Proposed acquisition of Maxim Integrated by Analog Devices will strengthen ADI's analog IC market share...
The $21 billion acquisition of Maxim Integrated by Analog Devices ranks in the top three among mega-semiconductor company acquisitions in recent years (the others include Avago’s acquisition of Broadcom for $37 billion and SoftBank buying Arm for $32 billion).
With any acquisition, the final deal often has to answer the question: how do Analog Devices (ADI) and Maxim complement each other? This is the question we pondered at EE Times when we heard about the deal on Monday. The official statement said it would increase scale and diversification and enhance domain expertise and breadth of engineering capabilities to “develop more complete solutions to solve customers’ most complex problems.” But it wasn’t completely obvious what specific strengths of each company was being tapped into do what exactly, which motivated the proposed deal.
ADI-Maxim Deal: Where’s ADI Headed?
When ADI acquired Linear Technology in 2017 for $14.8 billion, the aim was to expand analog market reach. With the proposed acquisition of Maxim, which is expected to close in the summer of 2021 subject to regulatory approvals, it is more about enabling ADI to offer a bigger part of the system solution in the analog and power domain.
The president and CEO of ADI, Vincent Roche, said the latest deal is the next step in ADI’s vision to bridge the physical and digital worlds, and with the increased breadth and depth of the combined technology and talent from the two, they would be able to develop more complete, cutting-edge solutions. “Maxim is a respected signal processing and power management franchise with a proven technology portfolio and impressive history of empowering design innovation,” he commented.
In spelling out the rationale for the deal, Maxim was said to be strong in the automotive and data center markets, complementing ADI’s strength across the broad industrial, communications and digital healthcare markets. Maxim’s applications-focused power management products were especially highlighted as complementing ADI’s catalog of broad market products.
So how exactly do ADI and Maxim complement each other? Looking at the most recent quarterly earnings reports, an obvious strength in a particular market application area doesn’t particularly stand out, apart from the fact that over half of ADI’s revenues comes from the industrial market.
To understand the broader reach that ADI expects, EE Times spoke to Martin Cotter, senior vice president, worldwide sales and digital marketing. He said, “We’re very excited and we see very strong market complementarity.” He added, “The combination of Analog Devices and Maxim Integrated has many benefits for customers. One example is automotive, where high speed GMSL [gigabit multimedia serial link] will complement audio A2B and allow a safer driving experience with enhanced in-cabin infotainment. Another area of advantage for the customer is the provision of more complete communication solutions, enabling the secure transmission, transportation and powering of data from antenna to cloud.”
The GMSL serializer and deserializers (SerDes) ICs are high-speed communication links developed by Maxim that support the high bandwidth, complex interconnect, and data integrity requirements needed to support evolving automotive infotainment and advanced driver assistance systems (ADAS). Advanced link integrity and diagnostic capabilities enable link performance monitoring that is vital in the design of automotive safety systems. Using shielded twisted pair or coax cables of up to 15 meters, GMSL SerDes ICs also meet stringent automotive industry electromagnetic compatibility (EMC) requirements.
The A2B audio bus from ADI is a high bandwidth bi-directional audio bus capable of transporting I2S/TDM/PDM data and I2C control information, along with clock and power, using a single, 2-wire UTP cable over distances up to 15 m between nodes and 40 m over the entire daisy chain. A2B can be used as its own network with embedded sub-networks, or as an endpoint transport bus used in combination with other, longer distance protocols.
Cotter said, “Maxim’s GMSL communications ICs enable a very strong high-speed interconnect for automotive, for which they’ve had considerable success and adoption. Meanwhile, ADI has a strong, robust audio interconnect in the form of the A2B digital audio bus. The combination enables a strong automotive infotainment system.”
Industrial automation, or Industry 4.0, is another key area that illustrates the complementarity between ADI and Maxim, according to Cotter. He said that ADI is already strong in industrial with over 50% of its business coming from this sector. However, he said, “In the future, industrial customers will be looking for a more complete solution. To fulfil Industry 4.0 needs where customers want flexible manufacturing, more efficiency, more intelligent deployment and smarter edge processing, the ability to provide more of a complete solution, and especially the analog part, will be vital.”
There are other areas where we would assume the two companies will be looking at utilizing their respective strengths – such as healthcare, where both companies have key products. Looking through Maxim’s new product announcements over the last year, a large majority are related to healthcare wearables, IoT, power management, security, as well as automotive safety. Just last week Maxim announced what it claims is the industry’s thinnest dual-photodetector optical sensor for wearable health and fitness products, the MAXM86416. The turnkey drop-in module includes built-in algorithms for heart rate and oxygen saturation (SpO2) monitoring, as well as advanced activity classification. The device combines two photodiodes, an optical AFE and a microcontroller with built-in algorithms (activity classification, heart rate, SpO2) in a 0.88mm package that is 45 percent thinner versus a discrete approach.
Strengthening No. 2 spot in analog ICs
Looking at the deal from a technology roadmap point of view, Dan Leibholz, CTO of ADI told EE Times, “We are very excited by the complementary strengths of the two companies. The combination of ADI and Maxim will unite best-in-class technologies, from DC to gigahertz, nano to kilowatts and sensor to cloud. By enhancing the scale and breadth of our product portfolio, applications and engineering expertise and manufacturing flexibility, we will have the opportunity to develop even better, more complete solutions, and over 10,000 engineers, to drive maximum customer impact.”
We asked industry analyst Rob Lineback of IC Insights for his thoughts on the deal. He commented, “I believe Maxim has more application-specific products in certain market segments than Analog Devices but there is some overlap as well.” He added, “In terms of sales percentages, Maxim is deeper into automotive applications with 25% of its revenues coming from this market segment in the company’s fiscal 2019 year (ended June 2019) compared to 16% at Analog Devices in its fiscal 2019 year (ended in last October). Maxim would add automotive-focused products to Analog Devices’ portfolio. Autonomous vehicles is one area that Maxim could bolster Analog Devices’ product offering in automotive.”
The message seems to be that ADI considers the acquisition of Maxim to be a path to offering broader, “more complete analog solutions”. Lineback said, “Analog Devices was second in worldwide analog IC sales in 2019 with 10% market share ($5.17 billion). Maxim was ranked seventh in analog IC sales with 4% share ($1.85 billion) in 2019. The combination of Analog Devices and Maxim will be second in the analog IC ranking. Texas Instruments (TI) will still be number one in analog ICs with $3.0 billion more than the merged company, using 2019 revenues. TI’s analog IC market share was 19% in 2019.”
Assuming the acquisition of Maxim complete next year, this will certainly strengthen Analog Devices position and its quest for number one spot in analog.
While there is justification for the deal from the standpoint of products and markets, EE Times contributor Bolaji Ojo suggested that it makes sense from a strictly financial view as well; Maxim comes with a not-insubstantial amount of cash on hand, which will likely fund whatever ADI’s next move might be. Read ADI-Maxim Deal; Where’s ADI Headed?