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Semiconductor grab: Silicon Valley chip companies making tasty acquisitions

Rex Crim, The Mercury News on

Published in Science & Technology News

SAN JOSE, Calif. -- Winter may be on the way, but Silicon Valley chipmakers are having their moment in the sun.

Semiconductors are the brains, heart and guts of just about every electronic gadget you own, and the companies that make them are famous for roller-coaster highs and lows as they seek to stay relevant in a fast-changing market. But as chipmakers pursue an acquisition binge, the recent deal wrangling is generating excitement from investors. After all, it was silicon chipmakers that gave Silicon Valley its name.

Marvell Technology inked a big deal this month to buy San Jose-based Cavium, while Broadcom -- another chipmaker with roots in San Jose -- is pursuing what would be the biggest-ever acquisition deal in the technology industry. Broadcom's intended target, San Diego-based Qualcomm, argues that Broadcom's overture undervalues the company.

Both Marvell's and Cavium's stock prices have soared nearly 30 percent this month.

And while it's unclear whether Broadcom will prevail in landing the mother of all tech deals, its shares as of Friday had soared about 60 percent higher than they were a year ago. Qualcomm may be playing hard to get, making any deal far from certain at this stage, but its shares have surged about 35 percent higher this month.

Chipmakers are always looking for something faster, which can handle more needs than the products they just sent to market.

 

And hastened by the growth in cloud-based computing, artificial intelligence and the potential for self-driving vehicles, Bay Area chipmakers are writing huge checks as they position for future growth.

"Consolidation in the semiconductor market has been a growing trend," said Mark Hung, research vice president at Gartner. "The deal sizes of some of the recent announcements and acquisitions are larger than before, and acquisitions have been in vogue."

Marvell Technology, which has its U.S. headquarters in Santa Clara, said on Nov. 20 that it would acquire Cavium in a cash-and-stock deal valued at $6 billion. The nature of the Marvell-Cavium tie-up illustrates why chipmakers are looking to do deals.

Marvell made its bones in the market for chips used in high-end business-storage systems. But that market is cooling as companies embrace cloud-based technologies and other storage options. With Cavium, Marvell is expected to expand its offerings by adding more security, networking communications and connectivity chips to its product line.

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