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  • Semiconductors Future Hinges on a Single Pillar

    A unique phenomenon has started manifesting itself under the slew of mergers and acquisitions this year in the semiconductor landscape. This phenomenon is bound to intensify in the near future and would positions itself as a key factor for the future of the semiconductor industry. The winners and losers in the game would be determined on how successfully they are able to execute on this aspect. In fact, this is one of the key aspects responsible for pushing companies towards mergers too.

    Mergers and acquisitions are part of usual cycle of consolidation after expansion. Considering the macroeconomic conditions, I have been foreseeing the increase of M&A activities since 2011, of course it is happening since much earlier than that but it intensified in 2015. With the recent announcements of mergers, which are expected to complete in 2016, the total deal size of semiconductor mergers in 2015 has gone much beyond $100 B. Earlier peaks were $70.3 B in 2000 and $75.2 B in 2006.

    I have been keeping track of key mergers year after year and reflecting on main themes of some of those in my blogs on semiconductor landscape. This time there are too many mergers, large and small, so it’s pointless talking on particular mergers, but it makes sense analyzing the key themes around which number of mergers have taken place. A common theme around all these is new technology which will act as the main pillar for the semiconductor industry in the near future.

    FD-SOI Wiki-single_pillar_balance1-min-jpg

    We have seen how macro economy has struggled since 2008 and yet not fully out of woods, although US FED has garnered confidence to start increasing interest rates. Thanks to business leaderships of companies who have been able to consolidate with good technology leaders who needed funds to grow. What’s next after such massive business consolidation this year?

    In most of the current mergers, one key aspect was visible: technological expansion. It’s consolidation with a view to expand in emerging technologies; so it’s complementary as against concentration. In my view, macro economy and business in semiconductors will continue on their own pace, IP leadership will continue as usual. What will see a massive change in near future is technology, which will in turn infuse new life to semiconductor business going forward.

    The future of semiconductor industry will depend on how new technologies pan out to support emerging businesses. Let’s review some of the common technological themes based on which some of the key mergers have taken place, and more may be seen.

    • Internet of Things – IoT has emerged as a general theme from which several verticals have originated from a business stand point, e.g. industrial, home, automotive, consumer, medical, wearable, and so on. From a technological stand point all of them converge on a system’s view with hardware and software integration, data analytics, big-data management and control, and real-time communication under different protocols. Clearly, IoT opened up many fronts for mergers of companies in hardware, software, as well as IP.

    As an example big-data management initiated revamping of data center (cloud server) technology. Good progress was seen in IoT edge and gateway devices, and now the focus is shifting to cloud which will see a major innovation and development in near future.

    Intel’s Altera acquisition is geared towards adding programmability, customer IP and security into the data center, and also increasing performance and decreasing cost and energy consumption. Also there are innovations happening elsewhere to improve performance and power efficiency of data centers. A big merger of Dell and EMC is on the horizon in the cloud computing space.

    Considering the gateway solution, there have been many mergers, for example Bluegiga and Telegesis acquisitions by Silicon Labs, Lantiq acquisition by Intel, Wicentric and Sunrise Micro Devices acquisition by ARM, and so on.

    Also there have been mergers or business arrangements around providing IoT devices in various segments such as health fitness, wearable, automotive, and so on. Dialog acquired Atmel to strengthen into microcontroller business that is a key to IoT. NXP and Freescale merger is another example of big consolidation.

    • System Design Automation – With SoCs being infused in many applications, and of course IoT, system’s view in design automation has become the key. In this space, the big EDA and IP companies are doing in-house innovation as well as acquiring key technologies to augment their system automation tools. Emulation and FPGA prototyping technologies are coming to the forefront.

    Mentor recently merged Calypto with itself. Earlier Mentor acquired Flexras Technologies to strengthen into FPGA prototyping and Tanner EDA for AMS and IoT solutions. Mentor’s Veloce interface with ANSYS’ PowerArtist is a big step in real-time and accurate power analysis of any application running on a system. Also Cadence is betting big on virtual emulation with its Palladium technology. Synopsys is strengthening its IP portfolio and software solution for systems; it acquired Atrenta to strengthen its verification platform.

    In IP world, differentiation has become important and that leads to difficulty in modeling non-standard IP. ARM, the IP giant acquired Carbon Design Systems to accelerate modeling and verification of their new cores, and testing of the cores in complex SoC designs.

    Another area in focus for systems is big-data and analytics. ANSYS acquired Gear Design Solutions, Microsemi acquired Vitesse.

    • Security – With IoT, security is getting prime importance in hardware as well as software. There have been several mergers around innovation in providing secure systems. ARM acquired Offspark and Sansa Security. Synopsys acquired several software companies including Protecode, Codenomicon, Quotium’s Seeker product and R&D team and Goanna Software for enhancing software security, integrity and privacy in various software applications. This space is ripe for innovative technologies to be acquired.


    • Semiconductor Technology – At one time process technology was thought to be ultimate at 28nm and 22 nm, but now 10nm is a reality and we are going to see 5nm. This brings new challenges and hence new areas to innovate. Towards consolidation, GlobalFoundries completed acquisition of IBM’s foundry business, and now China is eyeing to acquire GF. In process equipment space, Lam Research is acquiring KLA-Tencor, Cabot Microelectronics acquired NexPlanar, and there are others.

    There are several other mergers in different segments of semiconductor design space as well. Avago acquired Broadcom, Samsung acquired Yesco, Western Digital acquired SanDisk, MediaTek acquired Richtek, Diodes acquired Pericom Semiconductor, ON Semiconductor is buying Fairchild Semiconductor and Microsemi is buying PMC-Sierra which recently saw a few other contenders as well. More mergers are to be seen in near future.

    • New Innovative Devices – These are new devices to automate work in many areas and bring disruption in services traditionally driven by human workforce. Although this can bring more efficiency in work and reduce cost, there can be several repercussions; let’s park that for a later discussion. For now we can see these technologies in the making – Freescale acquired CogniVue getting into autonomous vehicle segment, PTC acquired Qualcomm’s Vuforia to usher into augmented reality, and Qualcomm acquired KMel Robotics to strengthen its strategy into Drone and Robotics market. Also, Qualcomm invested in 3D Robotics. Even Intel invested in drone maker Yuneec. Earlier Intel invested in Airware, and PrecisionHawk, and also in VR headset maker Avegant.

    Autonomous vehicle, Robotics, Drone, and VR are some of the upcoming technologies which can bring major disruptions in different service and logistics sectors.

    Another twist in semiconductor mergers is being driven by geographic traction. China is working hard to build large presence in semiconductor business from its soil by in-house development as well as acquisitions in other countries.

    A deeper insight into this expansion led consolidation can explain very well that the consolidation – expansion cycle will get elongated now. It’s time to watch how these new technologies bring major changes in our lives in the first quarter of this century.


    Pawan Kumar Fangaria
    Founder & President at www.fangarias.com