Mergers & Acquisitions In the Semiconductor...
Transcript of Mergers & Acquisitions In the Semiconductor...
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MERGERS & ACQUISITIONSIN THE SEMICONDUCTOR INDUSTRY
COULD CHINA CAUSE CONTINUED
CONSOLIDATION?
SEMI Advanced Semiconductor Manufacturing Conference (ASMC 2016)
May 16-19, 2016
Saratoga Springs, NY
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WHAT’S DRIVING THE URGE TO MERGE?
• “Organic” growth is slowing so go “Inorganic”
• Enter new markets;
• Enter new geographic regions – geographic diversification
• Enter new product areas- product diversification
•Greed - Increase profitability by increasing scale
• Fear – Eat or be Eaten
• China or fear of China
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WHAT'S DRIVING SEMICONDUCTOR M&A?
Source PWC & Morgan Stanley
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2015 WAS A VERY BUSY YEAR
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2015 HAD SOME “MEGA MERGERS”
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REASONS FOR M&A
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CHINA GETS INTO THE M&A FRAY
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WILL SEMICONDUCTOR MERGERS CONTINUE?
• Yes, but maybe not at the same pace…..Are good deals gone?
• Intel still needs to offset PC dead end
• Smartphone slowdown may further drive consolidation
• China is just getting started and has “catching up” to do……
• R&D costs have gone up exponentially
• The cost of developing a new chip is not cheap
• The need to accumulate IP & patents
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SEMICONDUCTOR EQUIPMENT M&A
• The industry has increased deal size
• Advantest/Verigy, AMAT/TEL and now Lam/KLA
• Yield management needs work – Nanometrics, Nova, Rudolph
• Back end remains untouched
•What about Japan? Hitachi, TEL, DNS
• Subsuppliers – MKS, AE, Brooks
• Can China buy its way in? Mattson as a start?
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WHY CHINA CARES ABOUT CHIPS
• China consumed $145B of Chips
in 2015 but only produced 10%
of them
•Wants to produce 70% in 10
years
•Wants to catch up
technologically by 2030
• China only produces low end
devices
•Military aspirations
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CHINA’S $100B CHECKBOOK CAN DRIVE M&A
• Tsinghua Unigroup is a “puppet” of the Chinese government
• Formerly Tsinghua Beijing University
• Has mandate to spend at least $100B to get into semis
• China to do in semis what it did in solar & LED
•Made a $23B bid for Micron – That ultimately failed
• Paid $2.6B for Spreadtrum & RDA Microelectronics
• Intel bought 20% stake for $1.5B
• Affiliate recently bought Mattson
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CHINA IS THE NATURAL EVOLUTION OF SEMIS
• Semis started in the US then moved to Japan as a lower cost
developing economy
• Taiwan, then Korea followed the same path of developing
economies after Japan
• China is the latest entrant to the market of microelectronics
producers
• The US and Japan are fading out as semi makers
• Virtually no consumer electronics is manufactured in the US
• China is just accelerating a natural evolution with cash
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SUMMARY• Consolidation will continue at a higher than average pace
• Slower organic growth drives need for more inorganic growth
• China’s entry will increase valuations and accelerate pace
• Semiconductor industry may be “Zero sum game” in which declines in the US
and Japan are offset by increases in China –flat capex & chip sales
• Will China get there before the end of the party?
• China will grow faster than Taiwan or Korea did due to government money
accelerating the natural process
• “Reunification” with Taiwan could be the end game
• Could China buy GLOBALFOUNDRIES?