Tech Mahindra To Acquire a Semiconductor Engineering Firm
Tech Mahindra made a surprise move in semiconductor engineering services. The company is to acquire Cerium Systems, a Bangalore-based semiconductor design and embedded systems specialist. Cerium has a headcount of 840 and revenues of ~USD 15m in FY19 (ending March 31, 2019).
The move is a surprise, as in the past year, Tech Mahindra seemed focused on growing its digital agency presence in the US. The recent BORN acquisition brought digital marketing skills and a significant presence in the US, with 1,100 employees.
Tech Mahindra does have a track record in buying ER&D-related firms: Pininfarina comes to mind, bringing vehicle design and style capabilities, and LLC, back in 2015, for mobile sites and network design and engineering.
There has been an acceleration of M&As in the semiconductor engineering space, with HCL Tech, Alten, LTTS and Cyient all making acquisitions in the past two years. The acquired firms were specialized in semiconductor, headquartered in Bangalore (apart from AnSem) and with headcounts below 1,000.
The acquisitions were all counter-cyclical and occurring at a moment when he semiconductor industry hit by the China-US trade war, and even more so by stagnating to declining sales of smartphones and cars. Yet, the semiconductor is set to rebound thanks to 5G driving smartphone sales and by cloud computing vendors expanding at high growth.
Tech Mahindra’s acquisition of Cerium, therefore, comes at the right time and is strategic. The increased usage of chips and embedded systems in products is a long-term trend, and semiconductor engineering skills will be a key capability.
Table 1: Semiconductor ER&D Acquisitions