Former Siemens chip company Infineon may find itself on the shopping list of a bigger semiconductor company, thanks to its strength in automotive.
Consolidation and specialisation has been the order of the day in the semiconductor industry, with fewer companies for each type of component. Where once there were a dozen or so companies – including Infineon – making mobile phone modems and application processors, the only players now are Qualcomm, MediaTek and handset makers' own solutions.
Infineon boss Dr Reinhard Ploss told the Financial Times [paywall] that not only was he looking to acquire smaller companies, he could envisage Infineon being bought by a larger company, and thanks to recent mergers there are a lot of those about.
One of Infineon’s great strengths is automotive and with electronics becoming a significant part of a car's bill of materials, it’s a lucrative market. It is also very much less dynamic than consumer electronics, with a much more long term procurement process and stable and predictable demand. Motor manufacturers like to keep the same components in a model all the way through its life. From sign-off to end-of-life can be ten years. While infotainment systems might well get a mid-life refresh, the types of system where Infineon has a strong market position, such hydraulic clutch control and braking systems, often don’t get refreshed.
Ploss told the FT: “There is one risk: we are busy in highly attractive markets. That is a strength, but maybe we should be aware that people might be interested in Infineon because of that market position.”
Infineon has built on its automotive pedigree by moving into the hybrid and electric market through the $3bn purchase of the US company International Rectifier, which within its large portfolio has main powertrain inverters, auxiliary motor drives, battery management, DC-DC conversion and chargers.
One of the main rivals in the automotive space is NXP, which recently bought Freescale for $11.8bn. Despite the component market being international, the dominance of the German car brands – VW alone has eight car brands and Ducati motorcycles – has no doubt helped Munich-based Infineon.
With a new emphasis on car security, there are increasing budgets from the motor manufacturers. So while Ploss wants to be the acquirer, he appreciates that others will be fishing for his chip company. ®