This is just the start of a consolidation that has been needed for some time.
In the U.S. our private equity, Wall Street and hungry execs drive this sort of thing to create Broadcoms and Qualcomms. It will be a Harvard Busienss review case study some day to see how well or poorly China's less capitalistic machinery performs on this task.
True, many aqusitions fail...but sometimes they work...you get either some technology, or some good people, or both...and in the worst case the execs have something to do ;-)...so they can justify their high salaries!
I think we need to take a look at this merger in China context. At a time when Taiwan's MTK is beating China fabless companies at their own game, it's understandable that China wants to see a stronger player than hundreds of small companies nibbling at the low end market.
BTW, Isn't Taiwan doing a pretty good job getting its act together with the MediaTek/Mstar merger, too? It would be interesting to hear stories about any progress on that front and the outlook for further consolidation in Taiwan where there is also the trend to many small companies.