Renesas to Buy IDT for $6.7 Billion

Japan-based Renesas Electronics Corp announced that it has agreed to acquire Integrated Device Technology Inc. for the price of $6.7 billion, its second big acquisition as it increased its push into chips for self-driving vehicles.

The deal for the chip design company based in the U.S. underscores the fierce competition between chipmakers worldwide as they attempt to boost product lineups and market share for the very lucrative field of chips for the automotive industry.

Renesas trails just NXP Semiconductors NV in chips that are auto related and holds 30% of the worldwide market of microcontrollers that are used for cars. However, its weakness is in analog chips which are used to process signals from things like light, temperature, and sound into digital data.

Renesas in particular wants to have IDT’s know-how for analog semiconductors for sensors and wireless networks which is expertise that is crucial for the development of autonomous driving car technology.

The agreement has Renesas paying $49 a share in cash for the outstanding shares of IDT, a premium of 16% in the closing price for IDT on Monday.

Renesas CEO Bunsei Kure said that the company was weak in chips used for wireless networks that are needed for connected cars and internet of things and have wanted to acquire such assets.

Renesas added that joining with IDT allows the company to provide comprehensive chips system to its clients. It added that IDT was strong in chips used for data centers which open up another new revenue stream at Renesas.

Renesas shares climbed over 4% in afternoon trading, regaining some of the 14% lost since the company said it was looking into acquiring IDT August 31.

IDT averaged close to 20% growth in revenue over the last four reporting quarters, but some analysts are worried the benefits from this deal could be hard to reach.

One analyst said that Renesas is weak when it comes to telecommunications chips making this combination good, but IDT does not have that many clients in the automotive industry therefore making it difficult to bring the chip they have up to the level needed for standards in the automotive industry.

Only 11% of IDT revenue at this time is generated from automotive businesses.

The deal arrives following the purchase last year of Intersil Corp a U.S. chipmaker for 3.32 billion.

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