Chip Makers Urge To Merge As Industry Transforms

The semiconductor industry is undergoing serious consolidation.

Rival chip makers are bonding together at an accelerating pace to expand their product range and market share, as the semiconductor industry undergoes a major consolidation. Many semiconductor manufacturers are bulking up amid soaring demand for certain chips—such as those used in making laptop computers—in the new work-from-home world created by the pandemic. Other chip producers are slimming down to focus on a particular niche.

Advanced Micro Devices (AMD) announced plans last month to buy Xilinx, inventor of the field-programmable gate array, in a $35 billion all-stock deal. Xilinx’s invention allows platforms to be more flexible, since its integrated circuits can be reconfigured by a customer after manufacturing.

The sharp rise in share prices of companies such as AMD this year has enabled them to use their higher-valued stock as currency in merger deals. AMD’s announcement came just weeks after Nvidia agreed to buy Arm Holdings, a British chip designer backed by SoftBank Group, for $40 billion, much of it to be paid in the form of Nvidia shares. If the deal goes through, it would be the biggest in the industry.

Meanwhile, South Korean chipmaker SK Hynix agreed to buy most of Intel’s flash memory manufacturing business in a deal valued at $9 billion. Intel CEO Bob Swan said in a statement that the deal “will allow us to further prioritize our investments in differentiated technology where we can play a bigger role in the success of our customers and deliver attractive returns to our stockholders.”

The sale also includes Intel’s manufacturing operations in Dalian, China. It is expected to help SK Hynix compete with larger producers, including Samsung, the world’s largest maker of flash memory chips, which plans to spend big to compete with TSMC and Intel in contract chip making.

The notion that bigger is better was also apparent in Analog Devices’ $20 billion acquisition in July of Maxim Integrated Products. There is limited overlap in the companies’ businesses. The combined company would be worth $68 billion, according to Analog.