How the shortage affects M&A

Scott Jones

Scott Jones

Principal, Advisory, Strategy, KPMG US

+1 408-367-7002

Chris Lanman

Chris Lanman

Advisory Managing Director, Strategy, KPMG LLP

+1 404-614-8598

The global semiconductor industry is scrambling to meet soaring demand, both in traditional markets, such as consumer electronics, where consumers are back in force, but also in fast-growing new uses such as electric vehicles and the internet of things. But the surge in demand has met a perfect storm of factors limiting supply—from the pandemic, to winter storms in Texas, to drought in Taiwan. This has caused production delays and shortages in everything from appliances to SUVs. The chip shortage has been particularly hard on automakers (see our Surviving the silicon storm).

Against this backdrop, the dynamics of semiconductor M&A are shifting. In 2020, before the shortage rippled through the economy, a record $120 billion in semiconductor deals were announced. This year there were $4.6 billion worth of semiconductor deals announced in just the first half, of which $2.8 billion occurred in Q2’21.

SPACs have become a factor in semis and are helping drive deal volume. In May for example, Navitas Semiconductor, a maker of gallium nitride chips (GaN), announced it would merge with Oak Acquisition Corp. II, a SPAC, in a $1 billion deal1.

Three factors will continue to shape the semiconductor market and the deal landscape into 2022:

Soaring demand

Supply constraints are already leading to new investments in capacity. Taiwan Semiconductor, the world’s largest operator of wafer fabs, has earmarked more than $100 billion for an accelerated plant building program2. Intel announced that it will invest in two new fabs in Arizona and is setting up a foundry services business for fabless semiconductor companies3. We expect chip customers in autos and other industries that are feeling the crunch now to invest more in the semiconductor sector. They may not buy fabs but are likely to invest in fabless chipmakers specializing in the parts they need for EVs. The automotive chip shortage has exposed the cost of this issue, resulting in $125 billion in lost revenue4.


Semiconductor shortages in key sectors are causing governments to look for ways to boost capacity and reduce their nations’ reliance on imports. In addition, tensions between the U.S. and Chinese governments are influencing where companies invest in new capacity. The U.S. government wants to see more domestic investment in semiconductor fabrication. In March, the EU said it would subsidize a doubling of chip capacity over the next 10 years. We expect the M&A market will continue to be active and heavily scrutinized by regulators as governments look to protect their supply chains and diversity both regionally and with more suppliers.


Bigger investment in regional supply chains is likely to mean the development of ecosystems around chip foundries and may lead to M&A opportunities. One focus is the need to invest in advanced technologies that enable data-driven management of the semiconductor supply chain.

Nobody expects the demand-supply imbalance in semiconductors to be resolved quickly. It takes up to two years to bring on new capacity. Based on what we hear from our semiconductor-industry clients, shortages could last well into next year.



  1. Source: KPMG, Surviving the Silicon Storm, 2021
  2. Source: Debby Wu, "TSMC to Spend $100 billion over three years to Grow Capacity," Bloomberg, March 31, 2021.
  3. Source: Tiffany Trader, “Intel Launches Foundry Biz with $20B Fab Spend, Teams Up with IBM,” HPC Wire, March 24, 2021
  4. Source: KPMG, Surviving the Silicon Storm, 2021.