Yesterday, market research organization IC Insights released a briefing summarizing mergers and acquisitions in the global semiconductor industry in 2020.

 

In 2020, five major acquisitions and more than a dozen smaller M&A deals brought the total value of M&A for the year to a record high of $118 billion, surpassing the $107.7 billion in 2015.

The five largest mergers and acquisitions in 2020 (which occurred in July, September and October) were worth a total of $94 billion, accounting for about 80% of the year's total.

 

2020 Semiconductor M&A Brief Introduction

ADI acquires Maxim

Last year's global semiconductor M&A spree began in July, when Analog Devices (ADI) announced that it would acquire Maxim Integrated Products (MIP) for US$21 billion (mainly in the form of stock).

NVIDIA acquires ARM

Nvidia announced a $40 billion acquisition of ARM from Japan's SoftBank in September, following a number of other smaller acquisitions in July and August.

Intel acquires NAND

In October, Intel announced the sale of its NAND flash memory business and 300mm wafer fab in China to South Korea's SK Hynix for $9 billion.

 

AMD acquires Xilinx

In the last week of October, AMD announced that it would acquire Xilinx, the leader in FPGA technology, for approximately US$35 billion (cash + stock). The transaction is scheduled to be completed by the end of this year.  
 

Marvel acquires Inphi

Also at the end of October, Marvell announced that it would acquire Inphi, a semiconductor supplier whose products are mainly mixed-signal simulation, for US$10 billion (stock + cash). The acquisition is expected to be completed in the second half of 2021.

 

The above does not include Intel’s $900 million acquisition of Israeli mobile application software provider Moovit in May 2020, mainly because the Israeli startup is not a semiconductor company.

 

Also included in the acquisition list are deals between semiconductor capital equipment suppliers, materials producers, chip packaging and test companies and design automation software companies.

The root cause of mergers and acquisitions

 

In the long history of the development of the semiconductor industry, mergers and acquisitions in the semiconductor equipment industry are not uncommon, and the motivations of companies for mergers and acquisitions are also diverse. But no matter what the considerations are for mergers and acquisitions, we can never be divorced from the company's consideration of its own development.

Product complementarity

The complexity of semiconductor processes determines the wide variety of semiconductor equipment, and the equipment products deployed by each enterprise must also be different. At the same time, the downstream of each enterprise has a high degree of consistency, so semiconductor equipment companies have the motivation to better combine two or even multiple types of mature products through mergers and acquisitions, and pursue synergies in revenue, expenses, customers, research and development, etc., thereby improving their profitability and market competitiveness.

 

Expand areas

The second is to expand its own field, which is specifically reflected in the pursuit of new technologies or the development of new markets. When demand for new equipment and technologies arises, timely deployment in the corresponding fields can give equipment companies a strong first-mover advantage and competitiveness, and fully benefit from the demand dividend.

 

The development of Chinese manufacturers  

 

Chip foundry and memory chips

Semiconductor foundry and memory chips were originally two important fulcrums that China hoped to leverage the semiconductor industry.

The semiconductor industry chain includes four major links: raw materials and equipment, design, manufacturing, and packaging and testing. In the field of semiconductor design, internationally competitive companies such as Huawei HiSilicon have emerged in China. The next development logic should be to seize the semiconductor foundry and then drive upstream raw materials and equipment.

 

But the United States has seriously hindered this process by sanctioning SMIC (Semiconductor Manufacturing International Corporation).

Memory chips are another breakthrough that China has pinned its hopes on. This is due to the large volume of memory chips, with annual memory chip shipments accounting for one-third of global chip production. Secondly, memory chips are more standard and versatile, and have far less ecological requirements than computing chips.

In terms of semiconductor equipment, mainland China has strong consumption power. Therefore, major semiconductor equipment manufacturers are keeping an eye on this piece of cake. However, on the supply side, China's local equipment manufacturers have relatively little influence in the global market and it is difficult to exert pressure on major international manufacturers.

However, with the intensification of trade barriers, the tenacious growth of local equipment manufacturers, and the strong support of the government, local equipment manufacturers have greater room for trial and error and growth, and the order volume has increased significantly in the past two years. It is expected to occupy a place in the highly competitive international semiconductor equipment market.

Equipment company

Semiconductor equipment companies can be roughly divided into "photolithography equipment companies", "coating deposition/etching and other equipment companies", etc. This is because among the major equipment, lithography equipment requires particularly special technologies, and players in the global market play completely different games.

 

China does not have the most advanced international technology in areas such as coating deposition/etching. That is, they cannot handle critical processes that require fine processing, so developing dry etching technology and ALD equipment that can handle these processes has become a top priority. External cooperation is still a better option for technology enhancement.

In order to achieve this goal, professionals believe that China's lithography equipment industry may consider acquiring relevant technologies through departmental acquisitions or talent recruitment as the next step.

 

Materials company

 

Semiconductor materials can be roughly divided into front-end wafer manufacturing materials and back-end packaging materials. Among them, wafer is the key material for manufacturing semiconductors. With the continuous improvement of semiconductor production technology, the wafer size has developed from 2 inches and 4 inches in the early days to the current 6 inches, 8 inches and 12 inches.

 

8-inch and 12-inch are currently the main sizes of wafers. Before 2020, China was mainly dominated by 8-inch wafer fabs. With the continued investment of large funds and supporting financial support from local governments, multiple 12-inch wafer fab projects have landed in mainland China.

However, the localization ratio of wafers is only about 5%-10%, especially the 12-inch wafers used in cutting-edge fields, which have only just begun to form commercial supply.

 

Not only is it necessary for China to build its own large-scale wafer fabs to ensure corresponding output, quality and cost levels, it should also accelerate the integration of 8-inch and 12-inch wafer fabs in China to build a competitive large-scale wafer manufacturer.

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