(i) the names of the merger parties;
(a) Analog Devices, Inc. (“ADI”)
(b) Maxim Integrated Products, Inc. (“Maxim”)
collectively, the (“Parties”).
(ii) a description of the transaction;
The notification relates to the proposed acquisition by ADI of the entire issued share capital of Maxim (the “Proposed Transaction”).
(iii) a description of the business activities of the merger parties worldwide and in Singapore;
ADI designs, manufactures and markets a broad line of integrated circuits (“ICs”) that incorporate analogue, mixed-signal and/or digital signal processing technologies and are designed to address a wide range of real-world signal processing applications. ADI’s IC product portfolio includes both general-purpose products used by a broad range of customers and applications, as well as application-specific products designed for specific types of customers or end-uses. ADI serves customers in various industries, particularly in the automotive, consumer, communications and industrial sectors.
ADI’s products are embedded inside various types of electronic equipment including aerospace and defence electronics, automobiles, energy management systems, factory automation systems, industrial process control systems, instrumentation and measurement systems, medical imaging equipment, networking equipment, optical systems, patient monitoring devices, portable electronic devices and wireless infrastructure equipment.
ADI is involved in the same activities in Singapore as it is globally.
Maxim is a global technology company that designs, develops, manufactures and markets a range of linear (commonly known as “analogue”), mixed-signal and digital ICs. Its products serve customers in diverse geographic locations in the following segments: automotive, communications and data centre, computing, and other consumer and industrial applications.
Its products are embedded in various electronic equipment such as automotive equipment, communication network devices, data storage/servers, Internet of Things (“IoT”) platform equipment, mobile devices, wearable devices, audio devices, factory automation systems, sensors, building automation systems, motion control equipment, automated test equipment, industrial IoT systems, military and aerospace equipment, wearable health devices, diagnostic and therapy equipment, and healthcare IoT systems.
Maxim is involved in the same activities in Singapore as it is globally.
(iv) a description of the overlapping goods or services, including brand names;
Both ADI and Maxim are active in the supply of semiconductor technology such as ICs, primarily to downstream Original Equipment Manufacturers (“OEMs”) which incorporate this technology into electronic devices sold to end-users.
(v) a description of substitute goods or services;
From the Parties’ perspective, close substitutes for the Parties’ semiconductor products would be the semiconductor products offered by other competing providers, such as Infineon, NXP, ON Semi, STMicroelectronics, and Texas Instruments.
(vi) the applicant’s views on:
a. definition of the relevant market(s);
The Parties submit that semiconductor devices can be broadly categorised as follows: (i) ICs (further divided into analogue and digital, and general purpose and application-specific); (ii) discretes; (iii) optical semiconductors; and (iv) sensors and actuators.
The Parties submit that the relevant markets for the purpose of CCCS’s review of the Proposed Transaction should be as follows:
(a) within general purpose analogue ICs:
(i) the global supply of amplifiers and comparators (or signal conditioning ICs);
(ii) the global supply of signal conversion ICs;
(iii) the global supply of interface and isolator ICs; and
(iv) the global supply of power management ICs;
(b) within application-specific analogue ICs:
(i) the global supply of consumer Application Specific Standard Products (“ASSP”);
(ii) the global supply of industrial ASSPs;
(iii) the global supply of communications ASSPs; and
(iv) the global supply of automotive ASSPs;
(c) within digital ICs, the global supply of general Metal Oxide Semiconductor microcontrollers (MCUs); and
(d) within sensors and actuators, the global supply of temperature and other sensors.
(collectively, the “Relevant Markets”).
The Parties submit that the Relevant Markets are global in scope for the following reasons:
(a) manufacturing of discrete components and ICs is performed on a worldwide basis with manufacturing facilities (owned or third-party) located around the globe;
(b) competition between suppliers is worldwide both for existing products and new pipeline products;
(c) there are generally no regulatory barriers restricting the import of such products;
(d) transportation costs are very low and are generally below one per cent. of the product value; and
(e) price differences among regions are small.
b. the way in which competition functions in this market;
The Parties submit that innovation is an important feature of the semiconductor industry, and market players compete with one another by constantly seeking to improve existing products and create new products. There is healthy competition across different sectors of the semiconductor industry, with a sequence of new competitive products introduced each year, and semiconductor manufacturers generally dedicate significant resources to R&D.
c. barriers to entry and countervailing buyer power; and
Barriers to entry
The Parties submit that there are no significant factors that serve as barriers to entry for any of the Relevant Markets, either in Singapore or globally. This is in view of the following:
(a) there are generally no import or export barriers for semiconductor products, nor are there any regulatory barriers for supplying semiconductor devices in most countries;
(b) raw materials used to manufacture semiconductor products in the Relevant Markets are all commodities widely available and can be easily obtained in a timely manner from various sources;
(c) potential competitors can enter the Relevant Markets without relying on IP rights or patents of incumbents. Analogue IC designers regularly develop new solutions in order to differentiate their products and compete with existing patented products; and
(d) market players looking to enter or expand into any of the Relevant Markets do not face a requirement for significant upfront investments into manufacturing facilities or transportation. Companies can easily outsource the production, assembly and testing processes to third parties, and transportation costs, in the Parties’ experience, comprise only a small proportion of the value of the IC products sold.
Countervailing buyer power
Customers in the semiconductor sector are generally large, global equipment manufacturers that have strong bargaining power and are able to exert strong countervailing power on the merged entity post-Proposed Transaction. Customers also face low switching costs to switch to a different supplier and often do so. It is not uncommon for customers to work with more than one supplier to source their needs.
d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).
The Parties submit that the Proposed Transaction will not give rise to any non-coordinated effects for the following reasons:
(a) the Relevant Markets are highly fragmented and saturated with competitors of varying sizes;
(b) strong countervailing power of the Parties’ largest customers and ease of switching for customers will continue to constrain the Parties post-Proposed Transaction; and
(c) the Parties’ product portfolios are complementary and will enable the merged entity to compete more effectively with large competitors in each Relevant Market.
The Parties submit that the Proposed Transaction will not give rise to any coordinated effects for the following reasons:
(a) the presence of a multitude and range of existing competitors of varying scales of operations in the Relevant Markets means that it would not be possible for the merged entity to arrive at an alignment or coordination of its behaviour with other competitors;
(b) suppliers would not be incentivised to coordinate with each other given that they compete on the basis of product differentiation and are constantly innovating to offer new and improved products in the Relevant Markets;
(c) pricing of semiconductor products across all the Relevant Markets is typically negotiated on an individual basis and is based on a variety of pricing models, making it difficult for competitors to coordinate pricing; and
(d) customers generally have the knowledge and expertise to make well-informed comparisons of alternatives available on the market, which facilitates the process of switching between different suppliers in response to price changes or any other reason.
There are no existing or potential vertical relationships between the Parties.