Chip M&A Value in 2-Year Slump

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Chip-company mergers or acquisitions (M&A) can be disruptive to the electronics supply chain. Post-merger, chip suppliers often consolidate product lines, discontinue older or less-profitable components and/or consolidate their distribution roster. The latter causes headaches for buyers because in some cases they can no longer purchase component lines from their preferred distributor.

The most recent example was Analog Devices’ acquisition of Maxim Integrated Products last year. Consistent with its channel strategy, ADI consolidated Maxim’s global volume business under a single distributor, Arrow Electronics Inc.

On the other hand, mergers can expand the range of products and services available to end-customers. The chip M&A deals of the first half of 2022 – valued at $20.6 billion — should only extend suppliers’ capabilities. So far, four large agreements have been announced, IC Insights reports:

• A Chinese investment consortium agreed to take over bankrupt semiconductor conglomerate Tsinghua Unigroup.  The company was debt-ridden after a decade of building up its semiconductor holdings as part of an effort to make China self-sufficient in a number of chip segments.  In April 2022, government-backed Beijing Jianguang Asset Management Co. (JAC Capital) led a group of investment firms to complete a $9.4 billion injection of payments into Tsinghua Unigroup, which runs Yangtze Memory Technologies—China’s leading domestic maker of NAND flash memory ICs.
• The second largest chip acquisition agreement in 1H22 was Intel’s $5.4 billion deal to buy pure-play wafer foundry Tower Semiconductor in Israel.  The cash purchase, announced in February 2022, is expected to be completed by early 2023 and is part of Intel’s push into the silicon foundry business.
• In May 2022, California-based MaxLinear announced an agreement to buy Silicon Motion in Taiwan for $3.8 billion in cash and stock.  This acquisition is expected to be completed in 1H23 and will add controller ICs for NAND flash storage to MaxLinear’s lineup of RF and mixed-signal products.
• AMD, in April 2022, announced a $1.9 billion agreement to buy packet-processor and cloud-computing software startup Pensando Systems in Milpitas, California, to boost its presence in the data center market and increase competition with Intel.  The acquisition of Pensando was finished in May 2022; three months after AMD completed its purchase of Xilinx in February 2022.

The Xilinx acquisition became the largest semiconductor M&A deal in history because the final acquisition value climbed to $49.8 billion—42 percent higher than the initial $35 billion estimate when the purchase was announced in October 2020—because of the strong increase in AMD’s stock price during the last two years.

The four biggest deals this year were each valued between $1.9 billion and $9.4 billion, according to IC Insights, pushing the combined 1H22 M&A total to $20.6 billion. In comparison, the first-half 2021 total value of M&A agreements for semiconductor companies, assets, product lines, and related business operations totaled $18.2 billion, including four that were announced with price tags between $1.4 billion and $7.1 billion.  In the last six months of 2021, the combined value of new chip M&A deals was $4.4 billion—the lowest total for the second half of a year since early last decade.

Deals in the chip sector are also under more regulatory scrutiny regarding competition and national security, according to financial services firm S&P Global, and are therefore harder to close. Regulatory resistance contributed to the termination of NVIDIA Corp.’s $38.59 billion offer to buy Arm Ltd. from SoftBank Group Corp.

Editor’s note: EPSNews is part of AspenCore Media, which is owned by Arrow Electronics Inc.