Texas Instruments to buy National Semiconductor

The all-cash deal, which sees the company pay $6.5bn, will unite the two analogue semiconductor makers and give them a combined portfolio of 42,000 products
Written by Jack Clark, Contributor

Texas Instruments has signed a deal to buy analogue chip specialist National Semiconductor for $6.5bn, in a move that should give it greater clout and broader products in the analogue sector.

The Dallas, Texas-based company announced the all-cash agreement on Monday. It will pay $25 (£15.38) a share, an $11 premium over National Semiconductor's closing price on Monday of $14.07.

Texas Instruments Japan

Texas Instruments' purchase of National Semiconductor could shield it from geo-shocks, such as the earthquake damaging its site in Miho, Japan. Photo credit: Texas Instruments

If the acquisition goes through, Texas Instruments (TI) will add 12,000 analogue products from National Semiconductor to its own 30,000-strong portfolio. The combined companies will also have a worldwide semiconductor manufacturing footprint and a salesforce of over 2,500 people.

"This acquisition is about strength and growth," Rick Templeton, TI's chief executive, said in a statement. "National has an excellent development team, and its products combined with our own can offer customers an analogue portfolio of unmatched depth and breadth."

"The combined sales team will be 10 times larger than National's is today, and the portfolio will be exposed to more customers in more markets," he added.

The two companies specialise in analogue semiconductors, which provide power management services, as well as converting analogue inputs into digital outputs and vice versa. Analogue chips have a very wide range of applications across a breadth of sectors, from amplifiers to temperature sensors. "Even a digital satellite signal rides on an analogue carrier," former National Semiconductor chief executive Brian Halla has said.

However, the benefit to TI depends on how many of National Semiconductor's products are truly differentiated from those already in TI's portfolio. TI has said it will gain 42,000 products from the merging of the company's portfolios and has stressed they are well differentiated, but problems could occur if there are duplicates, Gartner believes. 

"To my mind there is a greater overlap than they are letting on," Gartner research analyst Steve Ohr told ZDNet UK. "I think it's important to see how much overlap there is. If there's not much, you grow a lot of the business very quickly using TI's experienced sales staff. If there is an overlap, then that goes a little slower... it'll be a little harder." 

Add fabs

The acquisition will give TI a network of semiconductor fabs spread across at least eight countries. It plans to add National Semiconductor's three large fabs in the US, Scotland and Malaysia to its existing 17 facilities, for a total of 20.

The large manufacturing footprint should further shield the company from geo-specific shocks, such as the huge earthquake and tsunami that struck Japan in March and damaged a TI plant. It should also further protect it against needing to dependent on a 'fab tight' model of outsourced semiconductor fabrication.

"Our goal is a seamless, hassle-free merger for the customer," Gregg Lowe, a senior vice president in TI's analogue unit, wrote in a blog post on Monday. "We will continue to use National's fabs so no requalification will be required. Part numbers from both companies will remain the same, so you can continue finding the products you need."

A 'good fit'

The purchase is expected to go through in six to nine months, subject to regulatory and shareholder approval. Up to that point, both companies will continue to operate independently. Eventually, National Semiconductor will become part of TI's analogue business.

"We are a good fit, strategically and culturally... our engineers will have a larger selection of circuit design, package, manufacturing process and other technologies," Santa Clara, California-based National Semiconductor said in a statement.

We are a good fit, strategically and culturally. Our engineers will have a larger selection of circuit design, package, manufacturing process and other technologies
– National Semiconductor

Both companies have rich histories in their field. In 1954, TI entered the nascent semiconductor field as the first volume manufacturer of silicon transistors, thanks to the research work of then-employee Gordon Teal. In 1958, its employee Jack Kilby independently invented the integrated circuit, at the same time as Robert Noyce of Fairchild Semiconductor was investigating the technology. The discovery spawned a boom in integrated circuit-enabled technologies that has continued to this day.

Founded in 1959, National Semiconductor has had a diverse history. It worked across consumer and enterprise electronics, such as LEDs, electronic calculators, gaming and power management devices, before deciding in 2002 to dedicate itself to its initial speciality: analogue semiconductors.

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