Avago buys Broadcom for $37 billion to create IoT chip giant

It seems every corner of the mobile market is consolidating right now and semiconductors are clearly no exception, with digital signal processing chip maker Avago acquiring communications chip company Broadcom for $37 billion.

Avago was spun off from Agilent Technologies back in 2005, which was itself spun off from HP in 1999, leading to what was at the time the world’s largest IPO. It has a broad portfolio of semiconductor products and is strong in mixed-signal circuits and sensors. Broadcom has long been a leader in communications technologies such as ethernet, wifi and Bluetooth.

“Today’s announcement marks the combination of the unparalleled engineering prowess of Broadcom with Avago’s heritage of technology from HP, AT&T, and LSI Logic, in a landmark transaction for the semiconductor industry,” said Hock Tan, President and CEO of Avago. “The combination of Avago and Broadcom creates a global diversified leader in wired and wireless communication semiconductors. Avago has established a strong track record of successfully integrating companies onto its platform.”

“This transaction benefits all of Broadcom’s key stakeholders,” said Scott McGregor, President and CEO of Broadcom. “Our customers will gain access to a greater breadth of technology and product capability. For our shareholders, the transaction provides both compelling up-front value as well as the opportunity to participate in the future upside of the combined business.”

In practice the combination of Avago’s strength in sensors and Broadcom’s in communications looks like a potential IoT dream team, creating the ability to offer unified IoT chips that do everything you could ask of a connected thing.

Chris Taylor, analyst at Strategy Analytics, told Telecoms.com that Avago’s other strengths include RF power amplifiers and filters. “Their most notable success has been in Apple phones over the past several years with their multi-mode, multi-band power amplifiers,” he said. Taylor also noted their success in RF filters for LTE bands above 1.9 GHz, which are likely to be used more extensively as more capacity is needed.

A similar move was recently announced by NXP and Freescale, which are merging to form a semi company with strengths in NFC, automotive and microcontrollers, and which NXP announced today it would be selling off its RF Power business to fund. Both of these merged companies must compete with mobile chip leader Qualcomm, which acquired wifi chip giant Atheros back in 2011. It will be interesting to see if there’s a response to all this M&A from Asian chip players such as Mediatek.