Renesas Clinches $3.2 Billion Deal for Intersil

Renesas Clinches $3.2 Billion Deal for Intersil

The battle over chips used inside electric vehicles and self-driving cars is growing more competitive. On Tuesday, Japanese chipmaker Renesas said that it was paying $3.2 billion to acquire Intersil, in the latest example of the industry’s retooling for automotive and industrial electronics.

The deal unites two companies tackling automotive electronics from different angles. Renesas is one of the biggest makers of microcontrollers, or chips that are embedded in vehicles to control things like power steering and dashboard displays. The California-based Intersil makes chips that limit the amount of power consumed by microprocessors, as well as the analog chips that translate physical things like light and sound into digital signals.

Bunsei Kure, Renesas’ chief executive, said that both companies produced complementary products. In a conference call following the deal’s announcement, Intersil executives said that chips from both companies could be combined into complete systems: microcontrollers to carry out tasks, analog chips to handle sensor data and displays, and special circuitry to lower the system’s power consumption.

The acquisition is the latest sign of Renesas’ turnaround, following a devastating earthquake in 2011 that shut down many factories in Japan and forced auto plants around the world to throttle production. The fallout from the quake brought Renesas – which was formed in 2010 from the semiconductor units of Mitsubishi Electric, NEC, and Hitachi – to the brink of collapse. It consolidated chip factories, cut jobs, and sold businesses to stay afloat.

In 2012, a government investment fund and several major customers, including Toyota and Nissan, bailed out Renesas. With the investment, the chip maker refocused its business on power and analog chips that could be paired with its microcontrollers inside cars and industrial equipment.

Intersil, too, has placed bets on the automotive industry in an attempt to counteract the slowing growth of smartphones and computers. It has shifted more of its business into technology that handles dashboard displays and manages battery life in electric cars.

Intersil is the latest chipmaker to vanish in the semiconductor industry’s recent wave of consolidation. Big chipmakers are buying up competitors in slightly different fields to expand scale, reduce costs, and sidestep the costly process of designing analog chips. A recent example was Analog Devices’ unprecedented acquisition of Linear Technology for $14.8 billion in July.

The acquisition came on the heels of other major deals by Renesas’ competition: NXP’s acquisition of Freescale last year and Infineon’s absorption for International Rectifier in 2014. Both moves pushed Renesas down the list of the world’s biggest auto chip suppliers.

The deal ends a month of speculation about Intersil’s fate, when in August a Japanese newspaper reported that the two companies were in talks. Other reports came out that Maxim Integrated was placing a competing bid for Intersil.

One of the stumbling blocks to the deal is Intersil’s military and aerospace business. Transferring that part of the company outside of the United States would be subject to regulatory approval. The companies expect the deal to close in early 2017.

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