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5 October 2007


Compound acquisitions reach $2bn, driven by IP and product portfolio expansions

Consolidation in the compound semiconductor industry is predicted to continue, reckons market research firm Strategy Analytics. However, the strategies of industry players have matured beyond simply acquiring competing companies in order to gain market share. Instead, companies are now looking for valuable intellectual property and opportunities to expand product portfolios into multiple new markets.

Despite the sub-prime lending crunch, this summer has seen acquisitions with a total value approaching $2bn, for example by Anadigics Inc of Warren, NJ, USA (of Fairchild Semiconductor Inc’s RF Group in Tyngsboro, MA for $2.3m ), by Avago Technologies Inc of San Jose, CA (of Infineon Technologies AG’s polymer optical fiber business in Regensburg, Germany for $27m), by Holland’s Philips Electronics (of LED lighting systems maker Color Kinetics in Boston, MA for $790m), by RF Micro Devices Inc of Greensboro, NC (of fabless RF component firm Sirenza Microdevices Inc in Broomfield, CO for $900m), and by TriQuint Semiconductor Inc of Hillsboro, OR (of fabless discrete RF transistor firm Peak Devices Inc in Boulder, CO for $15m).

RFMD and TriQuint’s acquisitions, in particular, are driven by the aim to enter new markets by acquiring product portfolios complementary to their own. “The larger players need to expand their horizons beyond cellular handsets if they are to be profitable,” Asif Anwar, director of Strategy Analytics’ GaAs and compound semiconductor technology service, told Semiconductor Today. “As deals have become more difficult to finance, firms are being forced to scrutinize each deal much more closely and use strategic financing to fund deals,” he adds. "The industry has learned to look for affordable gems with unique IP suited to products and strategies.”

“I believe we will see further exits, mergers, acquisitions and divestments,” Anwar says. “Companies that have low market share and ‘me too’ products will find it difficult to survive,” Anwar adds. Indeed, in mid-September EiC Corp of Santa Clara, CA announced it was closing down its GaAs RFIC manufacturing operations (following the sale of most of its product line to WJ Communications in June 2004).

Another trend driving consolidation is firms selling their fabs, in order to become fabless (following the mainstream silicon sector).  “I believe we will see more GaAs device companies - especially outside the top ten and not tied to military sectors - looking to maximize profitability by going fabless [following the examples of Hittite Microwave Corp of Chelmsford, MA, Mimix Broadband Inc of Houston, TX (since selling its ex-Celeritek fab in Santa Clara, CA to USTI in April 2006) and WJ Communications Inc of San Jose, CA (since selling its fab in Milpitas, CA in Q2/2007)]. The success of pure-play foundries is a result of these trends,” Anwar told Semiconductor Today. “If you’re a small player chasing a high-volume market then it doesn’t make sense to have a fab, so companies will consider this option. Exceptions are companies that are involved in the defense sector, where high fab utilization is not a critical factor.”

“On the other hand, customers for the larger GaAs players such as RFMD and TriQuint expect their suppliers to match their requirements with investments in extra fab capacity,” Anwar adds. “Skyworks is an interesting example in that they have chosen a strategy that entails running its own fabs at 100% and then outsourcing extra requirements to a qualified foundry partner, namely AWSC [Advanced Wireless Semiconductor Commpany of Tainan Science-Based Industrial Park, Taiwan],” he concludes.   

See related items:

TriQuint acquiring Peak Devices for wide-bandwidth amplifier design

RFMD diversifies by acquiring Sirenza

Handset PA suppliers set for consolidation

RFMD and Skyworks gain share in handset PAs: further consolidation likely

WJ completes closure of its GaAs fab