Looking back on 2020, the entire semiconductor industry can be described as magnificent and ups and downs. At the beginning of the year, an epidemic swept the world. After a brief setback, the global semiconductor industry rose against the trend, followed by wafer foundry, packaging and testing capacity. Tight, the entire industry chain fell into a panic of “out of stock”…
At the same time, “M&A” has also become an important keyword in the semiconductor industry in 2020. In the second half of the year, large-scale mergers and acquisitions followed one after another. Influential companies are now stirring up the industry together, adding a “magic” color to the semiconductor industry in 2020.
01
“Giant + Giant” scale exceeds 100 billion US dollars
According to the author’s incomplete statistics (see the table below), the number of mergers and acquisitions in the semiconductor industry announced in 2020 is not large, but many transactions involve huge amounts of money. The transaction value of the 6 mergers and acquisitions that occurred in the second half of the year alone exceeded 100 billion US dollars. ($119.5 billion).
Source: Global Semiconductor Watch based on public information
Both the acquirer and the acquiree of these 6 mergers and acquisitions are giants in the semiconductor industry, and there have been “giant confrontations” many times, including the acquisition of Maxim for US$21 billion by Analog Devices, the acquisition of Arm by NVIDIA for US$40 billion, and the acquisition of SK Hynix 90 The acquisition of Intel’s NAND flash memory business for US$35 billion, the acquisition of Xilinx by AMD for US$35 billion, the acquisition of Inphi for US$10 billion, and the US$4.5 billion acquisition of World Creation by Global Wafer.
Analog Devices acquires Maxim
On July 13, 2020, Analog Devices announced that it would acquire Maxim in an all-stock transaction valued at approximately US$21 billion, and the combined company’s total market value exceeded US$68 billion.
Under the terms of the agreement, after the transaction closes, ADI’s current shareholders will own approximately 69% of the combined company, while Maxim shareholders will own approximately 31%. The transaction will strengthen ADI’s leadership in analog semiconductors.
Analog Devices is the world’s leading high-performance analog technology company, and Maxim is committed to developing innovative analog and mixed-signal products and technologies. Relevant data shows that in the global analog chip manufacturers ranking list in 2019, Analog Devices ranked second and Maxim ranked seventh.
Nvidia acquires Arm
On September 14, 2020, Nvidia announced that it would acquire Arm from SoftBank for $40 billion. Nvidia pointed out that the merger aims to create a leading computing company in the era of artificial intelligence; enhance Arm’s research and development capabilities.
Nvidia is the world’s top semiconductor company, and Arm, as the world’s leading semiconductor IP company, has shipped more than 180 billion Arm-based chips, and the merger of the two has caused industry concerns.
Nvidia has promised that with Nvidia, Arm will continue to operate its open licensing model while maintaining global customer neutrality. After the deal, Nvidia plans to retain the Arm name and brand identity and expand its headquarters in Cambridge.
SK Hynix acquires Intel’s NAND flash memory business
On October 20, 2020, SK Hynix announced that it would acquire Intel’s NAND flash memory and storage business for US$9 billion.
After obtaining the relevant licenses, SK Hynix will acquire the NAND SSD business and the Dalian factory from Intel by paying the first phase of consideration of US$7 billion. After that, it is expected that SK Hynix will pay the remaining US$2 billion to acquire the remaining related assets from Intel at the final delivery in March 2025.
Intel will retain its unique Intel Optane™ business, and will continue to manufacture NAND wafers at the Dalian flash memory manufacturing facility and retain intellectual property (IP) related to the manufacture and design of NAND flash memory wafers until the final closing date.
AMD acquires Xilinx
On October 27, 2020, AMD announced that it had reached a definitive agreement with Xilinx to acquire Xilinx in an all-stock deal worth $35 billion.
AMD shareholders will own about 74% of the combined company and Xilinx shareholders will own about 26%, and the transaction is expected to close by the end of 2021.
AMD said that through the acquisition of Xilinx, AMD will be able to provide a portfolio of high-performance processor technologies that combine CPU, GPU, FPGA, adaptive SoC and software expertise to provide leading computing platforms for cloud, edge and end devices. The combined company will jointly explore development opportunities in the data center, gaming, PC, communications, automotive, industrial and other industries.
Meiman acquires Inphi
On October 30, 2020, Meiman announced that it would acquire chip maker Inphi in a “cash + stock” transaction of approximately $10 billion. The combined total enterprise value will be approximately $40 billion.
It is understood that Meiman focuses on providing a complete set of broadband communication and storage solutions, and began to transform into semiconductor solutions for data infrastructure in 2016, while Inphi is an American chip manufacturer specializing in optoelectronic interconnections.
