As the semiconductor industry heads towards another inflection point, Intel, with its deep pockets, is letting other companies know that it is a willing buyer. Only time will tell what the company will buy, though.
As the semiconductor industry becomes more capital intensive it should enter another round of consolidation, according to Pat Gelsinger, chief executive of Intel. Chip design and production are becoming more expensive, which opens merger & acquisition doors for large companies like Intel. Speaking to the Wall Street Journal this week, Pat Gelsinger said that the semiconductor giant is willing to buy other players as the industry faces major transformations. The head of Intel made the comments after its alleged acquisition target GlobalFoundries reportedly started procedures to go public, scuttling any potential deal.
Intel's CEO did not mention GlobalFoundries specifically in the interview, but he did say that the company was willing to buy smaller players in the semiconductor field when asked about the U.S.-based foundry.
"There will be consolidation in the industry," Gelsinger said. "That trend will continue, and I expect that we are going to be a consolidator. […] M&A takes willing buyers and willing sellers. I am a willing buyer."
The number of companies that can produce chips using leading-edge fabrication technologies is declining. Just 15 years ago there were a number of integrated design manufacturers (IDMs) and foundries that could roll out leading-edge nodes around the same time with Intel and challenge the blue giant. Now the number of IDMs and foundries have shrunk either as a result of M&A or because some companies ceased making chips. Today, only three companies in the world can produce chips using leading-edge processes and some cannot move beyond 14nm/12nm nodes, whereas others have not even entered the FinFET era.
Like other big companies, Intel is always in an M&A mode as the company is permanently trying to acquire new IP and talent, expand its product lineup, and/or enter new markets. Intel has made dozens of acquisitions over the course of the most recent 25 years.
Strategic acquisitions like the purchase of Altera in 2014 enabled Intel to enter the FPGA market; takeovers of Mobileye, Movidius, and Nervana made Intel a serious competitor in the fields of AI and autonomous vehicles; Chips and Technologies transaction was Intel's entrance into the graphics field; other deals strengthened Intel's existing product lines with new technologies and/or IP. What Intel has not done (at least not in recent history) was buying other makers of semiconductors as the company has always had enough production capacity.
While Pat Gelsinger says that M&As are not at the top of his agenda as Intel's CEO, industry consolidation is something inevitable and Intel will have to participate in it. A takeover of GlobalFoundries makes great sense for Intel as a part of its IDM 2.0 strategy (even despite the fact that it will be hard to complete due to antimonopoly regulators). Furthermore, the ongoing economic processes might make some other companies a low-hanging fruit, or a strategic target that is not to be missed.
