Source: The content of this article comes from [all about circuits], thank you.
With recent mega-mergers like Renesas' acquisition of Dialog and Analog's acquisition of Maxim Integrated, let's look at the impact of consolidation in the semiconductor industry.
From a high-level market perspective, the semiconductor industry has been following some interesting trends in recent years. Specifically, a large number of mergers and acquisitions (M&As) have come to fruition in 2021 alone, and more are on the way.
The value of semiconductor M&A agreements. Image
courtesy of IC Insights
This article will cover a range of recently completed mergers and acquisitions and address more important questions such as what is driving this trend and how does it impact the semiconductor industry?
Recent Mergers and Acquisitions
Recently, three prominent M&A events have taken place:
-
Renesas Electronics acquires Dialog Semiconductor
-
Analog Devices (ADI) Acquires Maxim Integrated
-
Nexperia acquires Newport Wafer Fab (NWF)
The first notable merger was Renesas Electronics' acquisition of Dialog Semiconductor. Renesas representatives said the investment benefits the company, enabling it to expand its capabilities in the IoT space with Dialog's portfolio of low-power technologies. Particularly mentioned are Dialog's BLE, WiFi, and audio SoCs, which Renesas believes can complement its current MCU portfolio. In addition to this, the company can also benefit from an expanded engineering and design scale, resulting in faster time to market.
The second big merger of 2021 was ADI's acquisition of Maxim Integrated. The acquisition was designed to provide Analog with additional domain expertise and capabilities, opening up and positioning for a variety of key market growth trends. Specifically, ADI believes that Maxim's strength in the automotive and data center markets will be invaluable as it seeks to establish itself as a dominant player in both areas.
The final merger of interests is Nexperia's acquisition of NWF. Nexperia has been a customer of NWF for many years and now, through the acquisition, Nexperia has acquired 100% ownership of the semiconductor production facility. The wafer fab currently has a capacity of more than 35,000 200mm wafers per month, including technologies ranging from standard MOSFETs to trench IGBTs, which are the main products in Nexperia's product portfolio. In addition to the increase in production, Nexperia also believes that they benefit from NWF's significantly enhanced supply capabilities for automotive qualified products.
While there are some major advantages to these companies on the buying side; why is this shift toward integration happening among larger and larger companies?
With so many non-trivial acquisitions in 2021, we have to ask ourselves: Why did this happen? There may not be one “right” answer, but generally speaking, there are a few things to say.
One explanation
is that the market has become increasingly competitive since the turn of the century. In 2008, the top 10 semiconductor companies collectively controlled about 46% of the market, while the rest of the industry controlled the other 54%.
Fast forward more than a decade to 2020, and today it appears that the top 10 semiconductor companies collectively own 55% of the market share, with the rest of the industry controlling 45%.
Global market share of semiconductor companies from 2008 to 2020. Image
provided by Statista
This shift could mean that the industry as a whole has been moving toward consolidation, with more and more market share controlled by large companies over time.
One setback to this shift is that it can make it increasingly difficult for smaller companies to gain a significant foothold on their own, leading to the need for consolidation (i.e., mergers and acquisitions). To compete in today’s marketplace, companies often need both breadth and depth in their product offerings, which is nearly impossible to achieve without the scale and diversity that mergers bring.
Overall, this consolidation movement may have some impact on the semiconductor industry.
Supporters of this market trend may believe that integration can provide better products that are more cohesive. Instead of buying an MCU from one company, an SoC from another, and a power solution from a third company, all three solutions can be provided by one company. In this scenario, system design and component integration becomes much easier because all components are designed to work together.
To free market supporters, on the other hand, this trend may seem a little worrisome.
The theory is that if a few groups own all the market share, there will be less competition in the long run, leading to less diversity, innovation, and consumer choice. While this view may seem a bit Orwellian, Moore's Law is an economic law driven by competition, and if competition declines, so too may innovation.
Due to the lack of new companies
becoming major players in the industry, this trend seems to have set in. Today the story is that a new, innovative company will eventually be acquired and absorbed into the fold of some larger semiconductor giant. Conversely, 50 years ago, this innovative company might have grown into a semiconductor giant in its own right.
Overall, consolidation in the semiconductor industry has increased in recent years, and this trend is expected to continue in the near future. While this trend may come as a shock to some and be welcomed by others, only time will tell what consequences it will have.
*Disclaimer: This article is originally written by the author. The content of the article is the author's personal opinion. Semiconductor Industry Observer reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Observer agrees or supports this point of view. If you have any objections, please contact Semiconductor Industry Observer.
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