“Cash-rich China wants to become a global semiconductor player,” according to Greg Wood, Director of Part Content for IHS Markit. During a recent webinar, Wood said China intends to spend $100 billion on domestic semiconductor investment and acquisitions. It’s also acquiring foreign companies. In 2015, WeEn Semiconductor acquired NXP Power Semiconductors for $1.8 billion. ISSI was acquired by a Chinese consortium for $765 million; and Hua Capital Management Co. Ltd. Acquired OmniVision Technologies for $1.9 billion. “I would expect the trend to continue in 2017,” Wood said.
The dollar value of merger and acquisition agreements in 2015 and 2016 were both about eight times greater than the $12.6 billion annual average of M&A announcements in the five previous years (2010-2014), said IC Insights. A total of 27 semiconductor acquisition agreements have had dollar values of $2 billion or more since 1999.
China’s goal of boosting its domestic semiconductor industry has added fuel to the M&A movement, according to IC Insights. While Chinese moves to buy foreign semiconductor suppliers and assets grabbed a great deal of attention and scrutiny by governments wanting to protect national security and industries, U.S. businesses acquiring other companies, product lines, technologies, and assets accounted for 52 percent of the 2015-2016 M&A value, or about $104.5 billion.
Asia-Pacific companies were second among those making semiconductor acquisitions with 23 percent of the $201.5 billion two-year total, or $46.4 billion, IC Insights said. Within the Asia-Pacific region, China represented 4 percent of the total, or $8.3 billion. The purchase of IDMs or parts of those companies accounted for nearly 39 percent of the 2015-2016 total and takeovers of fabless chip suppliers, their product lines, and/or assets representing 45 percent. Acquisitions of semiconductor-design intellectual property suppliers and IP assets accounted for nearly 16 percent of the 2015-2016 M&A value while purchase agreements for wafer-foundry businesses and assets represented just 0.2 percent of the total.
China also intends to become a major player in memory chips, according to IHS Markit. XMC, a contract chip maker owned by the Chinese government, announced it will build a Chinese-owned memory-chip manufacturing plant.
In general, researchers said, recent semiconductor acquisitions have been driven by companies aiming to expand into huge new markets, especially the Internet of Things, wearable electronics, and highly intelligent embedded systems, such as automated driver-assist features in cars and autonomous vehicles in the future.
The pure-play foundry market is forecast to play an increasingly stronger role in the worldwide IC market. More than two dozen acquisition agreements were announced by semiconductor companies worldwide in 2016 with a combined value of $98.5 billion compared to the record-high $103.3 billion in purchases struck in 2015, when over 30 deals were reached, according to IC Insights.
All this activity represents some tremendous supply chain challenges, said Wood, including new chip brands, securing second-source agreements and qualifying parts and vendors for defense-related procurement.