Texas Instruments buying Nat-Sem


  • Technology
  • Tuesday, 05 Apr 2011

T1online

SAN FRANCISCO: Texas Instruments Inc is buying National Semiconductor for US$6.5bil (RM21bil) in a marriage of two of the world’s premier makers of analogue chips. These are widely used in electronics to transform signals such as sound into digital form that computers can understand.

In scooping up National Semiconductor, TI is getting a storied Silicon Valley company whose history stretches back more than 50 years and is known for its power-management chips.

The deal is the latest example of consolidation among big players in the technology world as trends such as the explosion in smartphones have shaken up the competitive landscape.

Longtime foes have joined forces while friendships have frayed as the boundaries between companies’ business lines have blurred.

TI has agreed to pay US$25 (RM80) per share. The all-cash transaction represents a 78% premium over National Semiconductor’s stock price before the deal was announced.

TI and National Semiconductor have been long-running rivals.

Good move

A leader in chips for cellphones, TI said swallowing National Semiconductor would be good for both companies’ sales. TI’s CEO Rich Templeton said the combined companies’ sales team will be 10x bigger than National Semiconductor’s current sales force.

“This acquisition is about strength and growth,” Templeton said in a statement. “National Semiconductor has an excellent development team, and its products combined with our own can offer customers an analogue portfolio of unmatched depth and breadth.”

Dallas-based TI noted that it makes some 30,000 types of analogue chips, while National Semiconductor, based in Santa Clara, California, makes 12,000. TI said that it owned about 14% of the US$42bil (RM134bil) worldwide analogue market last year, while National Semiconductor owned about 3%.

TI said the analogue business will rise to about 50% of the company’s overall revenue when the deal closes, which TI expects will be within the next six to nine months. Last year, they made up about 43% of the company’s US$14bil (RM45bil) in revenue. The rest was made up of various different kinds of chips.

Industry view

Ashok Kumar, an analyst with Collins Stewart, said he expects the deal will clear antitrust scrutiny because despite consolidation in the analogue chip market, “the market is pretty brutal” and pricing is aggressive.

He said Texas Instruments’ recent decision to exit the mobile-phone “baseband” business (chips that help phones connect to cellular networks) has put pressure on TI to find ways to replace the lost revenue.

The baseband segment brought in US$1.7bil (RM5.4bil) in revenue last year, and is expected to go to zero by next year. TI will continue to make “applications processors,” a different kind of chip that acts as the central brain of cellphones.

Kumar called the deal “a match of mutual necessity — for National Semiconductor more than TI.”

“National Semiconductor has been lost for quite some time — it didn’t appear to have critical share in any market of consequence,” he said.

“TI is not without its own set of problems, but it can more than survive. But the issue it is facing in the longer-term is that it is being squeezed out of the handset (segment) in the post-PC environment.”

TI executives have touted the untapped opportunities for TI in the analogue market as a key reason to expand in that area while shrinking parts of the wireless business. — AP

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