The Deals and No Deals that shaped 2017
The list below is complementary to a further 10 deals that were directly relevant to the analog, MEMS and sensors sector in 2017 (see Deals that shaped the analog, MEMS and sensors world in 2017).
1) Qualcomm’s pursuit of NXP
Throughout 2017 mobile semiconductor giant Qualcomm has had an agreement in place with the board of directors of NXP Semiconductor NV (Eindhoven, The Netherlands) that it will buy the Dutch company for about $39 billion. But Qualcomm has yet to persuade regulators of the deal and all of NXP’s shareholders. The year started with the idea that the price was already looking low (see Could NXP shareholders get more cash from Qualcomm?).
Then there was stop-start slowness around competition regulators investigations apparently related to the companies’ own inability to produce certain documentation (see EU starts investigation on Qualcomm’s NXP takeover and Europe halts review of Qualcomm’s takeover of NXP). And finally the admission came that the deal would be unlikely to complete in 2017 (see Qualcomm’s purchase of NXP could slip into 2018 and Qualcomm must raise offer or abandon pursuit of NXP).
Meanwhile Qualcomm was itself being pursued – in the courts by Apple and in the market place by Broadcomm (see below).
2) Toshiba sells its memories
Toshiba was in trouble with an enormous accounting scandal in 2015 but in 2016 the problems moved to its nuclear power business where losses were in the billions. It had initially said it wanted to sell off no more than 19.9 percent of the semiconductor business.
As Toshiba was forced to submit unaudited accounts in February the scale of the problem increased and it emerged that the company needed to sell off the semiconductor business lock stock and barrel to come close to stabilizing the rest of the business (see Toshiba mulls sell off of all of chip business and Toshiba casts doubt on its own survival).
Seeking to auction off the business upset Toshiba’s long-time partner in NAND flash production Western Digital, which asserted Toshiba was making moves that were prohibited under joint-venture agreements. The row escalated (see Toshiba sues Western Digital for $1 billion) while Toshiba was trying to negotiate with two or three consortia.
In September Toshiba finally signed a $18 billion deal with a consortium of acquirers (see Toshiba sells flash memory business to consortium, Apple gets its share). The consortium is led by Bain Capital and includes Apple, Dell, Korea’s SK Hynix and Japan’s Hoya Corporation. Toshiba may even be able to maintain a stake in this memory business. The deal could close by March 2018 – or regulators may yet take exception to the presence of leading flash memory company SK Hynix in the consortium.
Next: All change in IP
3) Metamorphosis of Imagination
eeNews can take some credit for breaking this story when we reported back in March 2017 that Apple was hoovering up GPU engineers from Imagination (see Apple hires group of UK GPU engineers ). Apple had already said in 2016 that it was not interested in buying Imagination, one of its IP suppliers and the two facts made the status quo ante look unstable.
Within two weeks of our story appearing Imagination went public that Apple had served notice on the winding down of their relationship. The time line was 18 months to two years, just about the time it takes to develop a GPU architecture and cores (see How Apple will dodge an Imagination lawsuit). Rather like Toshiba, Imagination hoped it could survive by cutting off portions of itself (see Sondrel agrees to buy Imagination SoC design group and Imagination puts MIPS, Ensigma up for sale) but in June it said that the whole company was for sale (see Imagination puts itself up for sale).
In September it was agreed that Imagination would be bought by a China-connected venture capital firm called Canyon Bridge – of which more later – for about £550 million (about $740 million) after divesting the US-based MIPS processor business to Tallwood Ventures (see Imagination, MIPS to be sold to China-, California-connected VCs) for $65 million.
4) ARM helps form Chinese IP firm
At first sight the deal between ARM and Hopu Investment Management looked like a venture capital fund for Chinese startups. But as more information came out it seemed that it was mainly about one Chinese startup that would take ARM intellectual property and integrate it for applications where China might insist that products must be engineered in China – such as in the defense and security sectors (see Reports: ARM agrees to create Chinese IP firm and China’s ARM twist underlines strategic nature of tech). But then again perhaps it is just China’s way of insisting that more value remains in China. And maybe ARM is happy to be an architecture of choice.