Meiman said that combining Meiman’s copper Ethernet PHY series with Inphi optoelectronics products will create an industry-leading high-speed data interconnection platform serving the enterprise, carrier, data center and automotive markets.
Global Wafer Acquires World Creation
On November 29, 2020, Universal Wafer stated that it is in the final stage of negotiations with Siltron to reach a commercial merger agreement. In December and October, the two parties signed a business merger agreement with a total purchase price of approximately US$4.5 billion.
Universal Wafer promises to keep Siltron’s Burghausen production base in Germany as Siltron’s main R&D center; to ensure that there are sufficient capital expenditures to cover the existing wafer production line; no layoffs or closure of Siltron until the end of 2024. any location in Germany.
It is understood that Global Wafer and Shichuang are the world’s third largest and the world’s fourth largest semiconductor silicon wafer manufacturers respectively. After the successful merger of the two, Global Wafer is expected to become a leading giant in the semiconductor silicon wafer industry.
In addition to the above-mentioned blockbuster acquisitions, such as Dai Luoge’s acquisition of Adesto, Synaptics’ acquisition of Broadcom’s wireless Internet of Things business, and MediaTek’s acquisition of Intel’s power management chip business, etc. have also attracted industry attention.
02
2015 & 2020: Two M&A Peaks
In fact, the trend of mergers and acquisitions in the semiconductor industry has never stopped, but it seems that 2015 and 2020 have become the two peak periods of mergers and acquisitions in the history of the semiconductor industry.
Recalling that in 2015, there were many mergers and acquisitions of tens of billions of dollars in the semiconductor industry, including Avago’s acquisition of Broadcom for US$37 billion, Western Digital’s acquisition of SanDisk for US$19 billion, Intel’s acquisition of Altera for US$16.7 billion, and NXP’s acquisition of 167 billion US dollars. The acquisition of Freescale for USD 100 million (including debts), etc., the transaction value of the above four mergers and acquisitions has reached nearly USD 90 billion.
In addition, mergers and acquisitions in the semiconductor industry in 2015 include the acquisition of OmniVision by a Chinese consortium for $1.9 billion, Qualcomm’s acquisition of CSR for $2.4 billion, and ON Semiconductor’s acquisition of Fairchild Semiconductor for $2.4 billion.
Similar to 2015, there will be many blockbuster mergers and acquisitions in the semiconductor industry in 2020. Comparing 2015 and 2020, it is not difficult to find that the semiconductor mergers and acquisitions in these two years have the characteristics of large industry influence on both sides of the transaction and a large amount of money involved in a single transaction. Whether it is Avago, Broadcom, Western Digital, SanDisk, Intel, NXP, etc. in 2015, or Nvidia, Arm, AMD, Xilinx, etc. in 2020, they are all giants in the semiconductor industry, and the amount of mergers and acquisitions is also large to the tens of billions of dollars.
Source: Global Semiconductor Watch based on public information
However, in contrast, the amount involved in a single merger in 2020 is even larger. For example, the amount of Nvidia’s acquisition of Arm and AMD’s acquisition of Xilinx alone has reached $75 billion. Excluding the two terminated mergers and acquisitions of Broadcom and Qualcomm and Qualcomm’s acquisition of NXP, three of the world’s top five large-scale semiconductor mergers and acquisitions in 2020, of which Nvidia’s $40 billion acquisition of Arm has the highest transaction value.
In addition, semiconductor mergers and acquisitions in 2020 also appear to be more concentrated in terms of time, and come more suddenly and violently-the first half of the year was calm, and in July, Analog Devices took the lead in kicking off this merger drama, and then in just four months Over time, blockbuster mergers and acquisitions involving a number of semiconductor industry giants have hit one after another, and three were officially announced in October.
At present, 2020 has surpassed 2015 to become the year with the largest merger and acquisition value in the history of the semiconductor industry, but several major mergers and acquisitions are still in progress, especially whether the transaction of Nvidia’s acquisition of Arm with the largest merger value can smoothly pass global government supervision Institutional approval is still unknown.
Yao Jiayang, an analyst at TrendForce, said that in the past, most of the semiconductor mergers and acquisitions were “big to eat”, but the amount of mergers and acquisitions has been escalating. This year is mainly due to the blessing of the capital market. Because the top semiconductor industry players Under the circumstance that the revenue scale of the company is constantly escalating, if there are semiconductor mergers and acquisitions in the future, if the funds allow, I am afraid that there will be “big eats” sky-high acquisition amounts.
Therefore, 2020 may be the biggest year for mergers and acquisitions at this stage, but it may be replaced in the future.
03
Behind this wave of semiconductor mergers and acquisitions…
At present, the huge wave of semiconductor mergers and acquisitions in 2020 has been set off. Although the final result is still unknown, many people have been thinking: What is the driving force behind this wave? If the merger is completed, what impact will it have on the industry?
