Dallas, Texas 08/28/2014 (FINANCIALSTRENDS) – ON Semiconductor Corp(NASDAQ:ONNN) holds good potential to be snapped up by big players said, Analyst Chris Rolland, at FBR Capital Markets Semiconductor, on Thursday.
Commenting on the recent consolidation spree which big sized player in the semiconductor industry Infineon Technology’s undertook at a cost of $3 billion, by taking over International Rectifier, he indicated that there are future such forays likely to happen.
Infineon buy trendsetting
The play out by Infineon, Rolland said was because, “If you have a ton of state-of-the-art capacity available and you’re a player like Infineon, you go out and you buy outdated manufacturing capacity like Atmel’s”
In an industry where the margins are below-marginal, the way to grow and survive is by snapping-up young and newer technology players, such as ON Semiconductor Corp(NASDAQ:ONNN) the analyst opined.
Where pressures of price and competitive spirit are high, the need to find the right technology player becomes the key.
He added that currently most are subject to scaling issues within the limits of size and machinery.
Rolland added further that, “You bring them in-house, give them an entirely new cost structure,” which he said was further reinforced when there was a ”cut in management …and all of a sudden you pop that model and you pop margins.”
Given the needs of small and large-sized companies, the road map would be very similar to Infineon Technology’s move. The large-capacity company’s will be able to fill-out capacity requirements for players such as ON Semiconductor Corp(NASDAQ:ONNN) he commented.
As the most semiconductor companies are makers of small components, the pressure remains that latest technology induction happens on an ongoing process. The need for players such as ON Semiconductor which have the infrastructure and financial strengths backed by technical expertise are always plum for big-time semiconductor players on the prowl!