Merger and acquisition (M&A) agreements in the semiconductor industry total more than $50 billion in 2016, according to IC Insights. Although semiconductor M&As reached an historic high of $103.8 billion in 2015, this year is shaping up to be the second largest year for M&A announcements in the chip industry, said the market researcher, which is attributed to three major deals in the third quarter totaling $51 billion.
In the first half of the year between January and June, the value of transactions totaled $4.3 billion compared to $62.6 billion in the same period in 2015. It wasn’t until the third quarter when three major deals - SoftBank's purchase of ARM, Analog Devices' purchase of Linear Technology, and Renesas' potential acquisition of Intersil – ensured that “2016 will be second only to 2015 in terms of the total value of announced semiconductor M&A transactions,” said IC Insights.
As of the mid-September, semiconductor acquisition agreements in 2016 was valued at $55.3 billion, compared to $79.1 billion in the first three quarters of 2015, which is 43 percent higher than last year, said IC Insights.
“In the first three quarters of 2016, we have 18 acquisition agreements being announced (including this week's deal struck by China's Shanhai Capital to buy Analogix in Santa Clara, Calif., for more than $500 million), said Rob Lineback, senior market research analyst at IC Insights. “This week's announcement of Analogix being acquired brings the 2016 M&A total to $55.8 billion.”
The market researcher attributes the continued M&As to offsetting slower growth in many end-use equipment markets including smartphones, PCs, and tablets, and to expand into new markets such as the Internet of Things (IoT), wearable electronics and certain areas of embedded electronics such as highly-automated automotive systems.
“China's goal of boosting its domestic IC industry is also driving M&A,” said IC Insights.
However, a big difference between the wave of acquisitions in 2015 versus the “nearly 20 deals in 2016 is that a significant number of transactions this year are for parts of businesses, divisions, product lines, technologies, or certain assets of companies,” said IC Insights. “This year has seen a surge in the agreements in which semiconductor companies are divesting or filling out product lines and technologies for newly honed strategies in the second half of this decade.”
A few examples include Cypress’ acquisition of Broadcom’s Wireless Internet of Things (IoT) business and related assets in an all-cash transaction valued at $550 million, which strengthens its position in key embedded systems markets and the consumer IoT market.
Another recent asset acquisition is STMicroelectronics’ acquisition of ams’ assets related to NFC and RFID reader business, acquiring intellectual property, technologies, products and business complementary to its secure microcontroller solutions.
In some instances, the sell-off of specific businesses or products was driven by regulatory issues. ON Semiconductor, for example, was forced to sell its IGBT product line in order to move ahead with its acquisition of Fairchild Semiconductor. A similar situation occurred when NXP acquired Freescale. The company had to sell its RF power transistor products to satisfy the regulatory agency reviewing the acquisition, Lineback said in a previous discussion.