ON Semi Deepens Power Stake with Fairchild Acquisition | EE Times

The semiconductor industry consolidation continues. Companies with power management technology and products appear to be good bets.

ON Semiconductor announced Monday (Sept 19) the completion of its proposal to acquire Fairchild Semiconductor. The purchase, for $2.4 billion in cash, gives ON Semiconductor an expanded position in power semiconductors, particularly power transistors and diodes. The companies’ press materials suggest that the new $5-billion entity is now the number two in power transistor and diode shipments.

The acquisition of Fairchild Semiconductor is among the latest in a series of pairings reflecting industry-wide consolidation. It demonstrates a shared perception that semiconductors is now a BIG COMPANY business; that BIGNESS is a virtue enabling more rapid technology deployments and larger manufacturing capabilities — two conditions for success in a market whose growth has considerably slowed. This consolidation has proceeded for several years now, encouraged by the ultra-low price of capital, and — with multi-billion-dollar companies acquiring other multi-billion-dollar companies — few people are shocked at the scale of such acquisitions (like Avago’s acquisition of Broadcom for $37 billion, or SoftBank’s $32 billion acquisition of ARM Holdings).

What is new is the interest and value placed on power management IC suppliers. The ON Semi acquisition of Fairchild is a power management play, as is Renesas’ proposal to acquire Intersil (a transaction worth $3.2 billion), and Analog Devices’ proposal to acquire Linear Technology Corp. (a transaction worth $14.8 billion). The interest in analog and power technology extends to microcontroller makers like Microchip Technologies (who acquired Micrel) and processor makers like Mediatek (who acquired Richtek). These companies have used acquisitions to enable power management for their own advanced devices. It does a processor maker no good to build a 14nm device with 5 billion transistors on one chip — and send your customer elsewhere for solutions to the problems of powering it. (Qualcomm grew another billion-dollar business for itself by offering its own PMIC device for the Snapdragon chip sets.)

Leadership in this area will depend on possession of both power management devices (like voltage regulators) AND power transistors. Infineon is arguably the sales leader in discrete semiconductors (transistors and diodes) with 21% of the 2015 market, according to IHS Markit. (Prior to the acquisition, Fairchild held 5.7% of the discrete power semiconductor market, ON Semi held 3.3%.)

The pairing of ON Semi and Fairchild deepens and balances ON Semiconductor’s portfolio of power management devices. ON Semiconductor’s portfolio was rich in “low-voltage” semiconductors, according to ON Semi president and CEO Keith Jackson, while Fairchild’s portfolio had serviced higher voltage applications. Despite their strengths in power discretes, there is little overlap in their portfolios, Jackson said. 

The “new” ON Semiconductor is targeting markets in which the “old” ON Semi already enjoys considerable success. These include automotive products (such as MOSFET power train drivers, cameras and attachments for automotive safety) which accounted for 33% of ON Semi’s 2015 revenues. Industrial products (including motor drive circuits and transistors) accounted for 24% of ON Semi’s 2015 revenues. Communication circuits accounted for 18% of revenues.

Computing products only accounted for 12% of ON Semi’s 2015 revenues — odd, considering that ON retains a leadership position in power devices (like Vcore regulators) in desktop PCs and laptops. The reduced revenue is a reflection of a much reduced PC market, reminds David Somo, ON Semi’s vice president in charge of corporate strategy and marketing.  ON Semi anticipates a near-term revenue boost with the roll-out of machines using the Intel Skylake processor family.  (ON Semi’s Vcore regulator, a high-performance design purchased almost a decade ago from Analog Devices, enabled ON Semi’s leadership in the computer power market — where it also provided power MOSFETs — an item not then on Analog Devices’ menu.) The DrMOS products — MOSFET drivers authored by Fairchild — may alsocontribute to ON Semi’ penetration of the compute server market.

Following the acquisition of Fairchild , ON Semiconductor  will reorganize itself into three “Solutions Groups” (SG), one for power (PSG), another for application-purpose analog (ASG) and a third for Imaging (ISG). Power Solutions Group includes power switching circuits, signal conditioning circuits, protection diodes, and voltage references. The Analog Solutions Group includes application-specific analog products, and its markets include automotive, industrial, communications, medical and military / aerospace products. The Image Sensor Group is built upon CMOS and CCD image sensors, proximity detectors and image signal processors for the automotive, medical, and aerospace applications