabled Marvell to quickly maximize its business strength with combined resources, including the leading product portfolios of Marvell’s HDD and SSD controllers, networking and wireless connectivity solutions, and Cavium’s multi-core processing, networking communications, and storage connectivity and security solutions.
Marvell expects the combined company to expand and diversify the total available market opportunity to over $16 billion.
NO.4 Renesas and IDT
Value: US$6.7 billion
On September 10th, 2018, Renesas Electronics Corporation and Integrated Device Technology (IDT) announced a definitive agreement for Renesas’s acquisition of IDT. The transaction was closed on March 29th, 2019.
The acquisition of IDT’s products for data sensing, storage and interconnect are key to supporting Renesas’s fast growth data economy-related applications and enhancing the company’s capability in the industrial and automotive segments.
NO.3 Microchip Technology and Microsemi
Value: US$8.35 billion
Leading semiconductor manufacturer Microchip Technology Inc announced in March 2018 that it would purchase Microsemi Corp, the largest U.S. commercial supplier of military and aerospace semiconductor equipment.
Microchip said the translation will considerably expand its serviceable markets, including communications, aerospace and defense, to more than US$50 billion.
NO.2 Bain consortium and Toshiba memory
Value: US$18 billion
On June 1st, 2018, Japan’s Toshiba announced its chip unit Toshiba Memory Corporation (TMC) had been sold to a Bain Capital-led consortium, to cover billions of dollars of losses linked to the bankruptcy of US nuclear unit Westinghouse Electric Company.
The purchasing consortium included Apple, Dell, SK Hynix and Seagate Technology, etc. However, as a TMC competitor, South Korean chipmaker SK Hynix was firewalled from accessing TMC proprietary information.
NO.1 BRoadcom and CA Technologies
Value: US$18.9 Billion
On Nov 5th, 2018, Broadcom Inc. announced it had completed the acquisition of CA Technologies to build one of the world’s leading infrastructure technology companies. Upon closing of the transaction, Broadcom obtained new product lines, expanded software solutions, and received solid cash flow for further business integration and growth.
After the failure of Broadcom-Qualcomm merger, the acquisition of CA was a strategic success for Broadcom, allowing it to continue to focus on acquiring established mission critical technology businesses.
Despite US M&A activity declined in 2018, transactions are continuing, with some of the most valuable deals made in China and Japan. These countries must however deal with technology limitations for general-purpose chip and high-precision semiconductor R&D if they hope to overcome US dominance in the global semiconductor industry.
Heading into the second quarter of 2019, M&A is still considered one of the top strategic priorities for semiconductor companies after R&D investing. On March 11, 2019, NVIDIA announced it will acquire Mellanox Technologies for US$6.9 billion. On March 29, 2019, ON Semiconductor Corporation said it was acquiring Quantenna Communications for about $1.07 billion. On April 24th, 2019, Xilinx (XLNX) reported the acquisition of Solarflare Communications, a deal that is expected to be closed in the 2nd quarter of 2020 (no price was disclosed).
Facing challenges including a possible global economic slowdown, increasing R&D costs and cross-border regulation issues such as trade policy and tariffs, semiconductor market confidence is now mixed. The global industry however still exhibits a strong long-term outlook, driven by the continuously growing high demand across a broad range of practical applications. As KPMG stresses in a recent report, “As the backbone of the connected world, the [semiconductor] industry’s future is bright.”
Source: Synced China
Localization: Tingting Cao | Editor: Michael Sarazen