In the first half of the year, MACOM has acquired Nitronex, Avago has acquired LSI, RFMD and TriQuint are merging, Cobham is acquiring Aeroflex, and most recently announced, Analog Devices is acquiring Hittite. My head is spinning with all of this consolidation, not to mention several other smaller acquisitions that happened during this period. What is going on in the RF industry? An industry that has been mostly made up of smaller to medium sized companies seems to be going large with all of these organizations turning into multi-billion dollar companies.
Is the face of the RF industry changing? It seems like from a financial standpoint, these companies need more scale and market share to satisfy their shareholders, but I am guessing this is just a temporary phase we going through as profits for these companies have stagnated. Hopefully, they will prosper and other companies will emerge finding new opportunities for growth.
MACOM, with the Nitronex acquisition, is aggressively pursuing the commoditization of GaN using their low cost GaN on Si process and scaling it to 8 inch wafers (currently only on 3-4 inch wafers). The plan is to utilize older Si fabs running 8 inch wafers and taking advantage of their excess capacity to product RF products which are much lower in volume compared to Si applications so could easily be fit into their production schedule. They are also utilizing low cost surface mount packing techniques to further drive down costs. And they are still making GaN on SiC for higher performance applications so the only company taking both approaches.
With the acquisition of LSI, Avago hopes to be a leader in the enterprise storage market. The acquisition also expands Avago's product offerings and brings system-level expertise in its wired infrastructure market. With increased scale and a diversified product portfolio, the combined company is positioned to capitalize on the growing opportunities created by the rapid growth in data center IP and mobile data traffic. They hope to achieve cost savings of $200 million in a year and are now about $5 billion in sales.
The RFMD and TriQuint merger creates a multi-billion dollar RF giant that has complimentary products in many areas. TriQuint brings expertise in RF filtering and defense technology while RFMD is strong in Si RF products and packaging technology. They hope to realize $150 million dollars in costs saving evenly divided over 2 years. Each company separately was a strong force in the RF market so together they should have a significant market share in the handset, infrastructure and defense markets.
Cobham previously purchased MACOM’s and REMEC’s defense businesses and now moves onto Aeroflex who is a widely diversified RF supplier. This brings together many divisions that supply everything from RF diodes to components to test systems. Aeroflex has traditionally let each division operate pretty independently, so it will be interesting to see how Cobham integrates them into the company. Cobham has traditionally absorbed the brands into the company over time which is the opposite of what Aeroflex has done.
Analog Devices has been rumored to be pursuing the purchase Hittite for many years. Over that time, Hittite has expanded their product lines into converters, defense and even test equipment. This acquisition gives Analog Devices a strong presence in the whole radio signal chain as they have always been dominate in the converter market and combing their RF products with Hittite gives them a leadership position in many RF markets. Hittite compliments their product well as they have higher frequency microwave and mmWave products and a defense business that ADI did not really have. ADI has also been strong in the RF source and control market so this extends their RF coverage to the whole chain. Although they paid a handsome price of $2 billion, this should be a strong company with a solid product portfolio from IF to RF.
Let me know what you think about all of this consolidation and where you see it going.