01-03-2021 | | By Robin Mitchell
Recently, Renesas announced that it is to purchase Dialog Semiconductors for $5.9bn to continue financial growth and increase customer opportunities. Who are the two companies involved in the deal, what products do they manufacture, and what will the deal include?
Renesas is increasingly becoming a well-known name in the electronics industry even to those who build circuits for fun. Renesas Electronics Corporation (Renesas for short), is a Japanese semiconductor manufacturer founded in 2002, started operation in 2010, and has over 19,000 employees.
Semiconductors is their main market. Despite their young age Renesas is the worlds largest manufacturer for automotive semiconductor parts, the worlds biggest developer of microcontrollers, and was the world’s 6th largest manufacturer for semiconductors in the early 2000s. Renesas also produce other semiconductor products including analogue, mixed-signal, memory, and SoCs.
Renesas is arguably somewhat of an unusual company in that they are the worlds biggest microcontroller producer. Yet, their products rarely enter the maker market, and many makers are entirely unaware of their operations.
Dialog Semiconductor is an American company domiciled in the UK, meaning that while the company itself is American developed, its legal location is in the UK. Founded in 1985, the company now has over 1,800 employees and yearly revenue of $1.566 billion.
Dialog Semiconductor focuses on the development of application-specific standard products (ASSP) and Application-Specific Integrated Circuits (ASIC). While ASICs are designed to perform a specific function, an ASSP is usually an SoC with a specific purpose, but sold to multiple customers.
Customers of Dialog Semiconductor include Apple who exclusively provides power management products for many of their products, but Dialog Semiconductor themselves are a fabless company. While Dialog Semiconductor does own its own private semiconductor production system, this is for the sole purpose of research and development of new devices.
Recently, Renesas announced in a press release that it has entered into an agreement with Dialog Semiconductor to purchase the company for a total of $5.9 billion. The agreement will see Renesas purchase shares of Dialog Semiconductor for 67.50 euros, which is a 20% premium to Dialogue Semiconductor shares' last closing value.
According to Renesas, the motivation behind the purchase of Dialog Semiconductor is two-fold. Firstly, Dialogue Semiconductor's acquisition allows Renesas to combine the technological capabilities of Dialog Semiconductor into their own products, including low-power, connectivity, and mixed-signals improvements.
Secondly, Renesas purchasing Dialog Semiconductor allows for the two companies to grow and increase overall revenue. It is expected that Renesas will see incremental revenue growth of around $200 million per year as a result of accelerated technological growth.
Renesas went on further to outline major plans on how Dialog Semiconductor will help grow their business. Firstly, Dialog Semiconductor power solutions will be combined with Renesas microcontroller technology to scale and expand Renesas’ IoT sector capabilities. Secondly, the combination of Dialog Semiconductor connectivity technology will broaden the customer base thereby creating differentiation between the two companies. Thirdly, the combination of the two companies can help to save costs in the long run due to the sharing of technological capabilities and increasing capabilities of Renesas products.
Tech companies purchasing other tech companies is not new, but recently we see more acquisitions by big names. For example, Intel purchased Altera to expand their programmable logic capabilities. AMD recently announced their acquisition of Xilinx for the same purposes, and Nvidia is now trying to purchase ARM Holdings.
As technology becomes increasingly more important in everyday life, the number of customers available increases. However, small companies can struggle to supply products to large markets for numerous reasons including competition, visibility, or a lack of funds.
Furthermore, tech itself is changing with multiple tech disciplines frequently being combined into a single product. For example, a smart IoT device may integrate hardware, software, and AI meaning that multiple technologies are required. Thus, it can make sense for a large tech company to acquire smaller companies which specialise in these areas.
Renesas acquiring Dialog Semiconductor is advantageous thanks to the little overlap the two companies have. Furthermore, Renesas will be able to create better products using Dialog Semiconductor technology, and Dialog Semiconductor will also be able to access technology developed by Renesas.