2020 Sets Record for Chip M&A
According to IC Insights, semiconductor market research firm, 2020 was a record year for chip deals, with mergers and acquisitions totalling $118 billion, overtaking the 2015 peak of $107.7 billion.
The five biggest 2020 M&A agreements, announced in July, September, and October respectively, had a combined value of $94.0 billion, representing about 80% of the total for the whole year.
The second half of 2020 saw a wave of huge acquisition agreements, led by Analog Devices announcing in July that it would purchase Maxim Integrated Products for $21 billion in stock. The deal is expected to complete in the summer of 2021, with Analog Devices anticipating that the acquisition will boost its market share in analog and mixed-signal ICs for automotive systems (especially in autonomous vehicles), power management, and application-specific IC designs.
Prior to the Maxim deal being announced, semiconductor acquisition agreements in the first half of 2020 had a combined value of only $2.1 billion. The M&A total was only $352 million in 2Q20, when the initial surge of the Covid-19 pandemic was sinking the entire global economy.
Following a handful of smaller acquisitions in July and August, graphics processor leader Nvidia blew the M&A lid off 2020, announcing a $40 billion mega-deal in September to buy processor-design technology supplier ARM in the U.K. from holding company SoftBank in Japan. The acquisition is scheduled to be completed by March 2022, but must win clearance from regulatory agencies in the US, UK, European Union, South Korea, Japan, and China.
Four weeks after Nvidia announced the largest semiconductor acquisition in history, more large M&A agreements were announced in October 2020. This began with Intel announcing the sale of its NAND flash memory business and 300mm wafer fab in China to SK Hynix in South Korea for $9 billion. In the last week of October, Advanced Micro Device announced an agreement to buy programmable logic leader Xilinx for approximately $35 billion in stock. This deal is expected to be completed by the end of 2021.
At the end of October, Marvell Technology also announced it would acquire high-speed interconnect and mixed-signal IC supplier Inphi in Silicon Valley for $10 billion in stock and cash. The acquisition is due to close in the second half of 2021.
As in recent years, semiconductor acquisitions in 2020 were driven by large IC companies looking to sharpen their positions in emerging and high-growth market opportunities, such as embedded machine-learning and AI capabilities, self-driving cars, all-electric vehicles, expansion of data centers for cloud-computing services and proliferation of the sensors and systems connected to Internet of Things. Industry consolidation also continued to play a key role in many of the 2020 acquisition agreements.
The top-five acquisition agreements in 2020 were among the largest of the 51 semiconductor M&A deals made over the past 21 years that were valued at $1.0 billion or more. Three of the 2020 agreements rank in the top five with No. 1 being Nvidia’s $40 billion bid for ARM, No. 3 being AMD’s planned $35 billion purchase of Xilinx, and No. 5 being Analog Devices’ move to buy Maxim for $21 billion.