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Renesas To Buy US Firm IDT To Advance Market Share In Automated Vehicles

Renesas To Buy US Firm IDT To Advance Market Share In Automated Vehicles
In its effort to strengthen its position in the semiconductors for self-driving cars market, Japan’s Renesas Electronics Corp will be acquiring Integrated Device Technology Inc (IDT) for in a deal worth $6.7 billion.
There is a tough competition between global chipmakers to get a better foothold and market share in the ever increasing global market for automotive chips and tghis deal is reflective of that fierce competition.
Renesas trails NXP Semiconductors NV as the market leader in the field of auto-related chips and has 30 percent of the global market for microcontrollers used in cars. But the company is not so strong in the field of the so-called analog chips that is used for processing of electronic signals from things such as sound, light or temperature and transforming into digital data.
IDT is particularly known for its expertise and capabilities in analog semiconductors for wireless networks and sensors which is critical in the development of autonomous driving and connected car technology and this was the main focus of the acquisition by Renesas.
The Japanese company is paying a 16 per cent premium on Monday’s shares of IDT ar $49 per outstanding share in cash.
“We were weak in chips for wireless networks needed for the Internet of things and connected cars. We’ve been wanting to get such assets,” Renesas Chief Executive Officer Bunsei Kure said in a news conference.
The Japanese firm would be able to offer better integrated chips to its clients with the acquisition of IDT, Renesas said. Additionally, Renesas would also benefit financially from opening up of a new avenue revenue because of the established business of IDT in the field of chips for data centers.
There was an increase of 4 per cent in the stocks of Renesas following the news following the fall of 14 per cent after the announcement by the Japanese firm that it was contemplating acquiring IDT at the end of last month.
Despite the fact that IDT has reported nearly 20 per cent growth in revenues on the average in the last four quarters, there are a number of analysts who see the Japanese firm finding it hard to reap the benefits of the American company.
“Renesas is weak in telecommunications chips, so the combination isn’t bad,” said Akira Minamikawa, principal analyst at IHS Markit. “But IDT doesn’t have many automotive clients. Bringing their chips up to the level needed for automotive standards will not be easy.”
About 11 per4 cent of its revenues is accounted for by clients from the automotive and industrial sector for IDT.
The deal needs to get clearance from the Committee on Foreign Investment in the United States (CFIUS) which is entrusted with the task of examining such deals from the point of view of US national security, as well as by antitrust authorities in some countries markets such as China.
Renesas said it was confident of obtaining the necessary approvals and expects the deal to end by in the first half of 2019.

Christopher J. Mitchell

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