Integrated Device Technology Inc. today will try to strengthen its communications market thrust by announcing plans to acquire Newave Semiconductor Corp., a telecommunications IC design firm based in China.
The proposed $80 million cash buyout will net IDT about 70 design engineers, along with analog and mixed-signal technology critical for voice
processing and transmission. Combined with its own digital switching products, the company will now possess a more complete product line to address the convergence of voice, video, and data traffic on the Internet, said Dave Cote, vice president of marketing and communications ASSPs at IDT, Santa Clara, Calif.
In addition, IDT will acquire a stronger presence in China, which analysts pegged as one of the fastest- growing semiconductor markets for communications applications, and where IDT now derives $20 million to $30 million of its annual revenue.
According to the Semiconductor Industry Association, China's semiconductor consumption is expected to grow 35% this year.
"There are initiatives at the government level [in China] to deploy the latest technology, both in wireless and optical networking," Cote said. "While our goal was not simply to penetrate China, but to get expertise, the fact that Newave is in Shanghai was an added benefit."
IDT stands poised to make further acquisitions along similar lines, Cote noted. In the December 2000 quarter, the company had about $410 million in cash and cash equivalents, according to a report filed with the SEC.
IDT's growth in the communications sector has come mainly from internal momentum. A few years ago, the company set out to drastically reduce its exposure to the low-margin SRAM business by developing application-specific parts. Today commodity SRAM represents 30% of its $1 billion revenue, while communications products-including network switches, high-speed physical- layer devices, and embedded processors-account for 48%.
By the second quarter, IDT expects to start rolling out Newave-developed products into its own channel. The combined telecom product portfolio will initially consist of voice codecs, subscriber line interface circuits, T1/E1 framers, and IDT's time slot interchange digital switching products.
"IDT's worldwide sales force and strong customer base, coupled with its in-house manufacturing capability, will allow us to broaden the reach of our products to customers around the world," said Ying Shum, president and chief executive of Newave.
The deal is expected to be completed by the end of the month, at which time IDT will designate the operation as a subsidiary named IDT-Newave.