TI plans to buy National Semiconductor in a $6.5bn deal

TI strikes deal to buy National Semiconductor for $6.5bn

Initial signs good for 400 jobs at long-established site in Greenock, Scotland.

Texas Instruments is set to buy analogue chip specialist National Semiconductor for $6.5bn (£4.0bn) in one of the biggest deals since the technology market began to recover.

The deal will lift TI in the global semiconductor rankings from fourth to third place, leapfrogging Toshiba, and extend its market leadership in the analogue space. TI’s total sales are now a nominal $14.5bn against Toshiba’s $13bn.

Rich Templeton, TI’s president, chairman and CEO, told a conference call that all of National’s R&D and manufacturing activities would be retained.

His company – which added three analogue fabs in China and Japan during 2010 – will also seek to drive TI products into National’s fabs, which are currently operating at around 60 per cent of capacity. “We’re keeping everything,” Templeton said.

This should be good news for almost all of the 400 staff employed at National’s research centre and fab in Greenock, Scotland. It is one of National’s longest established operations, originally opened in 1970. It is also one of the few semiconductor fabs left in the UK.

However, Templeton added that there would probably be some job losses as the two companies combine administrative activities. How this may – or may not – impact Greenock is unlikely to become clear until the deal’s closure, expected in six-to-nine months. National’s main European administrative office is in Germany.

As well as Greenock, National has a US fab in South Portland, Maine and a test and assembly plant in Malaka, Malaysia. There are also 40 R&D engineers in Scotland, and the company has 10 R&D sites in the US, a further five in Europe and two in Asia.

 

PUTTING IT TOGETHER

Although TI and National compete in a number of areas, the two companies do not expect much consolidation across their line cards. Instead, Templeton identified TI’s ability to raise National’s income from existing and new products as the main driver for the deal.

“In recent years, National’s management team has done an outstanding job of improving margins and streamlining expenses,” he said. “Our ability to accelerate National’s growth with our much larger sales force is the foundation of our belief that we can produce strong returns on our investment.

“The combined sales team will be 10 times larger than National’s is today, and the portfolio will be exposed to more customers in more markets.”

One feature of the analogue market is that products from each leading manufacturer have highly tailored design styles and manufacturing processes and are often aimed at very specific markets and specifications. As a result, they also tend to have longer shelf lives than digital devices.

“An analogue catalogue takes a particularly long time to build and there’s a lot of inherent value inside one,” Templeton said.

TI nevertheless sees some specific jewels in National’s crown. Don Macleod, National’s CEO, said,  “This provides a platform to enhance National’s strong and highly profitable analogue capability, power management in particular, leading to meaningful growth.”

Templeton also cited power management as a particularly attractive area. “There’s still room for great growth [in that market] and a lot of room to innovate,” he said.

The fragmented nature of the analogue market is also why neither company anticipates facing any major regulatory objections to the team. “There are competitive offerings in many of the areas where we are both active,” Templeton said.

 

AN EVEN BIGGER LEAD

According to analyst firm IHS iSuppli, TI currently has a 13.7 per cent leading share ($6.4bn) of the analogue market that will rise to 16.8 per cent on the basis of adding National’s current sales ($1.4bn). This will be 8.8 points ahead of TI’s nearest rival, Europe’s STMicroelectronics.

TI’s analogue line card has 30,000 products; National’s has 12,000. Templeton said that no existing parts would be made obsolete as a result of the takeover.

The iSuppli ‘snap’ note on the deal does identify two areas where the new TI will be notably strong. In voltage regulators, TI’s share will rise from 18.1 per cent to 26.5 per cent and in analogue/comparator ICs it will go from 24.6 per cent to 34.2 per cent.

“Voltage regulators represent a segment of the semiconductor market that delivers consistent, above-average annual growth,” iSuppli observed.

“The global voltage regulator market expanded by 36.3 per cent in 2010 to reach $9.1bn, up from $6.7bn in 2009. This represented larger growth than the total semiconductor market, which expanded by only 32.1 per cent for the year.”

 

Further analysis of the TI-National deal appears in today’s (April 5) View From Washington blog post.

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