In an apparent effort to expand its semiconductor chip business, Texas Instruments Inc., has decided to acquire Santa Clara, California-based National Semiconductor Corp. for $6.5 billion. The Dallas-based TI makes chips used in consumer electronics including cellphones, tablet computers and in industrial equipment and National Semiconductor also manufactures similar products.
TI makes about 30,000 items and National Semiconductor makes about 12,000. "Quite often their chips can almost be identical, with slight differences, or fit next to each other in the same device," said technology analyst Doug Freedman at Gleacher & Co to Los Angeles Times. "It's really about getting more product differentiation."
Brian Matas, vice president of market research at IC Insights added that the deal is not a sensible move as many products manufacture by each company do not overlap. TI's chief executive, Rich Templeton, however, defended the move saying that the differentiation of the products made the acquisition attractive. "There is minimal product overlap with National," Templeton said Monday in a conference call to investors. "This combination means we can engage with customers where we had minimal" dealings with them before.” Matas added that TI has decided to expand its business into the chip market as some of its other technology failed to find takers.
The deal was announced yesterday after the close of trading. The deal is subject to the approval of National Semiconductor shareholders and regulatory approval as well. TI said in a statement that it was planning to finalize the deal within nine months. On his part, Freedman added that TI would acquire more companies in the coming months. "TI has continued to execute the strategy of buying companies to gain market share," he said. "It's a pretty sound strategy."
