In my continuing series of listicles, I wanted to follow up my note from last week about the acquirors in semis, with a piece today on the likely targets.
The way I look at the industry there are really three buckets of companies.
- Buyers (see last week)
- Niche, growth companies (very few left)
- Targets – everyone else
Last week I listed the buyers. Then there are the ‘growth’ companies. There are very few of these left, and they tend to be very narrowly focussed on specific product niches. My former employer, Peregrine Semi, was a good example of that. There are not many others left. These will eventually get acquired as their place in the ‘stack’ gets incorporated into other, adjacent products. This is just the typical history of the semiconductor industry, and a key corollary of Moore’s Law.
But then there is a third bucket, the largest, is comprised of everyone else. I differentiate these from the niche players because for years they have operated as the scale players, with a choice about M&A. These are all pretty sizable, multi-product companies. My whole point in writing these posts is to point out that these companies were once immune, but are no longer safe. To oversimplify, many past semiconductor mergers were driven largely by strategic or technological needs, while the next wave are going to be much more about financial motives – scale economies, cost synergies, etc.
Also, I want to clarify something I said in the previous post.
“The truth is that semis are no longer a growth industry. There are no new giant product opportunities out there.”
Rajesh Patil (@_rajeshpatil) called these “famous last words” on Twitter. And he has a point. The world is only getting more covered in electronics. There will be other, big opportunities for semis, somewhere, someday. However, in its current state, the semis industry will neither lead that change, nor participate in it fully. There are almost no venture dollars being spent on semis now. And too few large companies command too large a share of the end-market. And then there is that whole China competition thing. I think that someday semis can see major growth again, but the industry will look very different then. And first has to go through a round of consolidation, as we are seeing now.
There are a lot of good chip companies out there, making good products, grinding out steady improvements. But none of them are really growing that much, and all of them make good potential targets. I am writing this list without consideration to personal or social issues. Meaning, maybe none of these management teams want to sell. I have no idea. And just for the record, I have no idea if any of these companies are actually ‘in play’, it could be years before they get bought. I include them on this list because they fit the profile for industry consolidation (in alphabetical order).
- M/A Com
Feel free to add to the list in comments.
(NOTE: I originally had commentary attached to each name, but in the off chance that I end up working for any of these companies, I did not want to pre-empt myself. In the same vein,, I also want to add that it could take many years before anything happens here.)