In just the last 5 to 10 years, we've seen at least eight major acquisitions, including:
• Avago's acquisition of Broadcom for $37 billion in 2015
• Infineon's acquisition of International Rectifier for $3 billion in 2015
• ON Semiconductor's purchase of Fairchild for $2.4 billion in 2016
• Analog Devices' acquisition of Linear Technology, a $14.8 billion deal in 2016
• Microchip's acquisition of Atmel for $3.56 billion in 2016
• Renesas' acquisition of Intersil for $3.2 billion in 2016
• Infineon then bought Cypress for $9.78 billion in 2020
• Analog Devices then bought Maxim Integrated for $20 billion in 2021
• And the big deals keep coming.

We expect these types of deals to continue for many reasons: technology continues to evolve, interest rates are low, and market caps and buyer stock prices are high, making it easier to trade stocks and borrow money. There are also a variety of new markets on the rise, including 5G, artificial intelligence, machine learning, automotive and electric vehicles, and IoT sensors, creating many new use cases for semiconductors. Acquisitions are an efficient way to complete a supplier's offerings and provide end customers with a robust solution.

Digi-Key is proud of our broad portfolio, which has served us well throughout this market consolidation. Whenever there has been an acquisition, we have almost always worked on both product lines. This has resulted in many synergies for the newly merged companies and further demonstrates the stability that Digi-Key offers our customers.

Of the eight major acquisitions mentioned above, Digi-Key has been the only e-commerce distributor to have worked on both product lines when the acquisitions took place. We are proud to be the only constant on both sides of the ledger and are honored to continue working with the companies as they complete their mergers and transformations.

Benefits for Suppliers
: Often, when an acquisition or merger is discussed within a company, employees are apprehensive about the changes to come, but there are many significant benefits to this trend of mergers among semiconductor companies. Of course, the biggest benefit from a supplier's perspective is the hope and expectation that 1 + 1 will equal something greater than 2. Deals of this magnitude require careful planning and foresight, and will likely prove highly beneficial in the long run from a financial perspective.

As a supplier expands its portfolio, it becomes more valuable to its customers, offering more components and playing a more significant role in the overall solution. By acquiring a complete solution offering through multiple acquisitions, the supplier can sell solutions rather than individual products, greatly increasing its profitability and importance to the end customer. As sales increase, their collective purchasing power also grows, enabling them to acquire more raw materials and capacity, and hopefully become more competitive as a result.

We've also seen that top talent is being retained and staying within the industry as teams and leadership change. That may not have been the case 20 years ago, when the acquiring company could have come in and fired people, but as the industry and this consolidation trend evolve, we're seeing buyers examine the different strengths of the teams and leadership of the companies they acquire, and recognize the benefit of having leadership remain to run the business. It's become a very collaborative process, and we actively help our partners promote to the best of our ability.

On Digi-Key's side, it's a seamless transition because there's really no learning curve for us in terms of marketing the products, working with the supplier, and dealing with their team; we're already familiar with everything. And thanks to our team's technical expertise, we have a deep understanding of the product synergies. We can take the strengths and elements of both companies and market them to the global engineering community, thereby positioning the newly merged company as stronger than ever.

As large corporations continue to grow, inventors of new technologies and products may worry that they can't compete with the giants. And, to some extent, they won't be able to. But inventors of truly new and cutting-edge offerings won't have to compete; they'll have more acquisition opportunities. Those with genuinely differentiated technology are likely to be quickly acquired by a savvy supplier.

Transforming the Industry of the Future
: Looking ahead, we predict the industry will see larger suppliers offering broader portfolios as they acquire companies with synergistic products to sell a wider range of product offerings to their customer base. Suppliers will be able to approach a customer or engineer with more in-depth offerings and provide a comprehensive solution, rather than a one-off widget.

Companies have learned that the more important they can be to a customer, the more respect they receive. If you look back 25 years, everyone was trying to sell their individual part, whereas in the last 5 to 10 years, it has truly become about selling solutions. Suppliers have discovered that customers are more engaged with those who can offer a solution rather than just a product. For example, yesterday a supplier might have sold only a single fuse sensor, but today they are more likely to market 7 or 8 pieces together to form a solution, and customers can more easily embrace that.

I expect to see these acquisitions continue in the coming years: companies have plenty of cash on hand right now and are likely to invest it in ventures that will boost their bottom line and share value—investing in a portfolio rather than simply leaving it in the bank. We also expect to see some M&A activity beyond semiconductors as companies continue to diversify outside the industry. That conversation is for another day and another article, but I'll certainly be keeping an eye on it, and other electronics stakeholders should be too.

Author: David Stein, Vice President of Global Supplier Management at Digi-Key Electronics

David Stein, Vice President of Global Supplier Management at Digi-Key Electronics, has over 25 years of experience in sales, marketing acquisitions, and business leadership. At Digi-Key, David oversees the organization's supplier relationships, goals, and key objectives, guiding strategic planning for more than 1,000 suppliers representing over $1.5 billion in assets and 3.5 million product SKUs.