Mixed Signals? Yes And No: Analog Devices Snaps Up Rival Maxim Integrated For $20.9bn

Analog Devices has confirmed an intent to buy rival Maxim Integrated, saying it'll fork out a whopping $20.9bn in an all-stock deal.

The merger was first mooted about half a decade ago when Maxim was valued at slightly under $10bn. Today's share-based offer is roughly $4bn higher than Maxim's market capitalisation.

Analog Digital expects the deal to close in 2021, subject to the usual regulatory rubber stamping.

“Maxim is a respected signal processing and power management franchise with a proven technology portfolio and impressive history of empowering design innovation. Together, we are well-positioned to deliver the next wave of semiconductor growth, while engineering a healthier, safer and more sustainable future for all,” said Vincent Roche, Analog Devices CEO and president in a canned remark.

Analogue semiconductors primarily concerns itself with the processing and regulation of "real world" features — like temperature and sound. The fortunes of this sector are heavily tied with the industrial sector, with vehicle manufacturing playing a particularly outsized role. Analog Devices is a face in the data converter sector - converting analog signals to digital and vice versa. Converter sales comprise over 30 per cent of its revenues. The business also makes RF converters to help base station kit vendors make the move from the RF to the mm-Wave spectrum domain, important in the latest 5G standard.

According to Deloitte, sales of analogue circuits to car manufacturers will grow by 7.4 per cent between 2017 and 2020, for a market size of $4bn.

Analog Devices was the second largest supplier of Analog ICs in 2019, according to IC Insights, with sales of $5.16bn and a market share of 10 per cent. Half of its sales went to the industrial sector, with communication, automotive, and consumer applications swallowing up the remainder.

Trailing behind in seventh place is Maxim Integrated, with sales of $1.85bn and control of just 4 per cent of the market.

The “top dog” of this market is Texas Instruments: In 2019, it sold $10.2bn worth of analog semiconductor devices, with a 19 per cent market share.

This one is logical, though the price tag is extraordinary. Such a stunning premium is based on potential developments more than Maxim's existing revenue

TI — also known for its arse-clenchingly expensive scientific calculators — was the seventh largest overall semiconductor manufacturer in 2019, according to Gartner, sandwiched between Qualcomm and ST Microelectronics.

The combined Analog Devices and Maxim Integrated behemoth would still trail Texas Instruments in these two important metrics, but nonetheless might provide stiffer competition as one entity.

Speaking to The Register, Forrester veep Glenn O'Donnel said: "Computers are mainly digital devices that see the world as binary - black or white. To make them make sense and adapt to the real world that is every colour of the rainbow, they need analog circuitry. This is harder than it may seem, but so-called mixed signals chips do just that. With a surge in IoT and edge computing, the innovation potential for mixed signal chips is skyrocketing right now."

He added: “Analog Devices and Maxim are two of the leading developers of mixed signal devices. The current economic conditions form a ripe environment for M&A in every industry, so we have been expecting an increasingly active wave of acquisitions. This one is logical, though the price tag is extraordinary. Such a stunning premium is based on potential developments more than Maxim's existing revenue.

In its most recent quarter, Q3 ended March 28, Maxim posted revenues of $561.9m and operating income of $183.3m, up 3 per cent and 16 per cent respectively.

Forrester's O'Donnel opined that Analog was also looking to pick Maxim's brains, and told us: "The talent that comes with Maxim is going to be priceless as Analog Devices capitalises on demand for this mixed signal surge." ®