Japan’s Renesas Electronics could encroach on No. 1 automotive chipmaker NXP Semiconductors (NXPI) with a $3 billion bid for U.S. chipmaker Intersil (ISIL), the Nikkei Asian Review reported early Monday.
Intersil stock rocketed 19.8% to 18.74, hitting an eight-year high in the stock market today. NXP stock dipped 0.3%. At Friday’s close, Intersil stock already was 7% extended from a 14.65 entry point out of consolidation achieved July 26.
Renesas is expected to spend 300 billion yen ($3 billion) to acquire Intersil in an all-cash bid that values the U.S. chipmaker at a 42% premium to Friday’s closing stock price. Intersil makes power chips for automobiles, industrial machinery and smartphones.
But Renesas could face regulatory hurdles. Semiconductor consolidation went rampant in 2015 on the shrinking industry, but chip-gear makers Lam Research (LRCX) and KLA-Tencor (KLAC) have struggled to merge, due to antitrust concerns. Fairchild Semiconductor (FCS), meanwhile, turned down a Chinese bid earlier this year.
Overall, the global semiconductor industry is expected to fall 2.3% to $324 billion in sales this year, industry tracker IDC said in May. One reason is that smartphone sales are slowing, slugging Apple (AAPL) and Samsung Electronics alike.
IBD’S TAKE: Sales to Apple are key for chipmakers like Intel, which is sidling up to the Cupertino, Calif., smartphone giant via a partnership with ARM Holdings, announced last week during the Intel Developer Forum.
As smartphones decline, chipmakers are making deeper grabs for the automotive market. Last year, NXP acquired Freescale Semiconductor, becoming the top automotive chipmaker. Some 40% of its total sales stem from that unit.
But NXP is facing competition from rivals like Nvidia (NVDA) and Intel (INTC), which are shoring up their offerings to pull business from tech giants like Tesla Motors (TSLA), Alphabet (GOOGL) and Apple. Autonomous driving, while still nascent, will continue to drive the industry.
Intersil, too, is making automotive strides. On the company’s Q2 conference call July 28, CEO Necip Sayiner told analysts that automotive sales brought in 13% of total revenue. For 2016, he models north of 20% year-over-year growth in that segment.
At 13% of total revenue, Intersil pulled in north of $17 million in automotive sales for Q2. Renesas reported 73.6 billion yen ($733 million) in fiscal Q1 automotive sales. Together, that $750 million between Renesas and Intersil still trails the $858 million NXP reported for its Q2 automotive segment.
“We are expecting yet another record quarter in Q3 in our automotive business,” Intersil’s Sayiner said on the call. “I think it’s a little too early to call out Q4, but we don’t see anything on the horizon that will shake the strength in that business.”
An Intersil spokesperson declined to comment on “rumors and speculation,” and a Renesas spokesperson also said the company does not comment on speculation.
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