Rising to occasion, chipmakers are switching to consolidation mode

The year 2017 saw hectic M&A activity in many industries; and the semiconductor sector, which has witnessed a series of merger transactions over the last decade, was no exception. In an unexpected development, chipmaker Broadcom reportedly raised its offer for rival Qualcomm, casting uncertainty over its ongoing bid to take over NXP Semiconductors.

Broadcom has made the “best and final offer” of $121Bil to buy Qualcomm, which if materialized would be the largest-ever merger deal in the tech industry. The offer comes at a time when Qualcomm is caught up in multiple lawsuits across the globe, involving both regulators and business partners like Apple. For Broadcom, the main lure is Qualcomm’s comparatively lower share prices, which has been on a downward trend ever since the legal issues cropped up. With the Broadcom chief well positioned to influence members of the Qualcomm board at the upcoming meeting on March 6, the offer has put the latter under immense pressure.

While big players take the path of consolidation to enhance growth, there is an emerging trend among smaller companies to pursue amalgamations within themselves, especially in the wake of the recent chip security scare.

AMD, Cirrus Logic, Cypress Semiconductor, Integrated Devices Technology and Micron Technology are next in the line for a potential takeover by their larger counterparts. The new equations assume significance considering the stiff competition faced by the US semiconductor industry from South Korea and China.

While big players take the path of consolidation to enhance growth, there is an emerging trend among smaller companies to pursue amalgamations within themselves, especially in the wake of the recent chip security scare. Such deals are a wise bet for companies that heavily depend on a single large customer for their business – such as Apple in the case of Cirrus Logic.

Bugged by scandals

The semiconductor space has been embroiled in litigations over the past several years, including those related to patents. Ever since the Spectre and Meltdown CPU bug was exposed, things don’t look good for leading chipmakers like Intel and AMD. The bug issue, which exposed some serious security flaws in microprocessors manufactured by these companies, is undoubtedly the biggest scandal the sector has witnessed in recent times.

The worst part is that Spectre and Meltdown can affect computers of all brands, working on any operating system. Intel, AMD and Apple, among others, are facing class action for not checking the vulnerability and also for keeping silent on such a serious threat even after detecting it. That gives a clear indication of what is in store for these companies in the coming months. And the trouble doesn’t end there, for it is also alleged that the security patches released by the companies to fix the glitch cause computer systems to slow down. That means users who are yet to avail themselves of the patches offered by the respective chipmaker are at the risk of getting affected by the dangerous malware.

The whole issue raises questions about the safety of information stored on computing devices, from personal computers to large networks. The time has come for those at the helm of affairs to sit back and do some soul-searching. With the world getting more and more connected, the day is not far when even the slightest compromise on data security could unleash catastrophe.