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Exploring Semiconductor Deals amid the US-China Trade War

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Jun. 6 2019, Updated 10:58 a.m. ET

Failed US-China deals

The US is a leader in semiconductor technology, accounting for 50% of the world’s semiconductor exports. US-based chip design companies have always been good acquisition targets for non-US companies.

Back in November 2017, Singapore-based Broadcom made a hostile takeover offer for US-based Qualcomm in a bid to gain access to 5G technology, but US President Donald Trump blocked the deal on the basis that the transfer of 5G technology to an outside company created national security concerns.

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The US has also blocked several attempts by Chinese companies to acquire US companies. Back in June 2015, Micron rejected a $23 billion acquisition offer from China’s Tsinghua Unigroup. In September 2015, China’s Unisplendour agreed to acquire a 15% stake in Western Digital for ~$3.8 billion, but it canceled the offer in March 2016 when the deal came under scrutiny by the US government.

Semiconductor deals amid the trade war

At a time when the US-China trade war is at its peak, German semiconductor manufacturing company Infineon has agreed to acquire Cypress Semiconductors (CY) for $23.85 per share, a premium of 46%. Netherlands-based NXP Semiconductors (NXPI) has also agreed to buy US-based Marvell technologies’ wireless connectivity business. It remains to be seen whether these two deals will be completed.

The above acquisitions show that European chip companies are moving quickly to acquire semiconductor intellectual property amid the trade war turbulence. What’s triggering these acquisitions is unknown, but the current semiconductor downturn has made chip stocks very cheap, which could be attracting potential buyers.

The last time a major semiconductor consolidation took place was in 2015 and 2016, when the memory and PC markets were down.

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