As we approach the new year and speculations fly for what to anticipate in the coming months, let’s take a moment to reflect on 2016 and the changes that have occurred throughout the semiconductor space.This year has proven to be the second largest year ever for merger and acquisition (M&A) agreements in the industry. Totaling over $50 billion in 2016 by the third quarter, it is only second to 2015’s historic year end high of $103.8 billion in semiconductor M&As.
The continued influx of M&As can be attributed to a strategy of many companies to offset slower growth in many end-use equipment markets such as smartphones, PCs, and tablets, while working to expand into hot markets such as Internet of Things (IoT), wearable electronics, and embedded electronics. Let’s take a look at some of the top M&As of 2016.
1. Qualcomm – NXP Semiconductors
Qualcomm made a strategic move in October by acquiring the Dutch-based company, NXP for $47 billion. This acquisition marks the largest semiconductor deal ever, surpassing Avago Technologies’ $37 billion acquisition of Broadcom Corporation in May 2015. Qualcomm’s goal is to capitalize on emerging trends in IoT, ADAS, and autonomous vehicles. With NXP recently shifting focus on automotive and IoT solutions, the deal makes sense. It will likely make Qualcomm essential to companies that want to develop and manufacture smart technology, including smart cars and smart home devices and appliances, which we will no doubt see more of in the future. Qualcomm hopes that their decision to purchase NXP will basically require every manufacturer fabricating connected devices to rely on them in some shape or form, effectively turning Qualcomm into the elite semiconductor provider the company seeks to be.
2. Softbank Group Corp. – ARM Holdings
In September SoftBank, the Japanese multinational telecommunications, Internet, and semiconductor design corporation completed its transaction to acquire British chip designer ARM for approximately $31 billion. Though ARM only grossed around $1.5 billion last year, ARM-designed chips dominate mobile computing in phones and tablets. Over half of the fifteen billion ARM chips shipped out last year were in mobile devices. SoftBank is clearly another technology company looking to boost their IoT plans, and their investment in the low-power and efficient chips from ARM will likely be a long-term pay off.
3. Analog Devices – Linear Technology
Moving ahead to July 2016, we saw Analog Devices (ADI), one of the most well-established players in the industry, acquire Linear Technology in a $14.8 billion move. The cash and stock deal included a payment from ADI of $60 per share for Linear Tech, which is a 24% premium over Linear’s closing price on the signing date. The merged companies will have a revenue of around $5 billion annually. This combination will bring a unique offering of data converters and power control products to Analog Devices. The companies expect the deal will eventually save $150 million annually through combined operations and elimination of redundancies.
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4. Microchip – Atmel Corporation
A year ago, the $4.6 billion bid by Dialog Semiconductor to acquire fellow silicon giant Atmel Corporation was suddenly outdone by Arizona-based Microchip Technologies. While the actual value of the proposal was less at $3.2 billion, the addition of a cash-and-stock proposal ultimately sealed the deal for these two major players in the microprocessor industry, and the acquisition was finalized in April. Since Microchip and Atmel have often been viewed as direct competitors with the PIC versus AVR series of microcontrollers, it’s both an interesting and exciting move for Microchip.
5. Renesas – Intersil
Renesas, a Japanese supplier of advanced semiconductor solutions, announced in September that it will acquire Intersil Corporation, a leading provider of innovative power management and precision analog solutions. The deal to combine these two long-standing industry leaders was for $22.50 per share in cash, representing an equity value of roughly $3.2 billion. For Renesas, the merge will ideally establish them as a complete solution provider of embedded systems with a highly synergistic, complementary product portfolio targeted largely at opportunities in the IoT, industrial, healthcare, and automotive markets.
6. ON Semiconductor – Fairchild Semiconductor
September also saw the announcement of ON Semiconductor’s acquisition of Fairchild Semiconductor for $2.4 billion. ON Semiconductor is a leading supplier of semiconductor-based solutions from energy efficient power management, analog, and sensors to connectivity, discrete, SoC, and custom devices. Fairchild specializes in analog products such as haptic drivers and batter protection ICs, as well as automotive products like power modules. "The acquisition of Fairchild is a transformative step in our quest to become the premier supplier of power management and analog semiconductor solutions for a wide range of applications and end-markets," said Keith Jackson, president and CEO of ON Semiconductor, in a statement. "Fairchild provides us a platform to aggressively expand our profitability in a highly fragmented industry.”
7. Cypress Semiconductor – Broadcom (Wireless IoT)
Following the trend for the year, Cypress Semiconductor announced in April that it would acquire Broadcom’s wireless IoT business and all related assets in a $550 million cash deal. This includes the company’s Bluetooth, Wi-Fi, and ZigBee IoT product lines and IP, as well as its WICED brand and developer ecosystem. Broadcom’s IoT business unit employs approximately 430 people worldwide and generated $189 million in revenue in the 12 months prior to the deal. The goal is to transform Cypress into a force in IoT and to also gain new market opportunities. With Broadcom’s IoT connectivity products, Cypress will be able to provide connectivity through the MCU, system-on-chip, module and memory technologies, as well as the mature developer ecosystem that IoT designers require. The result is an end-to-end portfolio of embedded solutions and a single IoT design platform.
8. Intel – Movidius Technology
In an effort to bolster its RealSense perceptual technology platform, Intel announced its plans in September to acquire the computer vision startup behind Google’s Project Tango 3D-sensor tech, Movidius. The San Mateo, California based company focusses on developing machine vision technology for IoT devices. At just 8 years young, Movidius employs roughly 180 people among its Silicon Valley, Ireland, and Romania offices. The heart of Movidius’ product is their vision processing unit, which offers a lower-power, high-performance SoC platform for accelerating computing vision applications. They also own some unique algorithms designed to enhance deep learning, depth processing, navigation, and mapping within devices. Although the terms of the deal and transaction price were not disclosed, Intel announced it will be able to incorporate Movidius technology within its RealSense offerings. Intel’s goal in the acquisition is to boost its digital security cameras, robotics, and augmented and virtual reality products.
As we close on 2016, it is apparent that the consolidation wave of the semiconductor industry has continued from 2015. As corporations work to shift focus from maturing markets toward fast-growing segments such as IoT and smart technology, we can expect more transformations in the coming year. Regardless of what happens next in the semiconductor industry, it’s safe to say it will be anything but monotonous.