Analog Devices (ADI) announced on Tuesday, July 27, 2016 that it will acquire Linear Technology Corporation (LTC) for $14.8 billion, continuing the trend of big consolidations within the semiconductor sector. ADI reported annual semiconductor revenue of $3.4 billion in 2015, while LTC revenue was $1.4 billion.
Jonathan Liao, senior analyst, power semiconductors, IHS Markit says that over 80 percent of ADI's products are general-purpose analog devices used in various end markets in the industry, including computing, communications, industrial, automotive, and consumer electronics. Within the analog products segment, ADI specializes in converters, amplifiers, radio frequency (RF), signal processing, and power management devices. It also invests in high volume manufacturing processes for both analog and digital products. While some ADI products are created for the high performance market and compete directly with LLTC, most of their goods are general-purpose devices made for medium- to high-volume customers. ADI has a massive customer base with over 100,000 customers globally.
Liao also notes that similar to ADI, LTC specializes in analog products. All of LTC's revenue was generated from the analog product segment, with specializations in voltage regulators, RF, data converters, and amplifiers/comparators. Contrary to ADI, LTC typically focuses on high-margin, high-performance, and lower-volume products in emerging applications, to maximize its return on investment. Analog products typically have larger feature sizes and less dependence on cutting-edge process technologies, and capital investments in analog manufacturing facilities (fab) are typically magnitudes lower than their digital counterparts. As a result, LTC invests less in manufacturing and achieves higher operating margins.
Over the last several years, both ADI and LTC were fueled by the growth from the automotive and industrial end markets.