Semiconductor Mergers and Acquisitions Reach Peak

By Eugenia Liu and Christian Dieseldorff, SEMI

As the semiconductor industry matures, many semiconductor companies have been divesting, investing or filling out businesses, technologies, and product lines based on newly honed strategies. In 2015, over $60 billion worth of merger and acquisition (M&A) activity was recorded among semiconductor companies. Based on anticipated deal closures, 2016 and 2017 may top $116 billion and $93 billion in M&A transactions, respectively.  

International M&A deals in the past year have significantly reshaped the industry. With an estimated over $116 billion in M&A deals, 2016 appears to be the peak of an intense M&A frenzy. These mergers and acquisitions are primarily driving efforts to grow scale and competitiveness in the maturing market ─  and as customers increasingly look fo integrated products. China’s strategic interest in building its own semiconductor supply chain and historically cheap interest rates also make M&A an attractive option.

There were over sixty transactions announced in 2016 with 49 transactions closing in 2016. Three of the deals make up over 75 percent of the total value of the M&A deals this year. These include Avago with Broadcom valued at $37 billion, now Broadcom, which is now well positioned to enable the Internet of Things (IoT) and related connectivity. Softbank with ARM Holdings valued at $32 billion will lead Smart Silicon applications. Western Digital with Sandisk valued at $19 billion has a full suite of data storage offerings to support Big Data. 

SEMI is tracking twelve deals valued in excess of $93 billion expected to close in 2017.  The largest M&A deal to close in 2017 is anticipated to be Qualcomm and NXP Semiconductors valued at $47 billion and is also the largest acquisition in Qualcomm’s history. The second highest value deal is between Analog Device Inc. and Linear Technology Group valued at $14.8 billion. These two deals alone, comprise 66 percent of the total deals currently on the horizon for 2017. These high purchases prices reflect new high market capitalizations, setting these new entities apart from their competitors.

For several years, M&A activity further down the semiconductor supply chain among equipment and materials suppliers has been taking place. With consolidation among device makers, foundries and fabless companies, further pricing pressure and tougher negotiations are likely to create pressure for suppliers to expand into adjacent and new emerging markets that offer possibilities of sustainable growth.

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Global Update
December 6, 2016