Will China block Analog Devices’ growth aspirations?
The agreed acquisition, for about $21 billion, was announced Monday (see Analog Devices to pay $21 billion to take over Maxim).
Texas Instruments was the top analog IC vendor in 2019 with $10 billion of business, almost twice the sales of its nearest competitor, according to IC Insights Inc. (see Texas Instruments stays on top of analog chip ranking). Analog Devices ranked second with about $5.2 billion of analog sales in 2019 but Maxim ranked seventh with $1.85 billion. Third ranked was Infineon Technologies with $3.75 billion.
The acquisition of Maxim will reinforce Analog Devices’ position as second-ranked analog IC supplier without changing the top five ranking.
The deal is still subject to US and certain non-US regulatory approvals as well as by the shareholders of both companies. The premium Analog was prepared to pay above the Maxim stock price was not that great but given approval by both boards of directors it would seem that stockholders will generally take to the deal, although such a large deal could take a year to close and a lot can happen over such a period of time.
It was notable that Qualcomm’s intended acquisition of NXP Semiconductors back in 2017 was one such major deal that never happened.
Next: It ain’t over til . . .
Of more interest is the regulatory approval. Such approvals are usually considered on an anti-monopoly basis and, as discussed above, the Analog-Maxim merger would appear to pass this test. But could China choose to put a spoke in Analog Devices’ wheels almost as a way of marking a transfer of power from the US to China?
With China representing more than one-third of the global chip market, the deal would not appear to make sense without Chinese regulatory approval. China may consider the consolidation of two US companies as the analog sector’s dominant twosome controlling a third of the supply of such chips as not being in its national interest.
China has many small analog, mixed-signal and RF IC companies but no presence in the top ten ranking. It may consider a more fragmented analog IC supply chain as being in its favour.
Or, given the feverish atmosphere between the US and Chinese governments, China may simply want to withhold approval as a bargaining chip in the wider trade negotiations between the superpowers.
Either way the deal isn’t done and there may be multiple twists and turns before it is.
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