April 19, 2024

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[THE INVESTOR] US fingerprint and display chipmaker Synaptics -- currently struggling to offset Apple and Samsung Electronics' supply cuts -- is hoping to create some new momentum with the acquisition of Conexant Systems, a semiconductor firm that provides the technology for Amazon’s voice assistant Alexa, industry sources said on April 7.

California-based Conexant is owned by billionaire investor George Soros’s QP SFM Capital Holdings. Its main product is the video and audio processing chip. For Alexa, one of the market’s leading AI assistant systems, the company supplies far-field voice recognition technology. Conexant is expected to cost Synaptics up to US$300 million, a price based on 15 times forward earnings estimates.

“Talks are still ongoing and will conclude soon in two to three weeks,” an industry source briefed on the matter told The Investor on the condition of anonymity. 

Synaptics CEO Rick Bergman

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Synaptics CEO Rick Bergman has reportedly been seeking a breakthrough with a possible tie-up with Conexant, the source added, noting that he has been under mounting pressure to restore the firm’s falling stock price. Synaptics’s share price has more than halved over the past year to be closed at US$48 on April 6.

The deal also could be a game changer for Synaptics, which is trying to come to terms with the reduced supply orders from top-tier smartphone makers Apple and Samsung for products such as the fingerprint sensor and display driver integrated circuit.

Synaptics was in the limelight after it beat Apple in acquiring Renesas SP Drivers, a Japan-based DDIC producer for liquid-crystal displays, for US$475 million in 2014. Much was expected from this deal since Renasas was then the sole supplier for Apple’s iPhones. But as of 2015, Apple has been diversifying its chip suppliers. And to further reduce its reliance on LCD displays, Apple is now planning to adopt OLED screens for some of its devices this year with aims to fully adopt them from 2018. 

Synaptics’ profits from fingerprint sensors has also been slowing in recent years as Samsung, one of its key clients, has started to use its own fingerprint sensors for the latest flagship Galaxy S8, in addition to securing chips from other chipmakers including Taiwan’s Egis Technology for the mid-range Galaxy A. 

Synaptics’ operating profit in the second half of 2015 stood at US$34.4 million, down from US$79.1 million on-year. Conexant’s audio chip business that made up almost 50 percent of the company’s total US$104 million revenue in 2016 has almost doubled over the past year, largely driven by supply deals with Amazon, Hewlett-Packard and other global set makers.

By Kim Young-won (wone0102@heraldcorp.com)