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Explore the latest trends and actionable insights on the Semiconductor market to inform business strategy and pinpoint opportunities and risks

Changing Landscape of the Semiconductor Industry

Industry: Semiconductors
Current: Other Industry Indicators

According to GlobalData, the semiconductor industry reported M&A transactions worth $354 billion in 2021, and the trend is expected to continue in 2022 due to the recently announced deals
Semiconductor industry leaders such as Intel and AMD pursued M&A opportunities to expand their operational capacity and product portfolio
Companies such as NVIDIA and GlobalWafers pulled out of specific deals owing to stringent regulatory scrutiny

Changing Landscape of the Semiconductor Industry

On February 15, 2022, Israeli chipmaker Tower Semiconductor announced that leading chip manufacturer Intel would acquire the company for a $5.4 billion valuation. The proposed acquisition highlights the present-day trend of consolidation in the semiconductor industry. The global demand for semiconductors increased considerably due to the government promoting sustainable initiatives such as electric vehicles (EVs) and changing consumer behavior in favor of such products. According to GlobalData, the semiconductor industry was valued at $500 billion in 2021 and is expected to grow at a CAGR of 7% during 2021–2025.

Customer demands increase with new generation technologies. Research and development expenses have become crucial to establish and maintain a leading market position in the burgeoning semiconductor industry. However, as costs grow, the product becomes expensive. Hence, semiconductor companies opt for acquisitions through which production capacity can be expanded, and chips can be made affordable. GlobalData Deals database shows that the semiconductor industry reported 354 mergers and acquisitions, valued at $354 billion in 2021. Among these deals, 115 deals worth $29 billion had an “Increasing Scale/Business Expansion” rationale. Based on the deals already announced at the beginning of 2022, this rationale was expected to influence acquisitions. We highlight some of the recent corporate actions in the semiconductor industry.

Intel to Acquire Tower Semiconductor

Intel will acquire Tower Semiconductor at $53 per share at a $5.4 billion valuation. This move is part of the strategy of Intel to focus on the expansion of its core business. Intel formed a foundry services division in 2021, through which it envisions the creation of the Intel Foundry Network. With the inclusion of Tower Semiconductor in its foundry services, Intel expects to gain specialty semiconductor technologies such as radiofrequency and industrial sensors, along with foundry presence in the US and Asia and growth opportunities in Italy and Japan. It aligns with Intel’s vision to consolidate its leading position in the US and Europe chip market while creating a global foundry network.

AMD Brings Xilinx Under its Umbrella

In what is considered the largest deal in the chip industry, AMD completed the acquisition of Xilinx on February 14, 2022. The transaction was valued at $35 billion. AMD improved its capacity for advanced products such as artificial intelligence engines with this deal. Along with a diversified product portfolio, this deal also provided AMD with considerable talent vital for research and development in the semiconductor industry. This deal was also crucial for AMD due to the stiff competition from NVIDIA and Intel. While closing the deal, AMD mentioned that this partnership would capture a market share of $135 billion in the near future.

NVIDIA calls off Arm Acquisition

NVIDIA, the manufacturer of legacy GeForce chipset, entered into a deal to acquire Arm, a semiconductor manufacturer backed by SoftBank, for $40 billion in 2020. The agreement was subject to antitrust regulations in Europe and the US. Arm has a unique model of customer neutrality under which it supports leading companies such as Samsung and Apple while giving no one privileged access. Regulators considered that the NVIDIA-Arm deal would create an entity that could hugely influence the chip market. Given these regulatory challenges, NVIDIA was forced to call off the deal in February 2022.

Siltronic Acquisition by GlobalWafers Fails

GlobalWafers, a Taiwanese silicon wafer producer, planned to acquire its German competitor Siltronic for $4.9 billion. Silicon wafers form the foundation for the manufacture of semiconductors. The deal agreement received a nod from Japan, South Korea, Taiwan, and China authorities. However, the deal fell through as the German government failed to approve in time. GlobalWafers would have become the second-largest producer of wafers globally if the deal had come to fruition.

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