Chip Merger

Struggling for Relevance, Infineon Buys U.S. Rival International Rectifier for $3 Billion

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Infineon chief-executive Reinhard Ploss.
  • Why it matters

    Why it matters

    The purchase of U.S.-based International Rectifier, a maker of chips for small businesses, could help Infineon build the necessary magnitude to compete with bigger rivals.

  • Facts

    Facts

    • Infineon makes chips to manage power in cars, wind power plants, and computers.
    • The German chipmaker is the world’s biggest producer of power chips, according to 2012 figures.
    • Infineon competes with California-based Fairchild, Japan’s Toshiba, Swiss-based STMicroelectronics and others
  • Audio

    Audio

  • Pdf

Infineon’s decision to spend $3 billion (€2.3 billion) to buy a U.S. rival, California-based International Rectifier, is the first sign of a long-predicted wave of industry consolidation in the computer chip business, which has been beset by falling prices and cut-throat competition, experts said.

On its face, the merger of the two companies, which will create a chipmaker with €4.5 billion ($5.9 billion) in annual sales, appears to be complimentary.

Infineon, spun off from German engineering firm Siemens in 1999, makes power regulating semiconductors for cars, industrial electronics and for telecom devices and mobile phones. Its strength lies in high-power, high-voltage products.

International Rectifier makes chips that manage power flow in satellites, aircraft, cars and lighting systems and specializes in lower-power, lower-voltage devices.

The American company is five times smaller than Infineon and has annual sales of $1 billion.

One analyst called Infineon’s purchase costly and shares of the chipmaker, based in Neubiberg, Germany, near Munich, were largely unchanged following the announcement.

But in the first half of this year, the global semiconductor market grew, with revenue of $160 billion through June, an 11 percent increase from the same period a year ago, according to industry figures.

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