Infineon’s $3 billion acquisition of International Rectifier last week may be just the beginning of a new period of consolidation in the discrete market, according to IHS Technology.
The deal will give Infineon access to IR’s expertise in lower-power, energy-efficient insulated-gate bipolar transistors (IGBTs), power MOSFETs, digital power management chips and power modules.
“More importantly, the acquisition generates a true market leader in MOSFETS, which along with IGBTs are the only category in discretes that matter,” said Len Jelinek, senior director and chief analyst for semiconductor manufacturing at IHS. Infineon and IR were the No. 1 and No. 2 ranked vendors for MOSFETs, with a combined market share of 25 percent, according to IHS, which owns Electronics 360.
The Infineon-IR deal has opened up a situation where other discrete semiconductor vendors may have to turn to the acquisition game if they want to compete.
Historically, discretes have been a technology market that has been very fragmented in terms of suppliers--as commodity semiconductors, vendors tend to avoid markets with entrenched competitors because the margins in this space don’t justify the investment. Discrete semiconductors aren’t sexy or exciting and have never really been in favor from a stock market perspective. Not surprisingly, many companies that play in the discrete market tend to refer to their business as analog or, more recently, power management.
What would drive future mergers? The same thing that has drove the Infineon-IR deal: MOSFETs and IGBTs for modules.
One potential target may be Vishay, a player in low voltage MOSFETs, and another would be the discrete business of STMicroelectronics, Jelinek said. “The catch with ST is that it would like to divest its discrete products but no one wants them because with ST comes a bunch of French fabs,” Jelinek said. “This is an unfavorable issue in that you have to deal with the French labor unions if you try to shut them down and they are not cost effective.”
However, Jelinek said he could see ON Semiconductor being interested in the ST discrete business or even the possibility of ON acquiring Freescale’s discrete parts. “ON has everything for automotive except microcontrollers and that is what ST or Freescale would bring to the deal,” he said.
Another interesting combination would be Texas Instruments (TI) absorbing Vishay, giving the semiconductor giant a low voltage element it is missing currently.
Game over, man
In terms of IGBTs, the game might already be over with Infineon clearly establishing itself as the No. 1 player with the IR acquisition. But Infineon is missing a piece of the puzzle in that it needs modules and that means a possible deal with Mitsubishi, Hitachi or Fujitsu, Jelinek said.
And what of Fairchild, given its recent news of realigning its manufacturing business, laying off employees and scaling back on some of its legacy parts?
According to Jelinek, Faichild has no unique discrete technology that would make the company an attractive candidate for a merger or acquisition in that category.
"Fairchild is not a leader in discrete technology," Jelinek said. "Fairchild's most attractive assets are the company's 8-manufacturing footprint in Korea. Those facilities focus on the manufacture of analog technology."