Semiconductor rumours.5 Jul 2014 16:04
Chipmakers are rushing to find partners or buyers in the busiest year for industry deals since 2011.
“We’re going to see more mergers of equals,” Doug Freedman, an analyst at RBC Capital Markets, a unit of Royal Bank of Canada, said in a phone interview. “There are a lot of deals being talked about.”
Stock Moves
A maturing of the semiconductor industry is pushing companies to turn to larger acquisitions for expansion, said Steve Smigie, an analyst at Raymond James. Total semiconductor revenue has increased at an average rate of 5 percent a year since 2010, less than half the rate over the preceding 10 years, according to data compiled by Bloomberg Industries.
Target List;
Companies such as Texas Instruments Inc. (TXN), which has excess capacity in its plants, may look to buy smaller rivals such as Atmel Corp. (ATML) to bring their orders in house and improve operational efficiency, he said. Any analog chipmaker that joins Texas Instruments would in turn benefit from its sales force, the largest in the industry, he said.
“The semiconductor industry is an industry of scale,” Rolland said in a phone interview. “You don’t need a full sales force for a $1 billion company. You could easily leverage TI’s sales force.”
Slower growth has also meant less volatility in profits, reducing the need to hold onto cash. In the past, wide swings in supply and demand have strained earnings, forcing chipmakers to keep extra cash on hand. Many semiconductor companies, which had previously spent billions of dollars to build plants that became largely obsolete within a few years, are now outsourcing their production.
Stock Moves;
Shares of Power Integrations climbed 0.9 percent to $59.27 today. M/A-Com rose 0.4 percent to $22.91, Fairchild rallied 1 percent to $15.79, and Monolithic increased 1.5 percent to $43.10, reaching an all-time high. Atmel rose 0.3 percent to $9.51, while Semtech jumped 1.1 percent to $26.73.
Representatives for Power Integrations, M/A-Com, Fairchild and Atmel declined to comment. Representatives for Semtech and Monolithic didn’t respond to requests for comment.
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