The Clock on the Wall Says It May Be Time for More Analog Deals
The surprise acquisition of National Semiconductor by Texas Instruments has given stocks in other companies that make analog semiconductors a big jolt.
Here’s a sampling: Fairchild Semiconductor is up nearly 5 percent in after-market trading. Analog Devices is up a little more than 4 percent. Maxim Integrated Products, 5 percent. Linear Technology about 3 percent. On Semiconductor more than 5 percent. Intersil, 8 percent. STMicroelectronics, 3 percent. You get the idea: Investors are clearly hoping that another acquisition is soon to happen in the world of analog semiconductors.
TI was already the big gorilla in the analog business. It’s a $42 billion business and TI accounted for about $6 billion worth of analog sales in 2010, and the analog business amounted to 43 percent of TI’s business last year. With this acquisition it goes from being a chip company that supplies the microprocessors for most of the world’s wireless phones to a mostly analog company. A Gartner market ranking of analog chip makers ranked TI number one and National fourth. The combination makes TI an even bigger gorilla yet.
Who’s number 2? Analog Devices, ahead of Maxim and Linear Technology, who are numbers three and five respectively in the Gartner rankings. Further down the list you see names like STMicro, On Semi, Intersil and Fairchild.
So what’s so great about analog chips? They go into everything: From wireless phones to games to medical devices to military and industrial gear. They manage power; help convert light and sound into digital information; and measure temperature or pressure or any other quantity that occurs in the real world. And with all the digital gadgets we rely upon these days, we’re relying increasingly on analog chips of every stripe. Analog sales grew 37 percent last year, which was faster than the chip business as a whole, Gartner analyst Steve Ohr told me.
As is the case with TI and National, there’s bound to be a lot of overlap in products and customers among all these other companies. That suggests that more combinations are likely, though with valuations inflating on the speculation, any company thinking of making an acquisition would probably want to sit tight until the prices come down a little bit before making a move.