5) Foxconn making America great again
Donald Trump was inaugurated as the 45th President of the United States on January 20. He had said that if elected he would “Make America great again” and bring manufacturing back to the country. In July Hon Hai Precision Industry Co. Ltd., which trades as Foxconn and is the world’s largest electronics contract manufacturer, said it would open an LCD panel factory in the state of Wisconsin that could employ up to 13,000 people (see NXP spends to ‘reshore’ manufacturing of security chips to US and Foxconn to build $10 billion LCD plant in Wisconsin).
Next: You can’t do that
6) TSMC under investigation
This is not so much a deal as a reminder that whenever companies are highly successful and become “dominant” in a market what they can and cannot do to maintain that leadership becomes contentious. Of course, what constitutes a market and dominance are open to interpretation.
Taiwan Semiconductor Manufacturing Co. Ltd. (Hsinchu, Taiwan) and its founder Morris Chang more or less invented the foundry semiconductor business and TSMC has about 56 percent of the market and even more of the profit (see TSMC to outgrow rival foundries in 2017, says TrendForce). In October Chang announced he will retire in 2018 (see TSMC’s Morris Chang sets retirement date).
But in September TSMC responded to reports that it was facing investigation of alleged antitrust violations (see TSMC responds to antitrust investigation reports). Two weeks later Reuters reported that it was second-ranked foundry Globalfoundries Inc. that had asked for an investigation because of alleged unfair practices such as: demands for exclusivity in contracts, offers of loyalty rebates, the bundling of sales, and threats of restricting access to TSMC’s semiconductor production. The report cited unnamed sources (see TSMC responds to antitrust investigation reports). Things have gone quiet since then but expect this to reignite in 2018.
7) Lattice deal blocked
In September President Trump issued an order banning the takeover of FPGA supplier Lattice Semiconductor Corp. by Canyon Bridge Capital Partners, LLC. Canyon was a newly-formed US-based venture capital firm that was working with Chinese funds (see President Trump blocks Lattice deal).
The founding partners in Canyon Bridge are Ray Bingham, a former CFO and CEO of EDA company Cadence Design Systems Inc. and Benjamin Chow. Chow was subsequently charged with insider trading regarding the deal (see Canyon Bridge founder charged with insider trading). Chow, a US citizen born in China, has denied any wrong-doing.
8) The billion dollar startup
2017 was a year that venture capital came back to semiconductor startups and hardware in general and in large amounts. And there was no bigger gamble than on China-backed Royole Corp. (Fremont, Calif.), a maker of flexible AMOLED displays, which has now raised over $1 billion since its formation in 2013. In September the company announced its Series D round (see Royole raises $800 Million, invests in flexible display production) which will help pay for its manufacturing campus in Shenzhen, China.
In August, it was reported that machine learning startups Cambricon Technologies Corp and Preferred Networks Ltd had received investments of $100 million each (see China chip startup nets $100 million Series A and ML startup gains $100 million investment from Toyota).
In November the UK’s own ML startup Graphcore Ltd. took another tranche of funding (see Graphcore’s funding rises above $100 million) and Samsung and Softbank joined in a $73 million funding round for Israel’s Innoviz Technologies Ltd. (Samsung, SoftBank back lidar startup Innoviz).
Next: Rivalry renewed
9) Marvell to buy Cavium
Storage and networking chip vendor Marvell Technology Group Ltd. has agreed to buy networking and data center processor company Cavium Inc. for about $6 billion. The deal is fairly complementary and big, but probably not so big as to attract regulator veto. It is expected to close by mid-2018 (see Marvell to buy Cavium for $6 billion).
10) Broadcom pursues Qualcomm
As the year progressed and Qualcomm failed to consummate its proposed deal with NXP Semiconductors NV, it began to look vulnerable itself. And in November Broadcom struck (see Broadcom bids for Qualcomm and Broadcom bid for Qualcomm would raise old rivalry).
Qualcomm’s board was resistant and described the take-over bid as opportunistic. And so Broadcom increased the pressure (see Broadcom ups the ante on Qualcomm hostile takeover). The final outcomes of both the Qualcomm-NXP and Broadcom-Qualcomm deals remain uncertain as we approach year-end.
There were many other deals that shaped 2017 and the ones that resonated in the analog, MEMS and sensors sector can be found here
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