Infineon's acquisition of Cypress is the latest in a list of big semiconductor vendors acquiring connectivity chip suppliers
Infineon Technologies has inked a deal to acquire Cypress Semiconductor for $10 billion, the latest in a series of acquisitions of connectivity chip suppliers in the last few months.
Last week, NXP announced it was acquiring Marvell’s WiFi and Bluetooth connectivity assets for $1.76 billion. And in March, Nvidia said it was acquiring networking IC vendor Mellanox Technologies for $6.9 billion.
The common thread appears to be connectivity. Hassane El-Khoury, Cypress CEO, said in an interview recently that its WiFi and Bluetooth connectivity chips for automotive and IoT could be attractive for potential acquirers, especially in the light of ON Semiconductor’s acquisition of WiFi chip vendor Quantenna Communications for just over $1 billion in cash. Based on this, it seems that Cypress was certainly actively looking for suitors.
Reinhard Ploss (source: Infineon)
El-Khoury seemed to reinforce the point in today’s statement, saying that Cypress was excited to join forces with Infineon "to capitalize on the multi-billion dollar opportunities from the massive rise in connectivity and computing requirements of the next technology waves." The companies are clearly targeting connectivity, saying the combination of Infineon’s security expertise and Cypress’s connectivity know-how will accelerate entry into new IoT applications in industrial and consumer segments.
Similarly, NXP’s acquisition of Marvell’s wireless connectivity last week is intended to bolster the former’s push into connectivity. NXP said the acquisition enables it to offer customers a full range of wireless connectivity solutions including WiFi 4, 5, 6 and Bluetooth/ BLE combo along with its flagship edge computing platforms including I.MX, Layerscape, Kinetis, LPC and the newly introduced RT crossover processors to provide turnkey solutions for industrial & IoT, automotive and communication infrastructure markets.
The NXP acquisition includes approximately 550 people worldwide, and NXP expects the creation of new revenue opportunities in its target end markets. With approximately $300 million in revenue in Marvell’s fiscal 2019, NXP anticipates revenue associated with the acquired assets to double by 2022.
While the Infineon acquisition of Cypress might appear to some to be a defensive move, it’s clear that the major chip vendors are looking at new strategic ways to bolster revenues and strategic reach. Infineon said the addition of Cypress’s R&D and geographical presence in the U.S. strengthens its capabilities for major customers in North America. Infineon adds to its R&D presence in Silicon Valley and gains exposure, as well as market share, in the strategically important Japanese market.
At the same time, Infineon aims to achieve significant economies of scale, "making Infineon's business model even more resilient." Based on pro-forma revenues of €10 billion in FY 2018, the transaction will make Infineon the eighth largest chip manufacturer in the world. In addition to its position in power semiconductors and security controllers, Infineon would become the No. 1 supplier of chips to the automotive market.
On the automotive focus, Antonio Garzon, a senior analyst with IHS Markit’s automotive electronics and semiconductor group, told EE Times, “The combined automotive revenue of Infineon and Cypress was almost $5 billion in 2018, so the Munich-based company will likely become the number one automotive semiconductor supplier in 2019. Interestingly, the news come just a few days after Infineon´s main competitor NXP strengthened its wireless offer with the acquisition of Marvell´s WiFi and Bluetooth assets. Half of Cypress' $800 million automotive business comes from infotainment microcontroller and connectivity solutions, but ADAS, where Infineon was already growing with radar and sensor fusion applications, will be also reinforced by the growing demand of NOR flash memory for autonomous driving.”
Strategy Analytics’ Ian Riches, vice president of the firm’s global automotive practice, told EE Times automotive memory is a hot growth area and hence the acquisition puts Infineon firmly in this area. Also, the addition of microcontrollers gets the German company more rooted into the cockpit and infotainment parts of the vehicle.
Of course, the deal still needs to go through approval from Cypress’s shareholders and the relevant regulatory bodies. If it goes through, the closing is expected by the end of calendar year 2019 or early 2020.
With the sweeping global and political leaning towards a future of smart cities, smart mobility, smart factories and smart health, both sensors and connectivity will play a major part in enabling the vision of the "smart connected world" that we see in many presentations from the chip companies. With connectivity being the vital link, what we’ve seen of the acquisitions just in recent months suggests it’s a good time for connectivity chip suppliers, especially with the top 10 chip vendors on the lookout for solutions that can bolster reach as well as revenues.