Semiconductors M&A Spree Cools Down

30 July, 2017

Total value of semiconductor's acquisitions in 2016 were nearly $100 billion, while 1H17 deals reaching just $1.4 billion. Is it over? NXP has a different opinion

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Qualcomm HQ

Qualcomm is still waiting to receive all the needed the approvals for its $39 billion bid for all outstanding common shares of NXP Semiconductors, and lately even extended the period of its cash tender offer to August 24, 2017. But, while Qualcomm is restlessly push to finalize one of the the biggest semiconductor’s deals, it seems the recent wave of mergers and acquisitions cools down.

A recent report published by IC Insights suggest that the value of Semiconductor Industry M&A deals slows dramatically in 1H17. Although numerous small deals have been made, “but mega-deals have yet to surface this year.” The research firm says that the unprecedented flood of merger and acquisition agreements that swept through the industry in the past 2 years slowed to a trickle in the first half of 2017, with the combined value of about a dozen transactions announced in 1H17 reaching just $1.4 billion.

It’s Not Over Until it’s Over

CEO of NXP, Richard Clemmer

So, is it really over? Not everybody agree. Recently, Techtime had the opportunity to meet the President and CEO of NXP, Richard Clemmer, and asked him about the future of the semiconductors industry. Although he did not said explicitly, it was understood that he expects more acquisitions in the near future.

Clemmer:  “The double-digit growth of the semiconductor’s sales is over. The new slower rates push the companies to emerging markets and value added products. This is why as the industry gets more mature, there will be less companies but bigger ones. Even our costumers prefer smaller and bigger companies.  The car manufacturers, for example, want to work with few suppliers with a wide range of products an services. I believe the future belongs to small number of big companies who provide complete solutions.”

Where is the Next Mega-deal?

IC Insights: “In the first halves of 2016 and the record-high M&A year of 2015, the combined value of acquisition agreements in 1H16 and 1H15 totaled $4.6 billion and $72.6 billion, respectively.  Last year, M&A got off to a slow start, but several large transactions announced in 3Q16 pushed the 2016 total value in semiconductor acquisitions to nearly $100 billion and within striking distance of the all-time high of $107.3 billion set in 2015.”

Semicondutors Mergers 2017The analysts estimates that a few major semiconductor acquisitions were pending or rumored to be in the works during July 2017, but it is unlikely that a 2H17 surge in purchase agreements will bring this year’s M&A total value anywhere close to those of 2016 and 2015. The big difference between semiconductor M&A activity in 2017 and the prior two years has been the lack of mega-deals. Thus far, only one transaction in 2017 has topped a half billion dollars (MaxLinear’s $687 million cash acquisition of Exar).

There were seven announced acquisitions with values of more than $1 billion in 2016 (three of which were over $10 billion) and 10 in 2015 (four of which were over $10 billion). This summary excludes Intel’s planned $15.3 billion purchase of Mobileye, an Israeli-based provider of digital imaging technology for autonomous vehicles, beacause IC Insights’ M&A list covers only semiconductor suppliers, not software and systems businesses.

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