Dive Brief:
- Arizona-based Onsemi has bid to acquire chip developer Allegro MicroSystems for $6.9 billion, or $35.10 per share, the semiconductor maker disclosed Wednesday.
- Allegro responded to the proposal on Thursday, calling it "inadequate."
- The acquisition could help give Onsemi new sources of revenue as it navigates a market downturn.
Dive Insight:
Both companies have been battling declining revenue in recent months, with Onsemi's annual revenue down 14% year over year amid a downturn in automotive demand. The company derived 84% of its Q4 revenue from automotive and industrial business, according to a recent earnings call.
Auto-driven demand is facing uncertainty as the Trump administration reevaluates electric vehicle tax credits and the use of tariffs, which could impact Onsemi customers, President and CEO Hassane El-Khoury said on the call.
"Entering Q1, we expect persisting volatility due to the geopolitical uncertainty across all geographies as our customers assess their manufacturing footprints and the impact of tariffs," El-Khoury said. "We are monitoring the demand signals of EV adoption, given the uncertainty around EV tax credits and slowing infrastructure deployment."
Onsemi also announced late last month plans to lay off 2,400 workers, part of a plan to save up to $115 million.
The purchase of Allegro could help alleviate the company's financial woes, however. While Allegro has similarly struggled with auto sales down 33% YOY in Q3, the company saw gains in datacenter and medical-driven sales.
Like Onsemi, Allegro has been taking cost-cutting measures amid the downturn – the company has reduced production levels to better match demand, EVP and CFO Derek D’Antilio said on a Q3 earnings call in January.
Allegro also offers the advantage of operating a local supply chain in China, giving the company access to the market without navigating tariffs and other challenges. The country made up 28% of Q3 revenues, and expects to scale production with local fab qualification in process and shipments from local outsourced semiconductor testing and assembly contractors underway.
"We continue to win in China and having a China-for-China strategy has been really, really helpful," D'Antilio said on the call.
Onsemi has made multiple attempts to acquire Allegro in recent months. The company last made a bid in September 2024, when it offered $34.50 per share.
“The Allegro team has built an impressive leadership position in magnetic sensing and power ICs for the automotive and industrial end-markets,” El-Khoury said in a statement. “Together, Allegro’s unique product portfolio and onsemi’s differentiated intelligent power and sensing technologies would create a diversified leader in automotive, industrial and AI data center applications.”
