SAN FRANCISCO—The unprecedented wave of semiconductor industry consolidation over the past three years may finally be slowing down. Or it it?
A general lull in major deals announced during the first month of the year may be nothing more than a pause before the M&A feeding frenzy resumes. Speculation is swirling right now around Toshiba Corp.’s semiconductor business, which the Japanese giant is reportedly considering spinning off.
“I’m not ready to declare the acquisition wave over yet,” said Rob Lineback, a senior market research analyst at IC Insights, in an interview with EE Times. “It’s a little bit like the ocean—the tide kind of rises and falls.”
Tom Hackenberg, a principal analyst for embedded processors at IHS Markit, also believes that the wave of acquisitions is not over. “I certainly expect more consolidation,” Hackenburg told EE Times.
Still, the numbers show that consolidation did slow down—albeit just a tad—last year. Nevertheless, 2016 was a big year for acquisitions by historical standards.
The total value of semiconductor industry acquisitions announced in 2016 came in at roughly $98.5 billion, down from a record $103.3 billion in 2015, according to market research firm IC Insights Inc. Both years’ totals represented about eight times the average annual value of semiconductor industry M&A activity over the previous five years, $12.8 billion, the firm said.
In all, there were about 24 major semiconductor industry acquisitions announced in 2016, down from 30 in 2015, IC Insights said.
Lineback said he expects 2017 to shape up a lot like 2016 in terms of M&A activity. In the first half of last year, acquisition announcements slowed down as the industry “digested” deals announced in 2015, with a comparatively small $4.5 billion worth of deals announced. But in the second half of last year the wave intensified, resulting in $94 billion worth of deals, including blockbuster deals like Qualcomm’s $39 billion acquisition of NXP Semiconductors and Softbank’s $32 billion deal to buy ARM.
Lineback noted that the stock market has rallied in recent months and that the cost to acquire chip companies is up noticeably from where it was a year ago or two years ago.
Asked what companies might still be attractive acquisition targets, Lineback pointed to several firms that have been the target of M&A speculation for the past year, including analog/mixed-signal chip vendor Maxim Integrated Products Inc., programmable logic vendor Xilinx Inc., network processor vendor Cavium Inc. and Apple iPhone supplier Skyworks Solutions Inc.
“Those companies that didn’t make any big acquisitions ended up sticking out as possible acquisition targets,” Lineback said. “People are waiting to see if big companies like TI that didn’t make any big acquisitions lately will do so.”
Hackenberg declined to speculate on semiconductor companies that may be ripe for acquisition. But he said that continued consolidation will be driven by, among other things, transitions to new materials and technologies as the semiconductor industry grapples with the increased cost of chip manufacturing at the most advanced nodes.
—Dylan McGrath covers the semiconductor industry and business news for EE Times.