skip to main content
Close Icon We use cookies to improve your website experience.  To learn about our use of cookies and how you can manage your cookie settings, please see our Cookie Policy.  By continuing to use the website, you consent to our use of cookies.
Global Search Configuration

Ovum view

Summary

Avago Technologies announced reaching a definitive agreement to acquire Broadcom Corp. for $37bn. The new business, to be called Broadcom Limited, will be a well-diversified communications company positioned to serve high-growth markets focused on data centers and the Internet of Things. Ovum finds semiconductor companies such as Broadcom Limited need to be sufficiently large to be competitive.

Scale needed to compete in communications market

Avago’s purchase of Broadcom, in the largest recorded semiconductor transaction to date, will create the “most diversified communications platform in the semiconductor industry” according to the company’s press release. Avago has been on a tear buying companies – it acquired LSI Corp. for $6.6bn in 2013, Emulex for $606m in 2015, and CyOptics for $400m in 2013. But Avago is not the only semiconductor company bulking up. NXP has entered an agreement to acquire Freescale for $11.8bn, and Intel is rumored to be in talks to acquire Altera for $14bn.

The wave of semiconductor acquisitions is not isolated. Ovum believes the companies are responding opportunistically to good stock market performance, a stable economy, and transactions up the food chain. Nokia, for example, announced reaching an agreement to acquire Alcatel-Lucent, spurring rumors of an Ericsson transaction. And at the carrier level, Charter Communications plans to buy Time Warner and Bright House Cable in the latest announced consolidation.

The transactions improve the positioning of these companies. This new marketplace is driven by Google, Facebook, Amazon, and other web-scale service providers with deep pockets and a relentless growth appetite. Also contributing to the competitive atmosphere is the rise of Huawei and its strength in the China market; Huawei’s vertical integration with HiSilicon for internal semiconductor supply gives it extra leverage.

Semiconductor companies, representing the bottom of the communications market food chain, need to be sufficiently large to support the demands of their customers under ever-increasing pressure to reduce prices, keep up with high-volume demand, and shorten time to market. Broadcom Limited will be challenged to deliver on the estimated $750m in synergies and continue to expand in markets developing around data centers and the Internet of Things. It certainly has the right piece parts to attack these opportunities. Should the deal close, execution will be the key factor.

Appendix

Further reading

“Nokia/Alcatel-Lucent tie-up could have far-reaching impact on telecom gear market,” TE0006-001051 (April 2015)

“NXP-Freescale merger targets connected car, IoT opportunities,” TE0017-000030 (March 2015)

“Avago raises networking stake with LSI acquisition,” TE003-000597 (January 2014)

“Avago to acquire CyOptics for bigger piece of data center pie,” TE003-000553 (April 2013)

Author

Daryl Inniss, Practice Leader, Components

daryl.inniss@ovum.com

Recommended Articles

  • Enterprise Decision Maker, Enterprise IT Strategy and Select...

    2017 Trends to Watch: Big Data

    By Tony Baer 21 Nov 2016

    The breakout use case for big data will be fast data. The Internet of Things (IoT) is increasing the urgency for enterprises to embrace real-time streaming analytics, as use cases from mobile devices and sensors become compelling to a wide range of industry sectors.

    Topics Big data and analytics IoT

  • Service Provider Technology, Enterprise Decision Maker

    IT services required to smooth the path to automation

    By Kris Szaniawski 17 Jan 2018

    Ovum expects telecoms-specific IT services to be the fastest-growing segment of the telecoms vendor services market, not just this year but also over the next five years, with a CAGR of approximately 7% over the period.

  • Service Provider Technology

    5G – Deployment and Commercial Considerations

    By Daryl Schoolar 24 Nov 2017

    In a few years, operators will start rolling out commercial, standards-based 5G networks. In doing so, these operators will face a variety of deployment scenarios based on spectrum and other various factors. The deployment decisions they make will impact what the network looks like and the types of services offered.

    Topics 5G

;

Have any questions? Speak to a Specialist

Europe, Middle East & Africa team - +44 (0) 207 017 7700


Asia-Pacific team - +61 (0)3 960 16700

US team - +1 646 957 8878

+44 (0) 207 551 9047 - Operational from 09.00 - 17.00 UK time

You can also contact your named/allocated Client Services Executive using their direct dial.
PR enquiries - Call us at +44 7770704398 or email us at pr@ovum.com

Contact marketing - 
marketingdepartment@ovum.com

Already an Ovum client? Login to the Knowledge Center now