Chip Maker Renesas Buying Intersil in Automotive Push

Renesas will pay $3.2 billion for Intersil in a merger that officials say will expand the company's efforts in such areas as smart cars and the IoT.

smart cars

Chip maker Renesas Electronics is pushing into connected cars, the internet of things and other emerging markets with the planned acquisition of Intersil, the latest in a series of such deals in a processor space that is reacting to rapid changes in the tech industry.

Renesas, a Japanese system-on-a-chip (SoC) maker, will buy U.S.-based Intersil for $3.2 billion in a deal that is expected to close in the second half of next year. Intersil's strength is in power management and precision capabilities in analog chips.

The deal is expected to grow Renesas' capabilities in a wide range of market segments, particularly in the automotive space, which has been an increasing focus for both Renesas and Intersil. Renesas President and CEO Bunsei Kure reportedly has been closing factories and cutting jobs as he aggressively shifts the company's focus to the automotive technology space, which is increasingly accounting for more of Renesas' revenues. In the second quarter, revenue from the company's automotive business neared record levels. Intersil officials in July said that combined, the company's industrial and automotive businesses made up about half of Intersil's revenues. Automotive accounted for about 13 percent of overall revenues for Intersil.

"Renesas is accelerating its focus of resources in automotive, industrial, infrastructure and the rapidly growing IoT segments to aggressively grow its global business and maintain its position as a leading provider," Kure said in a statement. "Intersil's extensive portfolio of analog and power devices as well as its strength in the automotive, industrial, and broad-based segments complement many of Renesas' initiatives in these areas."

In a briefing with journalists, the CEO said that Renesas will combine products from both companies into packages that can be sold to customers, according to Reuters. In addition, he told reporters that Renesas will "actively seek out" other acquisitions to grow the business. Renesas officials expect the Intersil deal to expand revenues by $170 million after four or five years.

The announcement regarding the deal comes almost three weeks after reports began surfacing about Renesas' interest in buying Intersil.

Renesas was launched six years ago through the merger of struggling chip makers Renesas Technology—which was a joint venture between Hitachi and Mitsubishi—and NEC.

The Renesas-Intersil deal is the latest in a string of acquisitions and mergers in the semiconductor industry as companies look to grow their capabilities in new areas—including automotive, the internet of things (IoT), artificial intelligence (AI) and machine learning, virtual and augmented reality, and high-performance computing (HPC)—at a time when the markets for PCs, smartphones, tablets and other traditional devices slow.

Among the higher-profile cases are Intel's $16.7 billion acquisition of field-programmable gate array (FPGA) maker Altera, Avago Technologies' $37 billion deal for Broadcom, NXP Semiconductors' $12 billion purchase of Freescale Semiconductor and Qualcomm buying British chip maker CSR for $2.5 billion.

In July, Japanese company Softbank said it was buying SoC designer ARM for $32.2 billion.

The automotive tech field is becoming increasingly crowded, with almost all chip makers pushing to gain traction in the space. Chip makers are looking for a larger role in the development of autonomous vehicles, as illustrated by Intel's partnership with BMW and Mobileye on a project to bring self-driving cars to market in 2021. Analysts with Strategic Analytics said late last year that fully autonomous cars probably won't emerge before 2025. IHS Automotive analysts are forecasting that more than 20 million autonomous vehicles will be on the road by 2035.