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Western Digital Deal Makes Semiconductor Space a Hotbed for M&A


Nov. 20 2020, Updated 5:32 p.m. ET

Western Digital buyout of SanDisk: One of the largest 2015 M&A deals in semiconductor space

In this series, we’ve covered various aspects of the Western Digital–SanDisk acquisition. The deal is expected to be one of the largest M&A (merger and acquisition) deals in the semiconductor space in 2015. It comes just behind the Broadcom-Avago merger, as you can see in the chart below.

For more information on recent M&A activity, you can read Market Realist articles on the Broadcom-Avago, Intel-Altera, and Freescale-NXP mergers. Watch for our upcoming series on the Lam Research–KLA-Tencor merger.

By acquiring SanDisk (SNDK), Western Digital (WDC) aims to have a broader portfolio of data storage components. It will also improve its market standing as a supplier that could reignite new pricing pressure in the storage market.

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Before WDC made the announcement to buy SanDisk, Lam Research announced a $10.6 billion acquisition of KLA-Tencor. Both companies are chip manufacturers, and their combination would make LAM a number-two supplier of chip-production tools, behind only Applied Materials, as reported by the Wall Street Journal on October 21. The Lam Research announcement is expected to ignite competition and rivalry among the industry’s key toolmakers.

What’s driven M&A deals to reach record highs in 2015?

According to Dealogic, a data provider, there have been semiconductor deals worth $100.6 billion through mid-October 2015. This is way ahead of the deals worth $37.7 billion in 2014.

A changing landscape and the high pressure that the semiconductor space is exposed to are playing major roles in these multi-billion-dollar deals. Slow growth, increasing competition, and rapid shifts in the technology space have pressured chip manufacturers and equipment suppliers to acquire scale and breadth.

Increasing costs have driven chip manufacturers and their suppliers to consolidate in the midst of a falling demand for PCs and servers. Recently, Intel Taiwan Semiconductor Manufacturing (INTC) and Intel Taiwan Semiconductor Manufacturing (TSM) announced the slashing of their capital expenditures. The reason was a weakness in the industry.

By joining hands either through integration, joint ventures, mergers, or acquisitions, these players intend to capture a bigger slice of the semiconductor pie to carve out a space for themselves.

You can consider investing in the SPDR S&P 500 ETF (SPY) to gain exposure to the tech sector. SPY invests about 18% of its holdings in the technology sector.


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