By Mark LaPedus, SemiMD senior editor

Heading into 2012 — and the first week of the year — the semiconductor industry is seeing one of its first trends: the ongoing consolidation among suppliers.

There are other trends seen for this year, including the expansion of smart mobility technology, PC volatility and a possible emergence of extreme ultraviolet (EUV) lithography.

Meanwhile, over the years, the IC and fab tool industries have already seen a wave of mergers and acquisitions. Many of the larger companies are looking to beef up their products lines or fill some gaps via an acquisition. On the other end of the spectrum, many of the smaller companies are finding it difficult to survive amid the current IC downturn. And the shakeout is expected to accelerate if the business remains tough.

In the semiconductor equipment sector, the business has seen a major shakeout among vendors. Heading into 2012, there could be more deals in place, especially as vendors are forced to team up and pool their resources in various and costly next-generation technologies, such as 3D chips and 450mm wafers.

For example, moving to compete against Applied Materials Inc. and Tokyo Electron Ltd. (TEL) in the broad line fab tool sector, Lam Research Corp. late last year entered into a definitive agreement to acquire Novellus Systems Inc. in an all-stock transaction valued at approximately $3.3 billion.

In a major move to diversify its product portfolio, Soitec SA late last year entered into a letter of intent to acquire Altatech Semiconductor, a French semiconductor equipment company.

This week, Francisco Partners, a private equity firm, announced the acquisition of Ichor Systems. Based in Tualatin, Ore., Ichor Systems is a manufacturer of process tools, gas delivery modules and chemical delivery modules sold to capital equipment manufacturers. Ichor Systems serves a variety of end markets, including semiconductors, LEDs, data storage and alternative energy capital equipment.

Meanwhile, in the semiconductor sector, consumer chip maker Trident Microsystems Inc. this week filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. As part of the filing, Trident has filed a motion to approve the bid procedures for the sale of its set-top-box chip business operations to Entropic Communications, Inc.

This week, Marvell completed the acquisition of Sweden-based Xelerated, AB, a supplier of network processing and programmable Ethernet switching solutions. Also this week, Mindspeed Technologies Inc., a supplier of semiconductor solutions for network infrastructure applications, has signed a definitive agreement to acquire U.K.-based Picochip Ltd., a supplier of integrated system-on-chip (SoC) solutions for small cell base stations, for a purchase price of approximately $51.8 million, plus a potential earnout payment of up to $25 million payable in the first calendar quarter of 2013.

Besides the consolidation trend, C.J. Muse, an analyst with Barclays Capital, outlines his top 10 themes for 2012:

1. Smart mobility — “We see the smart mobility theme continuing into 2012, with growth coming primarily from two areas: a) the high-end of the market as LTE comes more into view; and b) the low-end as smartphones continue to move down market with the transition from 2G to 3G in emerging markets.
2. Smart mobility and RF — “The RF semiconductor group fell out of favor in 2011 as fears of pricing pressure and integration worried investors. Looking into 2012, we do see pricing becoming more pronounced and have factored that into our market model, but we still believe this is one of the better end markets in terms of growth for 2012.”
3. Volatile year in PCs — PCs are not going away, but “Windows 8, Windows on ARM (WoA) and Ultrabooks together make for a potentially very volatile 2012 for PCs.”
4. Server product cycle — “Intel’s next server 2-way platform, Romley, is on track to launch late 1Q12” and will jumpstart the sever market.”
5. Touch screen growth — “We see the market for capacitive touch in handsets continuing to see strong unit growth increasing to 660 million in 2012 from 450 million in 2011. We still see a more competitive pricing environment in 2012 and 2013.”
6. Wireless infrastructure — There will be “smarter capex deployments, leading to more multicore and small cell basestations.”
7. FPGAs rule – “PLDs (will) continue to gain share from ASICs/ASSPs.”
8. Dogs of the Dow Theory — “Taking the lead from the Dogs of the Dow Theory, we highlight mean reversion ideas for select semiconductor names that materially underperformed in 2011. Here we point to BRCM, MU, and LRCX, in particular.”
9. What about analog? — “Weakness in the communication infrastructure and industrial end markets have been well telegraphed by analog vendors and while we typically see a recovery after two consecutive quarters of decline, it appears the trough is now more likely to happen in 1Q12 than 4Q11, with the rate of recovery the key variable now.”
10. Year of EUV — “Although 2011 was characterized by more muted optimism about EUV adoption, as a result of progress delays at the light source manufacturers, we believe 2012 will in fact be the ‘Year of EUV,’ where preliminary milestones are reached and EUV penetration becomes more certain. In turn, we believe growing confidence in the EUV penetration story will benefit the two clear winners in this space: ASML and CYMI.”

Tags: AMD, IBM, Intel, TSMC

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