Trade tensions, regulatory scrutiny, and falling demand for memory chips have dashed growth forecasts in the semiconductor industry. And as the market shrinks, companies are racing to get their share before it’s too late.
Earlier this month another mega merger was announced. German chipmaker Infineon has agreed to buy US semiconductor rival Cypress for €9bn – the largest deal in Infineon’s history.
A strategic move, the deal represents a big bet on automotive chips, which represent one of the few semiconductor segments expected to grow as electric and autonomous vehicles spur demand for more complex chips to power advanced electrical systems for assisted driving, safety, and navigation.
The combined company will be the single biggest supplier to this segment, and is expected to furnish this next generation of vehicles with a complete package of chips, while simultaneously extending its offerings in the Internet of Things and connectivity market that is also expected to rapidly expand in the coming years.
“With this transaction, we will be able to offer our customers the most comprehensive portfolio for linking the real with the digital world,” said Infineon CEO Reinhard Ploss in a statement. “This will open up additional growth potential in the automotive, industrial and internet-of-things sectors.”
With such a high price tag, the purchase of Cypress fits the trend of mega-mergers that the semiconductor industry saw from 2015 to mid-2018, which combined had a value of more than $245 billion. This included the acquisition of Microsemi by Microchip Technology for $8.35 billion, and Avago’s $37 billion acquisition of Broadcom.
Since then, the value of deals in the semiconductor industry has fallen amid China-US trade war concerns and increased scrutiny of tech mergers under the Trump administration.
But while some analysts raised concerns, the hope now is that Infineon’s acquisition of Cypress won’t meet the same fate as the firm’s former plan to buy semiconductor firm Wolfspeed, which was denied in 2017 by US regulators.