March 04, 2021

Market Spotlight: Semiconductor technology at a crossroads in EMEA

By Merlin Piscitelli, Chief Revenue Officer, EMEA

As highlighted in our new Deal Drivers: EMEA FY 2020 report, among the largest deals in the EMEA market in 2020 was US-based NVIDIA’s proposed acquisition of UK-based semiconductor technology firm ARM from Japanese telecoms and technology conglomerate SoftBank. Announced in September, the €32.5bn deal is awaiting regulatory approvals.

The vital importance of semiconductors was highlighted at the start of 2021 when global shortages led to spikes in prices for consumer goods and halts to automotive production around the world. Chipmakers had paused their production of automotive semiconductors when the COVID-19 crisis began, but auto sales have bounced back sooner than expected, catching the industry off-guard.

At an inflection point
The semiconductor sector has been at an inflection point for a number of years. Starting around 2015, consolidation swept through the industry, as firms sought scale to cut costs, build complementary portfolios, and invest in crucial research and development in cutting-edge new products.

Semiconductor firms have been facing a squeeze to their profits as their products became commoditized, all while the need for expensive investment in innovation grew. Chips are now more widely used than ever before – not only have consumer products like smartphones and tablets proliferated, but the growth of the internet-of-things (IoT) has also meant increasing demand for new kinds of chips for everything from smart thermostats to internet-connected industrial equipment.

Creating a complementary portfolio
At the time of its acquisition of ARM in 2016, which designs and licenses technology to chipmakers around the world, SoftBank was expected to be a long-term investor. But in the years since, SoftBank has experienced a series of challenges and setbacks, which have prompted it to announce share buybacks and asset disposals.

As the digitalization trend continues to transform industries and geographic regions across the world, demand for semiconductors will only grow. The NVIDIA/ARM deal creates a complementary portfolio, matching NVIDIA’s high-end chips for AI and high-performance computing with ARM’s mobile device chip technology. The deal also gives NVIDIA access to ARM’s IoT technology, which is expected to be boosted by 5G roll-outs around the world.

Demand for consumer electronics is expected to remain high as the world transitions back to post-pandemic life. With revenues and share prices high, semiconductor firms could continue to use M&A to seek synergies as well as the next generation of chip technology.

Deal Drivers: EMEA FY 2020

What other EMEA M&A deals made the headlines last year? Which sectors and countries saw the top bidders and values? Where do the opportunities lie going forward?

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If you'd like to see how M&A has fared around the world, check out our other Deal Drivers reports from EMEA, APAC, and the Americas to gain the latest insight into dealmaking.

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