The M&A cycle in the semiconductor industry

Over the past decade, the global semiconductor industry has repeatedly experienced an interplay of 'business cycles + waves of M&A.' When the market encounters growth bottlenecks, high R&D costs, and rapid diversification of processes and applications, M&A often becomes a key strategy for companies to break through their limitations. From the era of PCs and mobile devices to the current age where AI, cloud, and automotive chips coexist, capital integration has not only changed company sizes but also redefined the nature of industry competition.

Early semiconductor M&As were mostly aimed at filling technical gaps or acquiring patents, such as in manufacturing processes, IPs, or specific market channels. However, recent M&As have clearly shifted towards 'platformization' and 'ecosystem integration.' The most representative case is AMD's acquisition of Xilinx. This deal was not just about simply combining CPU and FPGA technologies; it transformed AMD from a single processor supplier into a comprehensive platform covering CPUs, GPUs, FPGAs, and adaptive computing.

Such M&As reflect a trend: competition in semiconductors is no longer solely about standalone performance but revolves around providing holistic solutions for specific application scenarios (such as data centers, AI acceleration, edge computing). As customer demands become increasingly complex, offering a 'one-stop' product portfolio is often more decisive than the performance of individual chips.

Another notable trend is the growing emphasis by chip companies on the software and system layers. Broadcom’s acquisition of VMware may appear to be a cross-industry combination of semiconductors and enterprise software, but it actually reflects deeper changes in cloud and data center architecture. For Broadcom, while hardware margins are constrained by economic cycles, enterprise-grade software can deliver stable and predictable cash flow. Combining the two helps smooth out cyclical fluctuations.

More importantly, such mergers allow chip companies to penetrate deeper into customers' IT architectures, extending from the underlying hardware all the way to virtualization, management, and security layers. As hardware-software integration becomes mainstream, the core of industry competition is no longer just about 'whose chips are faster,' but rather 'who can capture more comprehensive usage scenarios.'

However, mergers do not only bring positive effects. Increased industry concentration could squeeze the survival space for small and medium-sized innovative companies, while also reducing customer choice and bargaining power. Stricter regulatory scrutiny of large mergers reflects awareness of these risks. Additionally, improper integration may weigh down the acquiring company, with cultural conflicts, overlapping product lines, and fragmented R&D directions being common concerns after mergers.

Looking ahead, the cycle of mergers in the semiconductor industry will continue, albeit in increasingly diverse forms. New battlegrounds such as AI, automotive electronics, and advanced packaging may spur the next wave of consolidation. For companies, mergers are no longer just tools for scaling up but high-stakes gambles about positioning and long-term strategy. For the industry as a whole, capital integration is reshaping competitive rules and redefining what constitutes a true 'chip giant.'