IC Insights Bulletin: M&A Activity Continues Through Uncertain Business Climate

M&A Activity Continues Through Uncertain Business Climate
Slowing economic growth in China and a cloudy global economic picture added to list of reasons for ongoing M&A activity in 2015.

In July 2015, IC Insights examined the huge surge of M&A activity in the IC industry during the first six months of 2015. In just the first half of 2015, announced semiconductor acquisition agreements had a combined total value of $72.6 billion, which was nearly 6x the annual average for M&A deals struck during the five previous years (2010-2014).  With Dialog Semiconductor’s announced plan to acquire Atmel, the total M&A value has now reached nearly $77.0 billion.  Figure 1 summarizes major M&A deals so far this year.
Figure 1

The list does not include other, smaller (<$100 million) acquisitions such as Rohm Semiconductor’s $70 million acquisition of Powervation, an Ireland-based supplier of digital power ICs in July 2015 or Qualcomm’s plan to purchase Ikanos for $47 million, which is expected to close by the end of 2015.

Additionally, several large M&A agreements announced last year have closed in 2015.  These include the following:
• RF Micro Devices and TriQuint Semiconductor officially completed their Qorvo merger at the start of 2015.

• Qualcomm completed its acquisition of CSR in August 2015.  CSR's operations became a subsidiary of Qualcomm and were renamed Qualcomm Technologies International.   The transition was valued at $2.4 billion.

• Cypress completed its acquisition and merger with Spansion in March 2015.  The all-stock transaction had a value of $5 billion.

• Infineon completed its $3.0 billion acquisition of power-semiconductor pioneer and rival International Rectifier in January 2015.

• IBM completed the sale of its Microelectronics business, including its 300mm and 200mm wafer fabs, to GlobalFoundries in July 2015.
IC Insights has previously noted that the unprecedented M&A activity is indicative of IC suppliers experiencing slower sales in their existing market segments and the need to broaden their businesses to stay in favor with investors.  Rising costs of product development and advanced technologies are also driving the need to become bigger and grow sales at higher rates in the second half of this decade.  The emergence of and huge market potential for the Internet of Things (IoT) is causing major IC suppliers to reset their strategies and quickly fill in missing pieces in their product portfolios. China’s ambitious goal to become self-sufficient in semiconductors and reduce imports of ICs from foreign suppliers has also launched a number of acquisitions by Chinese companies and investment groups.

IC Insights believes that the increasing number of mergers and acquisitions, leading to fewer major IC manufacturers and suppliers, is one of major changes in the supply base that illustrate the maturing of the industry.  In addition to the monstrous M&A wave currently taking place, trends such as the lack of any new entry points for startup IC manufacturers, the strong movement to the fab-lite business model, and the declining capex as a percent of sales ratio, all promise to dramatically reshape the semiconductor industry landscape over the next five years.

Report Details:  The 2015 McClean Report

Further details on the latest semiconductor industry trends are included in the 185-page Mid-Year Update to The McClean Report—A Complete Analysis and Forecast of the Integrated Circuit Industry. A subscription to The McClean Report includes free monthly updates from March through November (including the Mid-Year Report), and free access to subscriber-only webinars throughout the year.  An individual-user license to the 2015 edition of The McClean Report is priced at $3,590 and includes an Internet access password.  A multi-user worldwide corporate license is available for $6,590.
To review additional information about IC Insights’ new and existing market research reports and services please visit our website: www.icinsights.com.
More Information Contact
For more information regarding this Research Bulletin, please contact Rob Lineback, Senior Market Research Analyst at IC Insights. Phone: +1-817-731-0424, email: Email Contact

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