What's going on?
Japanese chipmaker, Renesas Electronics, said on Tuesday that it plans to buy American rival, Integrated Device Technology (IDT), in a deal worth $6.7 billion. Salt and vinegar, anybody? (tweet this)
What does this mean?
Renesas has been on a shopping spree: last year, it purchased another US chipmaker for $3 billion. It identified (after some soul searching) that it was weak in the kind of chips used in autonomous cars – so it’s changing that by buying IDT. (Renesas is lacking “analog chips”, which are essentially used as sensors, taking physical cues from things like light and sound and processing them into digital data – crucial in autonomous vehicles.)
The deal still needs to be approved by the US government, which stopped a marriage between chip giants Broadcom and Qualcomm on national security grounds – but Renesas is confident it’ll get a green light.
Why should I care?
For markets: Everyone’s feeling chipper about the deal.
IDT’s stock sparked up 11% on the news, not too far off the 16% premium to Monday’s share price that Renesas agreed to pay for it. And Renesas’ stock rose, too, by 4% – suggesting that investors dig the deal. Renesas reckons it’ll be able to generate $80 million of cost savings (a.k.a. synergies) in the next two years by removing duplicate costs like admin.
The bigger picture: Autonomous consolidation ahoy.
Renesas’ peers are doing the same dance. In 2017, Intel – the world’s biggest chipmaker – purchased Mobileye, which makes collision-preventing sensor systems for (you guessed it) autonomous vehicles. It’s a race to the starting line in the driverless ride market, and Intel paid up to save some time. On the other side of the coin, General Motors bought startup, Strobe (which makes technology to help identify objects at a distance), to add to its self-driving arsenal; Ford’s autonomous vehicle subsidiary bought itself similar tech; and Delphi, one of the world’s biggest automotive suppliers, purchased self-driving car startup, NuTonomy.