Industry falls from peak IC industry merger tide rises against city

[sidi network news] mergers and acquisitions in succession, heavy news, chip industry is not quite calm recently. In March, NXP, the semiconductor company, agreed to buy Freescale, a peer, for $11.8bn. At the end of May, Avago reached a definitive agreement to buy Broadcom for $37bn in cash and shares. Intel's (INTC) acquisition of programmable logic chip giant Altera (ALTER) was followed earlier this year by a $16.7 billion deal, Intel's largest ever acquisition.

A flurry of mergers and acquisitions has knocked down the dominoes reshaping the semiconductor industry. Some industry experts point out that mergers and acquisitions in an industry during a period of high market growth are often for the purpose of acquiring certain technologies or specific markets. In the past two years, the semiconductor market is entering a mature and stable growth period, and the growth rate will drop to about 5 percentage points. This period of mergers and acquisitions, revenue synergy is only its surface, its essence is to emphasize cost synergy and economies of scale.

"The semiconductor industry is so mature and the design cycle is so long that it costs at least a few billion dollars to build a wafer plant and a few million dollars to design a chip... We've reached a point where the industry is so mature that it's too hard to live on your own and everyone has to stick together. And so these 'marriages' keep coming up." "Said one industry analyst.

Win-win logic of M&A

It is very important to find the right partner. The above mergers and acquisitions show a common feature: the two sides of the mergers and acquisitions overlap in terms of products and businesses, and there is a great deal of complementarity. The overlap means the combination of the strong, and the complementarity means mutual blood. The most important point is that the two sides often have a high consistency in the supply chain and customer groups, and the deep integration of the industrial chain brings about the reduction of costs and the improvement of discourse power.

The combination of NXP and Freescale will have a profound impact on the semiconductor industry's mixed-signal, MCU and RF amplifiers. Sensors are Freescale's strengths, NFC is NXP's strengths, and mixed signal, MCU and RF amplifier are both strong, the combination of the two gives birth to a strong enterprise in the automotive and industrial semiconductor fields.

Broadcom, created by the merger of Avaco and Broadcom, is bigger than Texas Instruments in size and has narrowed the gap with Qualcomm. Avacco's strengths are power amplifiers (PA) and RF components, and it is the leading supplier of front-end RF modules (FEM) to giants such as Apple and Samsung. Broadcom has been deeply involved in the wired and wireless network chip market for many years and has a high market share. Broadcom's business will cover front-end FEM or PA, network connection and terminal IC, as well as optical communication chips, etc., becoming a highly competitive semiconductor manufacturer with complete solutions.

Some industry veterans believe that in the short term, the new broadcom will bring greater impact to the terminal and network chip manufacturers such as Qualcomm, MediaTek and RuiTek, for example, Qualcomm and MediaTek have adopted Anwar high PA or FEM in the reference design of the mobile phone platform. In the long run, in the era of the Internet of Things, the power of the new Broadcom will be further released, and its "terrible" solution integrity, industry status and operation scale will give it more say in standard setting. The huge market for the Internet of Things may be the underlying appeal of the merger.

As for Intel's acquisition of Altera, the two seemingly unrelated, but in fact, Intel will be able to integrate CPU technology and FPGA technology. The importance of FPGA to Intel is mainly reflected in three aspects: First, in the PC market shrinking, the mobile market has been slow to start the situation, the server chip has become the profit growth point of Intel, Intel currently provides customers with the integration of third-party FPGA solutions, and with FPGA technology, Intel can undoubtedly enrich its own server product line. Second, the production of FPGA products in our own factories will effectively improve capacity utilization and unlock the value of advanced manufacturing processes. Third, FPGA is also widely used in the Internet of Things market chip technology, mainly used in network and automation systems, and can be complementary to Intel's existing terminal chip technology.

The Matthew Effect is starting to take hold

Semiconductor industry giants in the struggle between cost control and market size, how to choose? Is it acquisition, acquisition or marginalization? The era of oligarchic competition is coming, and the Matthew effect of the strong getting stronger and the weak getting weaker may gradually appear. However, the merger wave will not end here. Lone bosses seize the last golden window to launch action, or it is a wise choice to avoid being eliminated.

The collective action of several of the world's top 20 semiconductor vendors has left the rest with less room to choose, and that room will only get smaller over time.

It is reported that before NXP's acquisition of Freescale, Anwagao had held several high-level talks with Freescale on the acquisition issue, and had even finalized the main acquisition plan. As the news leaked, Freescale's share price soared and the deal fell through. NXP then took the opportunity to complete the Freescale acquisition, and Avalgo eventually sought a new Broadcom acquisition, which shows how fast the semiconductor industry M&A trend momentum.

The industry reshuffle has already begun, inaction may be a "chronic suicide", a variety of mergers and acquisitions rumors are still continuing to ferment. Including Atmel, Lattice, Marvell technology (Marvell) have not ruled out the news of industrial integration. Ledith executives are outspoken and Qualcomm and MediaTek is very "suitable". Marvell Technology, on the other hand, is said to be a possible acquisition by Datang Telecom, a Chinese company. Cao Bin, chairman of Datang Telecom Technology Co., Ltd. said in an interview that any company related to its business could be a target.