Renesas Electronics Corp has agreed to buy US chipmaker Intersil Corp for $3.2 billion, an all-cash deal that bolsters the Japanese group’s efforts to refocus the company around automotive chips.
Renesas, created from the semiconductor units of several Japanese companies, was bailed out by a state fund and key clients after the Fukushima earthquake five years ago, but has since been on a recovery path that has left it with a significant war chest.
“We managed to settle down at a price almost at the upper limit” Renesas CEO Bunsei Kure. “We are complementary. We can combine our products and offer them in a package,” he added.
Slowing growth in computers and smartphones – the traditional mainstays of the chip industry – has fuelled a wave of mergers globally for scale, with chipmakers turning to areas such as auto electronics for sales growth.
Though lifted by the popularity of electric cars, Renesas has struggled to remain at the forefront of the industry, as rivals like NXP Semiconductor and Infineon grow and consolidate.
At the end of last year, Tokyo-based Renesas was the world’s third-largest chipmaker by market share, with 9.1 percent, data from technology research firm Gartner showed.
Intersil, whose chips are used in industrial, mobile and infrastructure applications, would expand Renesas’ portfolio in analogue chips, which process signals such as sound, light and temperature before converting them into digital signals.
It would also give it a presence in the $10 billion power management segment of the chip market – Intersil has been researching efficiency problems including how to extend the life of batteries in electric vehicles.
By combining those products, Kure said he expects to bolster income by $170 million a year, allowing it to cover its acquisition cost within four to five years.
Renesas, which controls nearly 40 percent of the global market for microcontroller chips used in automobiles, will fully control Intersil after the buy-out, funded from existing cash. It aims to complete the deal by June 2017.
Renesas beat U.S. suitor Maxim Integrated Products Inc , promising Intersil access to its network of automotive clients to boost the auto-related business, sources have told Reuters.
Maxim officials could not immediately be reached for comment after Tuesday’s announcement.
San Jose, California-based Maxim has been on the hunt for a deal for some time, according to the sources. The company could therefore be at the centre of further consolidation in the still-fragmented market for analogue chips, they said.
Key steps for the deal now will include seeking security clearance from the Committee on Foreign Investment in the United States (CFIUS), which scrutinises deals for potential national security issues.
Apart from chips for industrial, mobile and infrastructure applications, Intersil also has a growing aerospace business and chips with military applications.
Shares in Renesas were up 0.7 percent at 0030 GMT.