In recent years, China's semiconductor industry has witnessed rapid growth, especially in the fields of analog chips and microcontroller units (MCUs). These two segments have emerged as the most promising and dynamic areas in the countryHowever, the industry's increasingly fierce competition, characterized by price wars and homogenization, has posed significant challengesTo navigate this tumultuous landscape and achieve sustainable growth, companies realize that they must embrace mergers and acquisitions, move toward higher-end markets, and offer comprehensive solutions.

The trend of merger and acquisition (M&A) in the MCU and analog chip sector has become evidentSince the second half of 2022, multiple factors have influenced a slowdown in global economic growth, drastically altering the supply and demand dynamics of the semiconductor industryFollowing a period of shortage, the industry has transitioned into one of surplus, with many firms facing reduced ordersThis situation has been compounded by tighter financing conditions in the capital markets, further straining the resources of many small to medium-sized analog IC manufacturersThe closure of the IPO window has made fundraising efforts even more challengingIn stark contrast, well-capitalized public companies have found themselves in an unprecedented M&A boom, seizing the opportunity to expand their market presence and consolidate technical advantages through acquisitions.

The integration of MCUs and analog chips showcases a growing trend within the analog IC sectorIn November 2024, a notable deal transpired when Gigadevice Technology, a storage and MCU manufacturer, announced plans to acquire a 70% stake in Suzhou Saisint for 581 million yuanBy December 18, the transfer had been completed, with Gigadevice securing 38.07% of the shares as the largest buyerGigadevice emphasized that recognizing the market dynamics led them to pursue this acquisition, as relying solely on their existing team for analog chip projects would be insufficient for establishing a robust foothold in the industry.

Moreover, Suzhou Saisint is considered an attractive target due to its previous unsuccessful IPO attempt, which once valued the company at 2.2 billion yuan

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They maintained a reasonable revenue stream, with first quarter earnings in 2024 reaching 134 million yuanTheir product offerings include lithium battery protection chips and power management chips, extensively used in portable power supplies and smart wearables, earning respect and recognition from major clients such as Xiaomi, OPPO, vivo, and HonorThus, Gigadevice's acquisition at a valuation of 300 million yuan has proven to be a strategic investment that enhances their analog product capabilities.

In a similar vein, on January 12, 2025, Nankai Technology declared intentions to acquire 100% of the MCU company Fengsheng Micro for 160 million yuanNankai, focused on power and battery management solutions, already offers a breadth of products ranging from charging management chips to DC-DC convertersFengsheng Micro, on the other hand, stands out in the industry as it boasts both power management circuitry and embedded MCU design capabilitiesTheir primary products, including Power-MCU, RISC-V MCU, and PMIC (power management integrated circuit), have found success within consumer electronics and automotive applications, with clients such as Xiaomi and Anker driving their business.

Nankai Technology has demonstrated impressive financial performance, indicating its promise for continued expansionFrom 1 billion yuan in revenue in 2019 to 17.8 billion yuan in 2023, they've displayed substantial growthThis trajectory has facilitated their recent success in the Science and Technology Innovation Board, illustrating the effectiveness of acquisition strategies for industry amplification.

In addition to direct M&A approaches, collaborations between companies also represent a significant trend in China's MCU and analog chip landscapeIn November 2023, the analog manufacturer Naxin Micro teamed up with MCU company Xinxian Semiconductor to launch a new MCU product tailored for the mid-tier market, aiming to compete with Texas Instruments' C2000. Naxin Micro has carved out a niche in the sensor and power management space, especially within the automotive electronics sector.

This collaboration exemplifies effective technical integration and reflects shifts in the competitive landscape of the industry

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By joining forces, Chinese firms can not only overcome traditional technical barriers but also share resources within confined market spaces, fostering quicker market penetration.

The trends observed through the activities of Gigadevice, Nankai, and the collaboration between Naxin and Xinxian indicate that China’s semiconductor sector is on the cusp of a new phasePresently, the global analog chip market is dominated by several key players—Texas Instruments, ADI, Sigma Design, Infineon, and STMicroelectronics—who together account for approximately 52% of the market shareGiven this concentration, domestic opportunities for growth remain vast.

Understanding why MCUs and analog chips must develop in tandem involves examining the practices of leading international firmsMajor players typically offer a broad spectrum of products, encompassing MCUs, DSPs, signal chains, and power management chipsThis comprehensive product line enables these companies to deliver holistic solutions for increasingly complex application scenarios.

To illustrate this concept, consider a system analogous to the human body, where the MCU functions as the "brain," handling data processing and issuing control commandsActing as the core of the system, the MCU is responsible for crucial tasks, including calculations, decision-making, and data transferMeanwhile, the analog chips can be likened to the body’s “arms and legs,” facilitating specific tasks such as signal processing and physical interactionsThese chips are further categorized into power management and signal chain chips, responsible for voltage regulation, power conversion, and signal acquisition and processing.

The division of labor between these components is clear yet interdependentFor instance, MCUs must manage power supply stability by controlling power management chipsThis dynamic is particularly critical across various sectors like electric vehicles, smart homes, and the Internet of Things, where seamless collaboration between the MCU and analog chips is imperative for optimal performance and stability.

Although a few Chinese firms boast both MCU and analog chip manufacturing capabilities, prominent players include Gigadevice, Nankai, and Naxin

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Additionally, the company Zhongying Electronics has made strides in both MCU and lithium battery management chips, establishing itself as a domestic market leader and gradually shifting focus towards power management chips and AMOLED display driver integration.

The rapid advancement in smart home technologies, IoT solutions, and automotive electronics has led to increasingly intertwined applications for MCUs and analog chipsConsequently, adaptive collaboration between these technologies has become essentialModern MCUs not only feature heightened frequency and computational power but must also interact effectively with external sensors and systemsMeanwhile, the analog chips provide the necessary flexibility for signal modulation, ensuring efficient operation across various applications.

As the CTO of Naxin Micro, Sheng Yun stated during a conference last year, "Without MCUs, it’s difficult to engage with clients on the development of next-generation applicationsAll technological advancements hinge on the control core.” This observation highlights the imperative of merging MCU capabilities with industry applications to create an evolutionary, competitive ecosystem tailored to customer needs.

The ongoing trend of acquisitions and strategic partnerships among MCU and analog manufacturers serves not only capital market demand but is also a reflection of essential technological evolutionObserving the success of established firms like TI and ADI, it’s clear that the synergy of closely integrated product lines can yield substantial market potential and bolster competitivenessUnder the influence of policies promoting merger integrations, the future may herald a wave of consolidations within the MCU and analog chip sectors, dismantling existing technical barriers and enhancing product competitiveness.

As we conclude, while the collaborative growth of MCUs and analog chips is an idealistic trajectory, effectively integrating these technologies within companies can be challenging

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