If ever there Generally quiet was the tech industry that was making big headlines this year, it was semiconductors. From record-setting M&A purchases to eccentric venture capital financing, the decline of key players and huge international business fights, semiconductor companies found themselves in inventors, VCs, regulators, politicians and, well, Apple’s crosshairs.
This is not to say that there is nothing left to buy in the market, but big players like Nvidia and AMD have made their biggest bets and are unlikely to make any big acquisitions in the meantime.
2020 was a banner year, as it was the culmination of the patterns we’ve been seeing in the industry for years now. It is dangerous to predict that there will be “less news” in any tech industry, but these patterns have worked themselves out in many ways, and it seems perhaps too much that 2021 is a quieter year for semiconductors than last year. Will happen.
Here’s a snapshot of the four biggest stories of 2020 and what might happen next as we enter 2021.
The chip is in the consolidation process. The question is whether all this will be approved
The biggest story of this year in chips was the rapid consolidation of the industry in a span of a few months. Was titled by that consolidation Nvidia’s $ 40 billion purchase offer of Arm, A chip design firm that supplies blueprints for almost all smartphones and has started to infest the desktop world with the launch of its M1 processor.
Nvidia was not unique in throwing big money to consolidate. AMD Spends $ 35 Billion to Buy Xilinx, Known as FPGAs, which are increasingly important in technology stacks such as 5G, where technology can be replaced faster than silicon. Intel Launches Its Memory Unit at SK Hynix for $ 9 Billion Because it fights for survival, and Analog Devices bought Maxim for $ 21 billion In a bid to strengthen the embedded chips market in areas such as sensors and power management. Beyond the major headlines of the course, several small acquisitions were made in the industry.
The chips industry is not unique in its heavy consolidation – a lot of other industries have also taken the M&A route which has given place to relatively liberal anti-policy and abundant capital from public markets at their disposal. Nevertheless, there are also unique powers that increase the half-force to increase this direction.
First, the cost of staying competitive in the chip industry is increasing rapidly. For most high-performance chips, fabs cost tens of billions of dollars and require lead time. R&D costs remain high, which is one reason the industry’s VC financing has been limited in the past (although this has changed – read below). If you are small and do not have the capital to burn to stay competitive, it is hard to make it into chips.
Perhaps even more important, however, is consolidation on the customer side, and that uniformity is also forcing general consolidation for suppliers. The biggest buyers of high performance compute and storage today are large cloud platforms such as AWS, Google Cloud and Microsoft Azure. Apple and some other manufacturers control most of the market in smartphones, and even in embedded systems, the number of buyers is clearly consolidated. Customer consolidation force is fighting supplier consolidation, market demand power along with market supply power.
Those two trends are for years, but we saw this year with M&A Mania. This is not to say that there is nothing left to buy in the market, but big players like Nvidia and AMD have made their biggest bets and are unlikely to make any big acquisitions in the meantime.
What to see in 2021: The big story really gets approval from these big acquisitions next year. Antitrust have been remarkably keen on consolidation in the regulatory arena, but now this consolidation exists only in a small number of players – or even their own markets.
These antitrust concerns are most notable with Nvidia / Arm, which is to receive simultaneous approval from four authorities (the United States, Britain, Europe and China). Industry experts I’ve talked to have been split on their predictions, with some feeling that the parties may “strike a deal” and others feeling that China is not particularly likely to approve a deal is. We can expect some indications of how it is going in 2021, although the deal may well get approval in 2022.
AMD / Xilinx has also raised some eyebrows among experts, but has not revealed any information about Nvidia / Arm’s press. For analog devices and Maxim – which is a much more classic horizontal consolidation – shareholders approved the merger in October, and the company Said in its press release After that, the period for the US to intervene on antithetical grounds was over. It still faces regulatory approvals in other areas and may close by the summer of 2021.
Given the lingering concerns in the United States among both Democrats and Republicans around platform companies such as Google and Facebook, the larger question is whether those concerns have spread to other technology industries such as chips. So far, this has not happened, but the new Biden administration may have other ideas on opening the shop in January.
The venture capital activity in chips flourished in 2020. However, how much more can the industry invest?
After heavy investment in 2019 and 2018, 2020 was another major year for VC dollars in next generation silicon. I have covered many exciting startups in the space, including Nuvia (Which announced $ 240 million for its Series B in September), SiFive, EdgeQ, And Cerebras, And there are many other companies in the field including Graphcore and Myth who are working on exciting products. Gross dollars in the sector are hard to calculate, as most chip companies have been very quiet about their financing for years due to concerns about competition. However, even the tours that have been announced are shockingly large.