SAN FRANCISCO — The blistering hot pace of merger and acquisition activity that dominated the semiconductor industry for more than two years cooled markedly in the first half of 2017 as the absence of so-called "megadeals" brought down the total value of transactions.
The combined value of about a dozen deals announced in the first half of this year totaled just $1.4 billion, down from $4.6 billion in the first half of 2016 and $72.6 billion in the first half of 2015, according to market research firm IC Insights Inc.
Despite the slow start to M&A in 2016, several large transactions announced during the second half of the year pushed the total value of deals to near $100 billion, within striking distance of the all-time record of $107.3 billion set in 2015, IC Insights (Scottsdale, Ariz.) said. Despite the existence of several pending or rumored deals currently — including the pending sale of Toshiba's memory chip business — it's unlikely that a second half M&A surge will emerge to bring the value of transactions for the year anywhere close to either 2016 or 2015, the firm said.
Only one deal announced so far in 2017 is worth more than $500 million — MaxLinear's $687 million acquisition of Exar finalized in May. By contrast, there were seven deals worth more than $1 billion each announced in 2016 and 10 such deals announced in 2015. Of these, seven deals were worth more than $10 billion each — three announced last year and four announced in 2015 — IC Insights said.
Rob Lineback, a senior research analyst at IC Insights, said in an interview with EE Times that a combination of factors has likely kept the pace of M&A activity down in the first half of the year, including increased regulatory scrutiny and the fact that companies that have made large acquisitions are still in the process of digesting what they've acquired and not likely to pull the trigger on more deals in the near future.
"Governments around the world are scrutinizing a lot of these deals, and that may play a role in reducing the numbers of deals that are being struck," Lineback said. Based on the political climate in the U.S. and other Western nations, Chinese entities "are really going to have a hard time" buying Western firms, which may make them hesitant to throw their hat in the ring on possible deals, he added.
Another major factor at play, Lineback said, is that more and more semiconductor companies are spending to acquire non-semiconductor businesses, bringing down the total of straight M&A deals by chip companies. Intel's planned $15.3 billion acquisition of Mobile, announced in March, is not included in the analysis because IC Insights' list includes only semiconductor suppliers and excludes acquisitions of software and systems businesses by IC vendors, he noted. Mobileye is an Israeli-based provider of digital imaging technology for autonomous vehicles.
"We are seeing a lot of that, especially in IoT and virtual reality and automated systems like autonomous vehicles," Lineback said.
Lineback also noted that stock market growth has cooled somewhat, possibly resulting in less money available for deals. He said there may well be a "wait and see" attitude toward deals pending the results of some of the big deals that have already been done.
"A lot of companies are going to have to show that these acquisitions are going to pay off and show that they are going to result in a more profit, which of course is what really matters," Lineback said.
—Dylan McGrath is the editor-in-chief of EE Times.
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