Acquisitive Semiconductor Companies
After entering a maturity market state, most semiconductor companies have been seeking to boost the low organic growth rates with acquisitions. The M&A activity peaked last year with a number of mega deals but have cooled significantly in 2017. Anti-globalisation support and a semiconductor cold war between China and USA have made most deals impossible to get approved. The Qualcomm-NXP merger is still waiting for final approval and Toshibas divestiture of the Memory division is likely to be the only remaining activity for the year.
The amount of goodwill that a company carries on the balance sheet is a direct indication of how acquisitive the company is. Goodwill appears via mergers and represents the part of the acquisition price that cannot be valued and placed in other balance sheet categories. Especially in Semiconductor deals where the intangible value is significant, goodwill stacks up.
A shift in the investment strategy
With a booming memory market and a lack of appetite towards acquisitions, the Semiconductor companies are once again turning their attention to growing their business through fixed capital investments. The activity is driven by a handful of large companies in the memory and processing markets.