Semiconductor industry looks to cut costs through consolidation

Oct. 19, 2015

Semiconductor companies are looking to streamline their operations through consolidation as growth slows and costs rise, according to Don Clark in The Wall Street Journal. He quotes Alex Lidow, chief executive of Efficient Power Conversion Corp., as saying, “It’s buy or be sold.” Lidow’s former company, International Rectifier, founded by his family in 1947, was bought by Infineon in January.

Clark cites Dealogic figures showing $100.6 billion in mergers and acquisitions this year so far, way up from 2014’s total of $37.7 billion, although the total number of deals are down to 276 so far this year from 369 in 2014.

As previously reported, Avago bought Broadcom, Intel is buying Altera, Dialog Semiconductor is buying Atmel, Microchip Technology  is acquiring Micrel, and NXP and Freescale are merging.

Clark reports that the consolidation wave seems not so much an effort to acquire new technology but to cut costs in manufacturing, sales, and engineering. “Avago, for example, has projected it can wring $750 million in annual savings beginning in 2017 after swallowing Broadcom,” he writes.

More deals could be in the works. Bloomberg reports that Analog devices and Maxim are said to be in merger talks and that Fairchild is looking for a buyer.

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