Synaptics Inc’s acquisition of Renesas SP Drivers Inc, announced earlier this week, means a continued consolidation in the global display driver integrated circuit (IC) industry, which is expected to also have implications for Taiwanese firms, including Novatek Microelectronics Corp (聯詠) and Ili Technology Corp (奕力) amid the increasing demand for touch-and-display driver integration (TDDI) solutions, analysts said.
On Wednesday, Japan’s Renesas Electronics Corp and the US-based Synaptics announced an agreement whereby Synaptics is to acquire the Japanese chipmaker’s display driver IC unit, Renesas SP Drivers Inc, for ￥48.5 billion (US$475 million).
Renesas SP Drivers is a joint venture established by Renesas Electronics, Sharp Corp and Taiwan’s Powerchip Group (力晶集團). Powerchip owns a 20 percent stake in the venture, invested in 2008 for ￥1 billion.
In separate statements, Renesas said the sale of its display driver IC subsidiary is part of its “structural reform policies,” while Synaptics said the deal would help increase its total available market by 1.5 times and accelerate its TDDI product road map.
The deal is expected to close in the fourth quarter of the year.
The Synaptics-Renesas SP deal marks the fifth major merger and acquisition (M&A) this year in the global display driver IC industry, following a deal between Taiwan’s ISSC Technologies Corp (創傑) and US firm Microchip Technology Inc announced last month, mergers between Integrated Memory Logic Ltd (安恩) and US firm Exar Corp, and between FocalTech Corp (敦泰) and Orise Technology Co (旭曜) in April, as well as the tie-up involving MediaTek Inc (聯發科) and MStar Semiconductor Inc (晨星) that was completed on Feb. 1.
“We think the competitive landscape in the mobile driver IC space will intensify due to the rising TDDI trend,” UBS Securities’ Taipei-based analyst Samson Hung (洪希民) said in a client note.
However, Hung said the immediate impact on existing driver IC vendors could be limited.
“First, adoption for TDDI may still take time to increase, as both in-cell and on-cell touch solutions from panelmakers have not ramped up yet,” Hung said yesterday. “Secondly, it depends on whether Synaptics and Renesas SP Drivers can move into the mass market with a price premium.”
Over the longer term, the bundled pricing for touch IC and driver IC by Synaptics-Renesas SP and by FocalTech-Orise may intensify pricing pressure on driver ICs and cause a shift of market share away from conventional driver IC fabless firms like Novatek, JPMorgan Securities Ltd’s analyst Narci Chang (張恆) said in a separate note.
“We now see a strong need for Novatek to enhance its touch IC either by in-house intellectual property development and/or relevant M&A action to participate in this TDDI trend, else they may lose out on this structural opportunity,” Chang said.
Credit Suisse’s Taipei securities branch analyst Jerry Su (蘇厚合) agreed.
“TDDI could be a disruptive product to the driver IC supply chain with Synaptics and FocalTech as the two suppliers that will have their solutions ready in 2015,” Su said in a research note. “We believe Novatek has smaller exposure to touch controller ICs and is lagging on TDDI development for in-cell display.”
If Synaptics could therefore gain more iPhone display driver IC orders from Apple Inc through the acquisition of Renesas SP, it would likely look for more outsourcing partners — which could be negative for Chipbond Technology Corp (頎邦), currently the sole provider for Renesas SP’s backend process services, Su said.
Nonetheless, the latest merger is set to continue raising investment sentiment toward regional IC design companies, analysts said, with First Capital Management Inc (第一金證券投顧) yesterday suggesting that small Taiwanese players such as Ili Technology, Sitronix Technology Co (矽創), and Raydium Semiconductor Corp (瑞鼎) could be potential merger targets going forward.
Novatek shares plunged 2.36 percent to NT$145 yesterday on the Taiwan Stock Exchange, underperforming the broader market’s 0.27 percent decline.
FocalTech fell 0.41 percent to NT$240 and Chipbond dropped 1.47 percent to NT$53.7, while Ili Technology rose 0.15 percent to NT$66.9.
On Wednesday in New York trading, Synaptics shares rallied 28.95 percent to close at US$85.79, the highest since its debut in 2002.
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