2020: The semiconductor industry's largest M&A deal ever.
Qualcomm is pursuing an M&A with Applied Materials.
Hynix grows through funds, LGE through joint ventures


In 2020, corporate transactions in the semiconductor sector reached an all-time high.

IC Insights announced on January 12 that the total mergers and acquisitions (M&A) in the global semiconductor market in 2020 reached a record $118 billion (approximately 130 trillion won).

This figure surpasses the $107.7 billion recorded in 2015.

In the first half of 2020, it was only $2.1 billion due to economic uncertainty and weakened consumer sentiment caused by the COVID-19 pandemic, and in the second quarter, when the global lockdown was at its most severe, it exceeded $300 million.

However, since July, large-scale M&As have continued, with the total transaction volume reaching over $100 billion, approaching 90% of the annual semiconductor market M&A volume.

△Nvidia's acquisition of Arm ($40 billion), △AMD's acquisition of Xilinx ($35 billion), △Analog Devices (ADI)'s acquisition of Maxim Integrated ($21 billion), △Marvel's acquisition of Inphi ($10 billion), and △SK Hynix's acquisition of Intel's NAND flash division ($9 billion) were among the big deals that drew attention.

The semiconductor industry's investment in preparation for the future is interpreted as gradually expanding, driven by the emergence of low-priced companies for sale in the wake of COVID-19 and the rapid transition to non-face-to-face and digital solutions.

IC Insights analyzed that in recent years, semiconductor market M&A has been driven by large companies seeking to strengthen their positions in the AI, electric vehicle, and autonomous driving markets. It also analyzed that the increase in data centers for cloud computing services and the proliferation of IoT sensors and systems were also key drivers.

Qualcomm targets the data center market with Nubia, solidifying its 5G presence.

Qualcomm opened the door to M&A in the semiconductor industry this year. On January 17th, Qualcomm acquired Nubia, founded by three key engineers who had previously designed Apple's "A Series" chips, for approximately $1.4 billion.

Nubia is a startup founded in 2019, and its strength lies in CPU design technology used in data centers. Qualcomm plans to leverage Nubia's technology across a wide range of applications, including flagship smartphones, laptops, in-vehicle infotainment (IVI) systems, and advanced driver assistance systems (ADAS).

Additionally, Nubia's CPU design capabilities are expected to contribute to improving the performance and power efficiency of application processors (APs), which are key chips in the 5G networking market.

Some interpret this as a strategy to reduce reliance on Arm to counter rival Nvidia. Currently, most of Qualcomm's chips use cores licensed from Arm.

◇ Acquisitions to secure market dominance and contain China

Applied Materials, the world's leading semiconductor equipment company, is in the process of acquiring Kokusai Electric, a Japanese company in the same field. Kokusai Electric possesses advanced film deposition equipment technology, which creates the fundamental film of electrical circuits on wafers, the primary material for semiconductors.

Applied Materials, which currently supplies equipment to most major semiconductor companies, including Intel, TSMC, and Samsung Electronics, is expected to further strengthen its market dominance if this acquisition goes through. According to Gartner, Applied Materials ranked first in the global semiconductor equipment market in 2019 with an 18.5% share.

The acquisition is also being driven by the desire to secure competitiveness in autonomous driving and AI fields in the 5G era, while also preventing semiconductor technology from leaking to China.

In fact, the acquisition price was initially $2.2 billion when the deal between the two companies was first signed in July 2019, but Applied Materials raised the acquisition price by about 59% to $3.5 billion in December 2020 when an unknown Chinese company entered the bidding battle.

◇ Domestic industry seeks growth engines through funds and joint ventures instead of M&A.

Excluding SK Hynix's acquisition of Intel's NAND memory business in the second half of 2020, there have been no M&As in the domestic semiconductor industry that would have impacted the global market.

LG Electronics, meanwhile, will invest $1 billion in a joint venture (JV) with Canada's Magna International in December 2020 to produce electric vehicle parts, entering the automotive semiconductor market in July.

LG Electronics has been steadily investing in automotive electronics technology, including the acquisition of automotive parts design company V-ENS in 2013 and automotive headlamp manufacturer ZKW in 2018.

Automotive semiconductors are installed in both the drivetrain and electrical systems of automobiles.

Current cityThe vehicles on sale contain 200 to 300 semiconductors, and it is expected that more than 2,000 will be needed for Level 3 autonomous vehicles that will be commercialized in the future.

Going forward, the domestic industry is expected to expand its dominance in the memory semiconductor market to the entire semiconductor market by seeking to expand investment in automotive semiconductors and establish funds.

Samsung Electronics, which has been aggressively investing in system semiconductors, is expected to have a high possibility of acquiring a competitive startup as it aims to become the number one global semiconductor company in the future.

SK Hynix signed a $3 billion funding agreement with the Industrial Bank of Korea, the Export-Import Bank of Korea, and Nonghyup Bank on January 19th for semiconductor industry investment over the next five years, which is expected to bolster its M&A efforts.

◇ The next-generation semiconductor market is one that even large companies cannot address on their own.

With the Fourth Industrial Revolution and digital transformation occurring faster than expected, demand for next-generation semiconductors, such as APs, GPUs, and sensors, which play key roles in 5G, AI, and autonomous driving, is also increasing.

The COVID-19 pandemic has restricted movement, driving explosive demand for gaming devices, and the expansion of data centers to support companies' digital transformation are also driving semiconductor demand.

As securing a lead in the next-generation semiconductor market becomes directly linked to a company's future competitiveness, the industry is actively investing. M&A investments, in particular, are an effective means of quickly responding to market changes and securing talent.

Even global companies can no longer keep up with the pace of technological innovation through their own efforts.

It's time to diversify and explore effective investment strategies that can create synergy effects by focusing on promising startups and small and medium-sized enterprises (SMEs) with diverse technologies and unique ideas.