ON buys storied Fairchild Semiconductor for $2.4 billion

Fairchild Semiconductor, one of the most storied names in Silicon Valley, is being acquired by Phoenix-based ON Semiconductor in a $2.4 billion cash deal.

The sale was announced Wednesday morning by the two companies, which said Fairchild investors would receive $20 a share – a 30-40 percent premium over Fairchild’s share price in recent months before word spread that the company was for sale.

The deal will create a company making semiconductors for the automotive, industrial and smartphone markets with combined revenue of about $5 billion, according to the announcement.

Cost reductions of about $150 million are expected from the merger over the next 18 months.

The merger is one of a series that have rippled through the semiconductor industry over the past couple years, as companies consolidate to stay competitive.

Keith Jackson, CEO of ON Semiconductor, said in a conference call that the deal would combine two businesses with large cash flows to create “a premier power and analog semiconductor company”

The two companies make power semiconductors. ON concentrates on the low voltage market and Fairchild sells high and medium voltage chips, Jackson noted.

With the acquisition, ON will be one of the top ten non-memory semiconductor companies worldwide, he said.

A crucial early chapter in Silicon Valley’s story begins with the formation of Fairchild in 1957, when eight employees of Shockley Semiconductor Laboratories jumped ship to form the company.

Shockley Semiconductor was founded by William Shockley, co-inventor of the transistor, the tiny building block with which the giant semiconductor industry was created.

From Fairchild, pioneers such as Intel’s co-founders Robert Noyce and Gordon Moore fanned out to create their own semiconductor companies.

The current Fairchild is a much different company than the one that pioneered the integrated circuit.

Fairchild became a subsidiary of Slumberger in 1979, was acquired by National Semiconductor in 1987 and became an independent company again in 1997.

Photo: Fairchild logo (Fairchild Semiconductor)


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