Communications & New Media Nov 2015 Vol 29 No 11

FEATURE
Navigating the silicon consolidation boom
M&A activity in the hardware arena is going gangbusters. The advent of mergers and acquisitions in
the tech world isn’t a new phenomenon, but the transitions involved in M&A pose myriad challenges for
communications teams, both internally and externally. Here’s what communications pros should keep
in mind when navigating the current landscape of consolidation in the tech industry.
By RJ Bardsley
If you look around the technology landscape,
you’ll see that we’re in the middle
of another tech boom — only it may not
be exactly the boom you’re thinking of.
The amount of money pouring into mergers
and acquisitions is on par with the late
1990s; indeed, the recent Dell/EMC deal is
one of the largest to rock the technology
industry in a long time. At the macro-economic
level, low interest rates have made
borrowing cheap and as a result there is
plenty of money to fund mergers and acquisitions.
It’s possible that companies are
rushing to make the most of the interest
rates before they go up, and this is why 2015
is turning into such a hot year.
M&A activity within the silicon segment
of the tech industry has been especially
hot. In the past year we’ve seen the consolidation
of chipmakers — from Altera to
Freescale to Broadcom.
A recent article by Ed Sperling at Semiconductor
Engineering estimates that 2015
has seen twice the average number of deals
and that the value of those deals is about
ten times higher than normal. In silicon,
the low interest rates are compounded
by fairly low valuations across the board,
making it easy for buyers to pick up some
pretty good deals.
The advent of mergers and acquisitions
in silicon isn’t a new thing though — we’ve
been living with it since the 1980s. However,
marketers should take note of three
things that are happening in this latest
wave of combinations that are shifting the
landscape:
A shifting center of gravity regarding
multiple trends.
An ecosystem that is changing.
Innovation spotting.
Silicon and the IoT
We have all heard the term — perhaps
we’re even a little sick of hearing about it.
The IoT — the Internet of Things — has
been on every technologist’s lips for the
past three years or so. You’ve read about it
in magazines and newspapers, heard about
it on the news and if you’re involved in the
Venture Capital community in any way,
you’ve seen it come up in countless conversations.
The interesting thing about the IoT is
that semiconductors are at the center of
this trend. If nothing else, IoT as a term
has served to create a nexus of several industries
— from medical to automotive to
construction — right at the doorstep of silicon
companies.
So what does semiconductor consolidation
mean for the IoT? It means that there
are broader implications for industries beyond
the semiconductor space. If acquisitions
lead to a burst of new innovation,
or conversely a slowdown in research and
development, it could impact the innovation
we see in autos, airplanes and even the
garment industry.
Smart marketers in silicon and semiconductor
companies should recognize this
new web of connections — the benefits
of these mergers need to be articulated in
much broader terms than simply a combination
of two companies that make certain
types of chips or sensors.
A changing ecosystem
Sperling is also careful to point out in
his article that consolidation runs counter
to trends in the silicon industry over the
past forty years. The industry traditionally
deconsolidates. Recent M&A’s threaten to
add three percent to market share of the
ten biggest companies in the silicon space.
Add to that the fact that recent M&A’s also
put formerly disparate companies together:
security and memory, SoC and Flash,
EDA and IP. Suddenly the nature of who
does what, and more importantly who
buys what, has changed dramatically.
This creates an interesting challenge for
marketers — the challenge of resetting the
playing field and repositioning brands that
have consistently done the same thing for
the past twenty to forty years. Part and
parcel to this is building and reshaping alliances,
and in the process crafting the vision
for the industry’s future. This process
becomes much more interesting given the
first point — that you’re repositioning in a
world where the silicon industry isn’t just
an obscure technical offshoot of the tech
industry; rather it’s the center of industries
from automotive to healthcare.
What does this mean for products and
technologies? It means they have life and a
voice beyond nodes, gHz, energy efficiency
stats and fabrication details. It means
semiconductor companies have a huge opportunity
to reimagine themselves at the
intersection of technology and humanity.
It’s time to play a much more sophisticated
game of ball — but time is not on the side
of these marketers. They must establish
their new ecosystem and market position
quickly.
Communications professionals often get
caught up in the internal
energy and friction of a
merger or acquisition.
That’s natural: it seems
to be where all the action
is. But, as soon as
the deal is announced,
external influencers are
trying to create a new
context for the merged
company. It’s critical RJ Bardsley
that communications
pros help them create that context by articulating
what your new ecosystem looks
like.
Arm your clients with essential ammunition
so they can talk about who their customers
and partners are, where they fit in
to the supply/demand chain, and how the
competitive environment has changed. If
you don’t set this stage, others will.
Innovation spotting
Innovation always comes out of consolidation.
This is sometimes hard to see when
CEOs are combining R&D programs, engineering
teams and real estate. The pressure
is to focus on communicating the synergies
and economies of scale — the bankers love
this part of the story, but it’s retrospective
in nature, not about innovation.
The most important part of any combination
story should be the innovation
that will come out of the deal — combined
imaginations should lead to visionary new
products or technology roadmaps.
Here is the challenge for the silicon industry
— there are very few startups in
the space. Innovation needs to come from
established players and this is something
that can sometimes be a hurdle. Marketers
must take the opportunity that this wave of
consolidation provides to redefine themselves
and showcase their best and brightest
in innovation.
RJ Bardsley is EVP, Global Tech Strategy
Lead at Racepoint Global.
14 NOVEMBER 2015 | www.ODwyERPR.COM