Looking back at the long history of the development of the semiconductor industry in the past, it is not difficult to find that mergers and acquisitions have always been an important means for the development and growth of semiconductor companies. However, the global spread of the new coronavirus epidemic in 2020 has affected the global economy and the upstream and downstream of the semiconductor industry to varying degrees. There has also been such a large-scale merger and acquisition, which makes many people in the industry puzzled.
In this regard, the industry believes that the loose monetary policy of the United States this year may be an important driving force.
Yao Jiayang said that judging from the acquisitions in the second half of 2020, most of the US-based semiconductor companies launched acquisitions. The reason is that the US government has adopted a loose monetary policy, which has made the capital market at a high point, and many semiconductor manufacturers have launched acquisitions. With abundant cash, it would be a very reasonable choice to take acquisitions to strengthen the inadequacy of their own product lines.
Taking AMD’s acquisition of Xilinx as an example, Yao Jiayang pointed out that whether AMD is in automotive, AI, 5G and other application fields, compared to Intel and NVIDIA, AMD’s right to speak is almost zero, but AMD has performed well this year. , coupled with the drive of the US capital market, there will naturally be an acquisition strategy.
Another industry insider said that from the perspective of the acquiree, in 2020, the stock prices of many semiconductor manufacturers will continue to rise, and the overall market value will increase, and the overall market value of some manufacturers has even doubled. bigger valuation. We can see that most of these large-scale mergers and acquisitions have adopted the “stock + cash” transaction method. Among them, AMD’s acquisition of Xilinx has adopted an all-stock transaction method.
So, if these “giant + giant” mergers and acquisitions are successful, what impact will it have on the semiconductor industry?
Yao Jiayang pointed out that, first of all, the bargaining power of the acquirer for the upstream and downstream will be improved. In this case, the optimization of the cost structure will pose a threat to small and medium-sized semiconductor companies.
Yao Jiayang further stated that if the acquisitions of Nvidia’s acquisition of Arm, AMD’s acquisition of Xilinx, and Meiman’s acquisition of Inphi are completed, they will pose a direct or indirect threat to Intel, and their competition areas are mainly related to 5G and data centers. In the future, the semiconductor industry in the data center and Netcom infrastructure will become highly centralized.
He believes that if there are related mergers and acquisitions in the future, it may be related to data centers and other fields, because data centers and 5G infrastructure are both stable growth application markets, and in the long run, there should be no recession, and from the pursuit of revenue growth From the point of view, this will be one of the competitive goals of semiconductor manufacturers.
04
Influence and Enlightenment on China’s Semiconductor Industry
As the so-called giants stomp their feet, the global semiconductor industry will shake a few times, not to mention multiple giants stomping their feet together. As the world’s largest semiconductor market, China’s semiconductor industry is developing rapidly. I am afraid it will inevitably be hit by this wave of mergers and acquisitions. So what will be the impact on China’s semiconductor industry?
Yao Jiayang pointed out that the development of China’s semiconductor industry is mainly based on policy guidance, supplemented by private funds and the market, and this situation should not change in a short period of time. At present, China’s semiconductor industry is mainly responding to the domestic market demand. The effect of mergers and acquisitions by international manufacturers should form a high wall for the development of Chinese semiconductor companies in the field of data centers and 5G infrastructure, which may be difficult to overcome in a short period of time.
In Yao Jiayang’s view, China’s semiconductor industry has been developing for a period of time, and it may be possible to gradually return to the normal market mechanism in terms of policy, so that larger-scale semiconductor companies can compete directly with international manufacturers without policy intervention. , in order to correct the development path of Chinese semiconductor companies’ product strategies; at the same time, in the case of the vigorous development of Chinese semiconductors, it is also necessary to form a normal cycle of good money driving out bad money.
He predicts that from 2021, domestic semiconductor acquisitions may occur one after another, which should have a positive effect on Chinese semiconductor companies facing international manufacturers.
Some industry insiders said that his thinking about these large-scale mergers and acquisitions is that China’s semiconductor industry should seek opportunities to acquire high-quality assets while strengthening independent development. “For Chinese companies, there is currently no other way than to do their own thing. After all, it is not an order of magnitude.”
Editor’s point of view: The merger between semiconductor giants has expanded their business breadth, improved industry competitiveness, and has stronger control over market prices. In the future, 5G and even 6G will be the key to the development of global communication networks, and the data center is also the cornerstone of the future merger trend. However, the gap between the domestic semiconductor market and the international semiconductor giants is too large. At present, it is only possible to merge domestically. Through healthy domestic competition, companies with stronger competitiveness are selected and finally compared with international giants.
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