Taiwanese chipmaker MediaTek acquires rival MStar

Taiwanese chipmaker MediaTek acquires rival MStar
MediaTek chairman Tsai Ming-kai, right, and Morningstar chairman Wayne Liang, center, at a press event held to announce an acquisition plan. (Photo/Chen Chen-tang)

MediaTek, Taiwan’s leading fabless semiconductor company, has announced that it will acquire rival MStar Semiconductor in a deal worth NT$115 billion (US$3.83 billion).

Following the takeover, MediaTek‘s revenue scale will reach close to US$4.2 billion. It will overtake Nvidia to become the world’s fourth-largest integrated circuit (IC) design house, behind Qualcomm, Broadcom and AMD. If successful, the deal will become the largest merger in Asia’s semiconductor industry in the past decade.

Pan Jiutang, section chief of Shenzhen Semiconductor Industry Association, said that the merger will improve the finances of both parties but have a limited effect on other mobile phone chipmakers in the short term. MediaTek specializes in making mobile chips, while MStar is a leading LCD TV chipmaker.

Following the merger, MStar‘s mobile phone business will be incorporated into MediaTek, and the two companies’ TV chip manufacturing will also be integrated. Founded in 2002, MStar racked up sales of NT$36 billion (US$1.2 billion) in 2011, 65% of which came from processors made for TVs. MediaTek recorded sales of NT$87 billion (US$2.9) last year, the second consecutive year in which it has seen a sales decline.

MediaTek chairman Tsai Ming-kai said that alongside increasing competitive pressure, integration will be an overall trend in the future, especially in smartphones, TVs and smart TVs.

“With the emergence of smart terminal products, the IC industry will face more rigorous challenges,” said Tsai. “Following the merger, both sides can secure their edges, integrate their resources and maximize benefits.”

Industry insiders say the merger will allow MediaTek to focus on the development of chips for 3G smartphones and widen its lead over Chinese IC designers in the 2G market. MStar will be able to consolidate its leading status in the global TV chip market and face up to competition from Qualcomm and other international competitors, say analysts.

MStar has long been a major MediaTek rival in the low-price mobile chip market in China, offering prices up to 30% lower than MediaTek products.

Some market players, however, are downplaying the potential benefit the acquisition will bring MediaTek. The two firms’ products have consistent overlap, and MStar‘s mobile technology lags behind that of MediaTek, they say.

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