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Semiconductor Mergers and Acquisitions: Segmentation in 2018 will Continue
As the suspense of the "double-pass" M&A drama fades, 2017 is drawing to a close. The semiconductor industry’s mergers and acquisitions did not carry forward the turbulence of the previous two years; instead, the market has become more subdued. Only two transactions exceeded $1 billion: Intel’s acquisition of Mobileye and Toshiba’s deal. But what lies ahead for global M&A in 2018? Walden C. Rhines, CEO of Mentor (a Siemens business), shared his insights on next year’s M&A trends in the semiconductor sector during an interview with Micronet. In his view, specialized M&A in niche areas will be the key theme.
This year, the pace of semiconductor M&A has slowed compared to 2015 and 2016, when average deal values reached nearly $100 billion. While Toshiba’s M&A activities have been relatively quiet, recent moves like Broadcom’s takeover bid and the Marvell-Cavium merger have reignited interest. Looking back, it's clear that successful M&A activity has often focused on specific segments—like automotive, wireless devices, and networking—where companies have strong market positions and profitability. Meanwhile, global monetary policies have fueled investment, supporting this trend. This specialization is likely to continue, as it enhances the profitability of top-tier players such as TI, Broadcom, and NXP.
However, full-scale integration across the entire semiconductor industry seems unlikely, as there is no clear correlation between revenue and profit margins. As growth slows and markets stabilize, some companies may turn to aggressive M&A strategies to drive development. How can they balance boldness with stability? For Mentor, the path has always been one of internal R&D. Over its 36-year history, the company has built most of its products in-house, with only a small portion of revenue coming from acquisitions. Products like Calibre, TestKompress, and CellAwareTest were developed internally, and their creators remain at the company.
Looking ahead, the merger with Siemens brings new opportunities and accelerates growth through strategic acquisitions. Previously limited by financial constraints, Mentor now has the resources to pursue larger deals. Yet, the company’s DNA remains rooted in independent innovation—from concept to product lifecycle. That won’t change. However, M&A will play an increasingly important role in future development.
Cultural integration has always been a challenge in M&A. Mentor and Siemens share similar values, including respect for individuals, a focus on technology, and an openness to cross-cultural collaboration. These commonalities make the integration smoother. In cases where alignment isn't strong, Mentor is willing to walk away from deals.
Since Siemens acquired Mentor in March 2017, both companies have worked hard to align their operations. A key factor in the success of this deal was Siemens’ focus on “income synergy†rather than “cost synergy.†This approach emphasizes growth over cost-cutting. Siemens has also made it clear that Mentor’s IC design business is a critical part of its future strategy.
With more system manufacturers entering the IC design space, EDA companies are poised for new opportunities. As I highlighted over a decade ago, EDA tools used for IC and PCB design are becoming essential for system-level design. As electronic complexity grows, so does the need for advanced EDA solutions. In the coming years, EDA will increasingly focus on system design, offering tools that automatically interpret other design data.
Another key acquisition for Siemens was Solido, a company specializing in machine learning for variability-aware design. With over 40 major clients using its tools, Solido has revolutionized how companies design and validate chips. Its integration into Mentor’s analog/mixed-signal verification unit has created significant synergies, enhancing both product capabilities and customer reach.
Machine learning is transforming the EDA landscape, improving performance while maintaining accuracy. Solido’s 12 years of expertise in this area made it a perfect fit for Mentor. Their technologies are already being integrated into broader Siemens offerings, reinforcing the company’s long-term vision for EDA. As AI continues to evolve, its impact on EDA will only grow, opening up new possibilities for innovation and efficiency.