Speculation is rife that Samsung Electronics Co. will seek to acquire a global semiconductor firm to strengthen its competitiveness in the non-memory sector. The company has enough capital to finance such an acquisition. Vice chairman Lee Jae-yong said in January, “We will show what we have really got from now on,” referring to concerns over the semiconductor market downturn.
Samsung Electronics is expected to take over NXP Semiconductors, the world’s largest supplier of automotive semiconductors, according to business community and investment banking (IB) industry sources on March 7. The Dutch chip maker headquartered in Eindhoven, the Netherlands, is listed on the Nasdaq Stock Exchange in the United States and its market capitalization amounts to nearly 30 trillion won (US$26.56 billion). Market analysts expect the sale price of NXP to reach 50 trillion won (US$44.27 billion), including a management control premium that Samsung will have to pay. In fact, the price was about US$44 billion (49.70 trillion won) when Qualcomm tried to take over NXP in 2016.
Samsung Electronics has denied the speculation that it would acquire NXP. Referring to Samsung vice president Ahn Jung-hyun's recent trip to the United States and president Sohn Young-kwon’s meeting with NXP CEO Rick Clemmer, the company said the top executives’ visits were intended to “check the business of Harman which was acquired two years ago and had nothing to do with NXP acquisition."
However, more and more experts inside and outside of the semiconductor industry say that Samsung Electronics is highly likely to buy the global semiconductor manufacturer despite its denial. When Samsung Electronics acquires NXP, the company will be able to raise its competitiveness in the automotive semiconductor market at once. NXP ranked top in terms of share of the automotive semiconductor market with 12.5 percent as of 2017, followed by Germany’s Infineon Technologies with 10.9 percent, Japan’s Renesas Electronics with 10 percent, U.S.’ Texas Instruments with 8 percent and STMicroelectronics, a joint venture established by France and Italy, with 7.1 percent. There have been rumors about the merger between Infineon and STMicroelectronics from 2017.
Market analysts say NXP is the only M&A target available for Samsung Electronics. In fact, Samsung considered entering a bidding battle when Qualcomm tried to acquire NXP in 2017.
Samsung Group has been recently bolstering its automotive business on a group level. Samsung Electronics will enjoy a considerable synergy effect from the acquisition of NXP. The company has been promoting its automotive electronics business by taking over Harman in 2017. Samsung Electro-Mechanics, which produces multi-layer ceramic capacitors (MLCCs), which are called the “rice” of the electronics business, has recently been reorganizing its business portfolio from information technology (IT) to automotive electronics. In addition, Samsung SDI is continuously strengthening its automotive battery business. However, the group has failed to secure competitiveness in the automotive semiconductor sector yet. Given the current situation, Samsung Electronics’ acquisition of NXP will make up for what Samsung Group lacks.
Furthermore, Samsung Electronics holds the highest-ever cash reserves. The consolidated cash reserves of the company came to 104 trillion won (US$92.08 billion) as of the end of last year. An official from the IB industry said, “Since Samsung Electronics has too much cash reserves, shareholders’ demand for shareholder return is increasing. The company is highly likely to pursue the merger as it has to make a future investment.” Samsung Electronics is also cited as a potential buyer of GlobalFoundries, a U.S. foundry company that has been recently put up for sale.