M&A Deals of 2022 in the Semiconductor Industry

M&A activity has dropped from its record pace in 2021, as deals were delayed in the first half of 2022 due to economic difficulties.

This is according to PwC's Global M&A Industry Trends: 2022 Mid-Year Update. Asia-Pacific saw the biggest drop, with both volume and value down more than 30% from the 2021 peak, mainly due to macroeconomic issues and lockdowns imposed in several major Chinese cities. 

The pace of major mergers and acquisitions in the semiconductor industry regained momentum in the first six months of 2022, according to IC Insights' August 3Q Update of The McClean Report. There has also been a marked reduction in mergers through SPACs (down 78% from the same period last year), which accounted for around 20% of US M&A transactions last year. Four major deals got announced in the semiconductor industry so far this year. Leading the M&A deals in the first half of the year was an agreement by a Chinese investment consortium led by Beijing Jianguang Asset Management Co. to acquire semiconductor conglomerate Tsinghua Unigroup, which operates Yangtze Memory Technologies, China's first and leading domestic manufacturer of NAND flash memory chips. The second largest chip acquisition agreement was Intel's deal to buy Tower Semiconductor in Israel. The deal, announced in February 2022, is expected to be completed by early 2023. 

In May 2022, California-based MaxLinear announced an agreement to buy Silicon Motion in Taiwan. This acquisition is expected to be completed in the first half of 2023 and will add NAND flash memory controller chips to MaxLinear's product line-up. In April 2022, AMD announced an agreement to buy cloud computing processor and software start-up Pensando Systems in Milpitas to increase its presence in the data center market and strengthen its competition with Intel. The acquisition was completed in May 2022, three months after AMD completed its purchase of Xilinx in February 2022. The Xilinx acquisition was the largest semiconductor M&A deal in history, as the final purchase price rose to $49.8 billion - up 42% from the original estimate of $35 billion when the acquisition was announced in October 2020. 

Many of the factors underlying the record M&A market in late 2021 and the first half of 2022, such as supply chain sustainability, portfolio optimization, environmental, social and governance (ESG), and, above all, the need for technology to digitize business models, will remain essential to deal making in the second half of 2022 but, in an uncertain economic environment, will require a new approach.

With inflation reaching a 40-year high in many countries, dealers also need to anticipate different inflation scenarios, consider the market impact, price elasticity, customer and supplier relationships and pay, and staff retention. That said, staffing strategy should be a priority in any deal, as the highest wage inflation in decades will affect future business performance.