The compound semiconductor market has been flourishing in recent years thanks to the strong demand from markets such as electric vehicles and renewable energy. This has led to an increase in M&A as companies race to establish their position in the industry.
The market has seen a significant surge in M&A deals over the last few years: from 2006 to 2017, there was only one deal every two years, but since 2018, there have been six deals annually, surpassing historical data.
While SiC and GaN are the top categories for M&A, 21 of the transactions are directly related to SiC. This is because after its development over 20 years, SiC has been able to be mass-produced for market demands, particularly in the automotive industry where SiC has become the mainstream technology.
Vertical Integration driven by Industry Titans
Industry leaders in the US and Europe, such as Wolfspeed, On Semi, II-VI, ST, and Infineon, have started accelerating vertical integration in recent years, as reflected in the frequency of M&A.
The United States has led 12 M&A deals, with only four of them occurring before 2018, and Wolfspeed contributed to three of them. Over the past three years, On-Semi, II-VI, and Macom have led several deals with a focus on SiC’s vertical integration to meet market demands.
In Europe, there were eight M&A deals in total, all of which took place in 2018 and beyond, with ST and Infineon being the major players. Both companies have been accumulating technical strength through strategic acquisition to maintain their leading ground in the SiC power device market.
In 2019 and 2020, ST acquired Norstel AB to bolster its SiC wafer manufacturing capabilities and Exgan to improve the GaN power device design expertise. Similarly, Infineon acquired Siltectra GMbH in 2018 to gain control of the crucial SiC wafer cold split process technology and recently acquired GaN Systems to reinforce its presence in the GaN market.
It’s evident from the cases that the high frequency of M&As in the US and Europe is mainly driven by leading companies in the industry, gradually defining the landscape of the market.
Wolfspeed, which has grown into a leading company after a long period of time, has accumulated enough capital for M&A and gradually been transforming into a platform-type company. Meanwhile, Onsemi, ST, and Infineon, which have traditionally been platform-type companies with established expertise in the field of compound semiconductors, are now ramping up their M&A activities to expand market presence and generate strong growth momentum.
Market Landscape Continues to Change
M&A deals among semiconductor equipment companies are also receiving attention. Recently, ASM and Veeco have successively acquired LPE and Epiluvac, indicating that equipment manufacturers have also realized the huge potential of the SiC market and are accelerating their investment.
Given the rapid technology breakthroughs, the overall SiC power device market is predicted to grow at an annual rate of 41.4% to reach $2.28 billion by 2023 and $5.33 billion by 2026 at 35% annual growth, according to TrendForce’s latest report.
However, with the current market boom comes a new challenge – the supply shortage. One of the biggest obstacles to industry growth is the scarcity of SiC substrate material, despite efforts from companies like STM and Onsemi to ramp up their production.
Manufacturers are now on the hunt for both internal and external sources to keep the supply flowing. While most of the SiC substrate suppliers are expanding, only a few, like Wolfspeed, are controlling the manufacturing capacity for high-end SiC substrates used in automotive main inverters, which worsens the bottleneck in SiC devices’ production for cars.
With that being said, major players must quickly address technology hurdles and supply issues to bridge the market gap. This will inevitably drive intense competition and industry consolidation, and only the ones that can adapt quickly will be thriving in the long run.