The deals’ dollar values in 2015 and 2016 are 8 times greater than the $12.6 billion annual M&A average in the 5 previous years — driven primarily by slow growth in end-user apps.
Semiconductor companies worldwide have established more than two dozen acquisition agreements in 2016-with a combined value of $98.5 billion-compared to the $103.3 billion in purchases struck in 2015 (over 30 deals reached), according to a summary and analysis in IC Insights’ 2017 McClean Report.
According to the report, M&A agreements’ dollar value in 2015 and 2016 were both about eight times greater than the $12.6 billion annual average of M&A announcements in the five previous years (2010-2014). Nearly half of the 15 largest semiconductor acquisitions in history were announced in the 2015-2016 period, according to a ranking of M&A transactions over $2 billion in the 2017 McClean Report (Figure 1). A total of 27 semiconductor acquisition agreements have had $2 billion values or more since 1999.
Figure 1: IC Insights’ ranking and acquisition data chart includes semiconductor suppliers, wafer foundries and businesses licensing intellectual property (IP) for IC designs, excluding transactions for fab equipment and material companies, chip packaging and testing operations, and design automation firms. Seven of $2 billion-plus semiconductor acquisitions occurred in 2015 and five took place in 2016, with three each being announced in 2014, 2011 and 2006, two in 2012, and one each in 2013, 2009, 2000 and 1999.
Semiconductor M&A greatly accelerated in 2015 and continued to be high in 2016 as companies turned to acquisitions to offset slow growth in major end-use applications, such as smartphones, PCs and tablets. In the last two years, acquisitions have been driven by companies aiming to expand into huge new markets-the IoT, wearable electronics and highly intelligent embedded systems, such as automated driver-assist features in cars and autonomous vehicles in the future. China’s goal of boosting its domestic semiconductor industry has added fuel to the M&A movement.
Figure 2: Breakdown of the 2015-2016 semiconductor acquisition data: purchase of IDMs or parts of those companies is nearly 39% of the two-year total and takeovers of fabless chip suppliers, their product lines and/or assets represents 45%. Acquisitions of semiconductor-design intellectual property suppliers and IP assets accounted for nearly 16% of the 2015-2016 M&A value while purchase agreements for wafer-foundry businesses and assets represented is just 0.2% of the total.
While Chinese' moves to buy foreign semicon suppliers and assets grabbed a great deal of attention and scrutiny by governments wanting to protect national security and industries, U.S. businesses acquiring other companies, product lines, technologies and assets accounted for 52% of the 2015-2016 M&A value or about $104.5 billion (Figure 2). Asia-Pacific companies were second with 23% of the $201.5 billion two-year total or $46.4 billion. Within the Asia-Pacific region, China represented 4% of the total or $8.3 billion.