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Semi's Final Four Reconfigured: TI rises to third largest with analog remix


It's the talk everywhere this week; Texas Instruments (TI) is purchasing their long-time rival, National Semiconductor (NS), for an all-cash deal worth US $6.5 billion (see this statement from TI).  Not only does this deal move TI up one spot to the third largest semiconductor company from fourth (swapping ranks with Toshiba, as iSuppli details here), it is a significant event within the analog sector, especially (see this and this WSJ M&A review).  Most importantly, the question of increasing oligopolies in the semi industry is raised.  In order for the smaller analog companies to compete, additional M&A activity is expected, a trend we have been watching here at MarketWatch for a while now throughout the wider semi supply chain.

TI has held a dominant role in analog for a very long time and with good reason (see this article citing Databeans research from EETimes).  TI's dominance does not end there though, as they are best known in computing and communication sectors as well strengths in specialized medical, oil and gas exploration and production (E&P), as well as some industrial, white box and automotive subsectors.  NS's analog dominance is primarily industrial and handsets with energy management as a newer sector, which compliments nicely TI's market positions, lending positive reviews of the deal by analysts of all types (see this EETimes overview of what the analysts are saying).

By adding NS's strengths to its own, analog will now represent 50% of TI's portfolio (see this EETimes review).  Importantly, TI takes over roughly a quarter or more of the various subsectors for analog ICs in which it is already a dominant player (e.g., power management, voltage regulators, analog/comparators) as well as increasing the number and geographic distribution of fabs (see this fab map from Electronics Weekly).  In terms of revenue, the acquisition is likely to mean TI will dominate one-fifth of the global analog semiconductor revenue market once the post-merger dust settles.

What to make of this?  Well, if you're not a smaller analog company, this acquisition can be seen in a positive light.  While it may take as many as three years for full integration and profitability from the purchase to fully realize, the combination of analog products (42,000 single product portfolio), diverse location and types of owned fabs (eight across three continents), plus a sales team of well over 2,500 means we should be seeing continued, strong, positive growth in the analog sector, as has been forecasted (see our MarketWatch Quarterly Sector Brief on the analog market here). 

If you are a smaller company, then it might be time to look differently at your peers and the analog market landscape.  It appears that the semi industry continues to grow in value and volume but shrink in number of players.  As we've mentioned before for upstream fabs, this might make sense on Wall Street, but from a supply chain perspective, fewer suppliers presents noteworthy challenges as well as opportunities.

Lisa Ann Cairns, Ph.D.
Written on Wednesday, 06 April 2011 10:51 by Lisa Ann Cairns, Ph.D.

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