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Capitalists exercise caution in semiconductor investments

Posted: 19 Aug 2014     Print Version  Bookmark and Share

Keywords:venture capital  semiconductor  investment  funding 

M&A activity robust

With an abundance of cash on their balance sheets and access to cheap debt, semiconductor sector members have seen a considerable rise in merger and acquisition activity. There were 55 M&A transactions totalling approximately $23.4 billion in the last 12 months, more than double from the previous 12 months.

"This renewed confidence in financial conditions has led many companies to seek more strategic acquisitions, both large and small, and we expect this consolidation trend to continue," Alexander said.

The chip sector recorded nine M&A deals in July 2014. The Ethernet network processor maker EZchip Semiconductor Ltd. agreed to acquire Tilera Corp., a multi-core processor vendor, for $130 million in cash. The microcontroller supplier Atmel Corp. beefed up its RF portfolio with a proposed deal to acquire the WiFi and Bluetooth chip maker Newport Media Inc. for $140 million. And Vishay Intertechnology Inc. made a move to expand its optoelectronics business with a $205 million deal to acquire Capella Microsystems Inc.

Some of the smaller deals include Audience Inc.'s $41 million cash purchase of Sensor Platforms Inc.; Ceva Inc.'s $19 million purchase of RiveraWaves; and Monolithic Power Systems Inc.'s $20.6 million cash deal for Sensima Technology SA.

A few companies didn't disclose the purchase price of their transactions, including Invensense Inc., which signed an agreement to acquire the motion processing software vendor Movea SA; Qualcomm Inc., which acquired the wireless chip developer Wilocity Ltd.; and Microsemi Corp., which bought Mingoa Ltd.

IPOs still weak

Though M&A activity has been robust in the chip sector, the initial public offerings market has been stagnant. In fact, there were no IPO filings from semiconductor companies in July, and none are waiting to go public, the GSA said. Only three IPOs have occurred in the last 12 months: Applied Optoelectronics Inc., Montage Technology Group, and China Wafer Level CSP Co. Ltd. Since 2011, five semiconductor companies either have withdrawn IPO filings (citing weak market conditions) or have been acquired before completing their IPO, Alexander said.

"Many companies are not going public because they recognise that, in today's market, this is not necessarily a sustainable exit strategy," she said. "It's not because they don't have great technology or great management teams, but rather going public requires tremendous scale that most emerging semiconductor companies don't have."

- Ismini Scouras
  EE Times

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