Tracking semiconductor mergers provides a valuable window into the future market.
After a year of major semiconductor mergers, NVIDIA’s merger with Arm was blocked by the FTC. Concerns about the largest-ever-proposed semiconductor merger included stifling competition, proprietary information, and rising prices. The FTC alleged that “the combined firm would have the means and incentive to stifle innovative next-generation technologies, including those used to run datacenters and driver-assistance systems in cars.”
The global regulation of larger semiconductor mergers has trended upwards in recent years, according to Accenture. Accenture reports that from 2013-2015, government intervention or regulation prevented only three deals. But in 2016-2018, there was a sharp increase in blocked mergers with 14.
Heading into 2022, what is on the horizon for semiconductor mergers? While there is a growing global emphasis on regulating high-value mergers, we are seeing growth in the world of smaller semiconductor mergers as well. Accenture’s analysis shows that 8 out of 10 semiconductor mergers in the past 5 years had a transaction value of less than $1 billion.
Tracking these changes offers a window into potential challenges caused by such an active merger environment. At A2 Global, we are currently advising several strategies for proactive preparation.
The impacts of mergers, large and small
While larger semiconductor manufacturers are facing scrutiny from global regulators, we see smaller companies using mergers to encourage growth.
Focusing on solving problems in their own supply chains could make smaller chip manufacturers more robust partners. But, often the focus of a merger is chasing new technologies. The result is that your existing lines may face a trend of EOL in the face of streamlining during mergers and the pursuit of new market share by semiconductor manufacturers.
Strategic responses to A Dynamic enviroment
To avoid impacts on your product lifecycle from semiconductor mergers — large or small — now is the time to strategize. Broadening networks of trusted vendors and enhancing your supply chain options are both good starting points.
When examining product redesign options, consider your approved vendor list. You can shore up your supply chain by calculating your EOL risks and managing them appropriately.
While an EOL may present the only option for some critical parts, you might consider other suppliers for your AVL list for less specialized parts. By examining if there are other appropriate options, you may find that you can build flexibility into new designs. Paired with an expanded AVL, this could keep you more nimble in the event semiconductor mergers create an EOL situation.
The bottom line: While major semiconductor mergers face roadblocks, smaller mergers are on the rise. Focusing on strengthening your sourcing options and supply chain now can help you prepare for this dynamic environment.
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