Analog chipmaker Onsemi buys Synaptics in $7B all-stock deal to push into physical AI

Arizona-based chipmaker Onsemi today announced plans to acquire the internet of things and computer interface technology firm Synaptics Inc. in a deal valued at around $7 billion.

The deal will help Onsemi, officially known as Semiconductor Components Industries LLC, pursue its ambitions in “physical AI,” and bring artificial intelligence from massive cloud-based data centers into the physical world. Synaptics shareholders will receive 1.35 shares of Onsemi’s stock for each share they hold in what is described as an all-stock deal.

Onsemi’s stock fell more than 8% to $108.85 in extended trading in the wake of the news, but it’s still up 119% in the year-to-date, having benefited from soaring valuations across the semiconductor industry. It means Synaptics shareholders are getting a nice premium on the deal, as its stock rose 11% to $140 in late trading today.

Onsemi is a major manufacturer of analog silicon carbide chips that are used in the automotive and industrial markets. Among other things, its chips are used in power and sensing devices. The company also has a growing data center business, but until now it has not really benefitted from the AI boom. However, it believes it has an opportunity to drive growth in “edge AI,” which refers to AI models that perform their computations on local devices rather than processing workloads in the cloud.

Synaptics is a developer of human interface systems and software, including touchpads for laptops, touchscreen technologies, display drivers, human presence detectors, fingerprint biometrics scanners for smartphones and video and far-field voice technology for cars and smart home devices. Founded by semiconductor and machine learning legends Federico Faggin and Carver Mead, the company is noted for inventions, including the click wheel on the classic iPod, touch sensors on Android phones, integrated touch and display driver chips and fingerprint sensors, among other innovations.

Onsemi Chief Executive Hassane El-Khoury said the combination of his company’s chips and Synaptics’ connectivity solutions and software platforms has big potential in the nascent physical AI industry, which is mostly focused on robots, drones and autonomous vehicles. It refers to the integration of AI models with physical hardware including sensors, motors and actuators so they can perceive their environments, understand spatial relationships and perform work in the real world.

“This transaction would add immediate connected compute capabilities, expand our software and ecosystem reach and position Onsemi to deliver greater value as customers increasingly seek intelligent systems,” El-Khoury said. “As artificial intelligence moves beyond the cloud and into the physical world, including automotive and industrial, the next phase of innovation will depend on systems that can sense, decide, act and adapt in real time.”

By targeting physical AI, Onsemi believes that it can expand its total addressable market opportunity by $30 billion to $243 billion by 2023. It anticipates that the acquisition will close in mid-2027, subject to regulatory approvals, and deliver a significant boost in its earnings per share within 18 months.

Photo: Onsemi/Synaptics