Page 23 - DIY Investor Magazine - Issue 26

SEMICONDUCTOR CONSOLIDATION
Recently we saw another chapter in semiconductor consolidation as Analog Devices agreed a deal to buy rival chipmaker Maxim Integrated Products for more than $20bn.
This looks set to create a combined business worth around $70bn. It should be a major rival to current industry leader Texas Instruments.
For the newly combined Analog/ Maxim, it should help it be more competitive: not only will it save significant costs, it should be able to offer more competitive pricing.
However, we believe consolidation may be petering out for the semiconductor industry. In the last cycle, there was huge consolidation in the memory industry and there are now only three companies left, plus a number of Chinese companies who are trying to get into the business.
We are reaching a similar situation here as the number two and number three players in analogue come together.
There are not many medium sized semiconductor companies left - we saw Infineon takeover Cypress last year – as such, there are fewer players to consolidate.
INDIA AND BIG TECH
India is moving online at a pace unseen almost anywhere else. More than half a billion Indians came online in the 10 years to September 2019, according to government data.
That makes it an exciting market and the US big tech companies have already sniffed an opportunity.
Over the past few years, we have seen WhatsApp achieve significant penetration, while Google has moved to become the leading browser; Facebook has partnered with Reliance in an attempt to try and replicated Tencent’s success with Alipay in China.
Amazon has said it will spend $5 billion building a presence in India, trying to grow the share of e-commerce.
It’s a major battleground with vast potential, but increasingly the Indian government is changing the rules of engagement for operating in the country.
One of the rule changes this year was that foreign companies couldn’t be primary sellers of products but could only function as a marketplace.
For Amazon, this means it needs to halt its Select programme, which had been gaining significant market share because of its low prices.
This may be a perennial problem for big tech players wanting to participate in this market.
As with a number of emerging markets, the potential is significant but there are political complexities.
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23 DIY Investor Magazine | Dec 2020