Global Mixed-Mode Technology Inc’s (致新) unexpected bid last week to take over local IC peer Advanced Analog Technology Inc (台灣類比) shows that consolidation among domestic chip designers is accelerating, analysts have said.
Consolidation of the industry comes amid intensified competition in the analog IC market and a need to achieve sustainable economies of scale, considering that the companies having similar product portfolios, they said.
The analysts’ remarks came after Hsinchu Science Park-based Global Mixed-Mode, which designs power management chips used in notebook computers, flat panels and TVs, initiated a tender offer on Friday to acquire at least a 5 percent and at most a 90.07 percent stake in Advanced Analog Technology at NT$23 per share.
The NT$1.3 billion (US$42.2 million) deal is expected to close on Jan. 10, Global Mixed-Mode said.
“Through this tender offer, we expect to see Global Mixed-Mode Technology gain more orders from China’s top flat-panel makers, as the company speeds up new product development on the back of Advanced Analog Technology’s design capability for microcontroller units [MCUs],” Taishin Securities Investment Advisory Co (台新投顧) said in a client note.
Yuanta Securities Investment Consulting Co (元大投顧) analyst Chen Chuan-chuan (陳娟娟) said that Advanced Analog’s client base complements Global Mixed-Mode’s sales book, and Advanced Analog’s other product lines, hall sensors and motor drivers, can strengthen voice coil motor and optical image stabilization (OIS) applications that Global Mixed-Mode develops.
“The highly integrated design of MCUs that combine power IC and motor drivers is the trend for developing smart and power-saving products,” Chen said.
Global Mixed-Mode reported a net profit of NT$181.83 million in the third quarter, up 86.95 percent from a year earlier, with earnings per share (EPS) of NT$2.12.
The results beat market estimates as the company’s sales grew 16.38 percent annually to NT$1.27 billion and gross margin improved 3.43 percentage points to 32.96 percent, coupled with foreign-exchange gains of NT$11.92 million.
In the first three quarters of the year, cumulative net profit totaled NT$353.27 million, up 34.44 percent annually, with EPS of NT$4.12, company data showed.
Based in Hsinchu County’s Jhubei City, Advanced Analog uses MCUs as an integration platform, but its business has slowed since 2015, with revenue dipping into the red over the past two years.
In the first three quarters of this year, Advanced Analog’s net losses expanded to NT$76.77 million from NT$38.26 million a year earlier, with net losses per share of NT$1.14, while revenue fell 24.4 percent to NT$794.02 million.
While Advanced Analog’s earnings contribution to Global Mixed-Mode could be limited in the short term, the focus of the deal is the integration of their research and development and distribution channels over the long term, Jih Sun Securities Investment Consulting Co (日盛投顧) analyst Wang Wen-wen (王文雯) said.
Capacity expansion by Chinese flat-panel makers and rising orders would drive growth for Global Mixed-Mode in the near term, Wang said, but added that the market is focused on the firm’s development of IC solutions for handset OIS applications, which continues to lag behind that of rivals and might not contribute to the firm until next year.
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