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Avago / Broadcom Merger to Rank Third Largest Semiconductor Supplier, Says IHS

Merger activity in the semiconductor industry moved to a new level with the announcement of the agreement for Avago Technologies to acquire Broadcom, according to market research firm IHS.

The deal, which is valued at $37 billion in cash and stock, will create a new company valued at $77 billion.

This is the latest and, by far the largest, merger in the semiconductor industry, as major players continue to move in an aggressive way to establish position and profitability in key segments of the industry, said Dale Ford, vice president and chief analyst for IHS Technology. Investors have responded favorably to the announcement, with promised bottom-line benefits derived from realized cost savings.

The combined revenues of the two companies in 2014 exceeds $14 billion, making the newly merged semiconductor company the sixth-largest globally, according to final annual semiconductor market shares. More significantly, the combination of the two companies creates the third-largest semiconductor supplier, trailing only Intel and Qualcomm, if memory integrated-circuit (IC) revenues are excluded.

The complementary product portfolios of the two companies move them into a powerful position, in both the communications IC market and the storage IC market, Ford said.

Quadrupling in size in two years
This latest move from Avago Technologies has formed a company with revenues four times greater than in 2013. The two biggest recent mergers by Avago Technologies were the acquisition of LSI in 2014 and this new acquisition of Broadcom.

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The mergers increase the company's strength in the communications and storage categories. Outside of these two areas, Broadcom has a much smaller presence in consumer electronics and industrial electronics and almost no revenue from other data processing and automotive electronics.

To read the rest of this article, visit EBN sister site EE Times.

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