As the terminal application market matures, the growth of the semiconductor market is likely to decline year by year. According to the Institute for Information Industry (MIC), the growth rate of the global semiconductor market in 2015 will be less than 3%, far lower than 10% in 2014. The annual growth rate of the semiconductor market in the next three years will also be difficult to improve, and may even begin to show negative growth.

According to MIC, the global semiconductor market will grow by less than 3% in 2015, far lower than 10% in 2014.

Under this trend, all major semiconductor manufacturers around the world are actively seeking new applications and new markets. At the same time, major manufacturers can also start to launch merger and acquisition strategies, on the one hand to expand market share and pursue economies of scale, and on the other hand to actively seek targets with complementary properties to develop emerging applications.

In the international M&A trend, the participation of the Chinese government has made the M&A activities in the semiconductor industry more active recently. In recent years, China has been trying to support the local semiconductor industry with national funds, and the fastest way is to acquire international manufacturers with technical IP. Under this logic, Jiangsu Changdian, a major packaging and testing manufacturer in China, has been supported by government funds to acquire Singapore's STATS ChipPAC to strengthen its technical capabilities in high-end packaging; Beijing and Shanghai have even acquired memory company ISSI through cooperation with local government investment funds; Tsinghua Unigroup once announced its intention to acquire memory giant Micron.

In the current M&A events of major semiconductor manufacturers, they can be summarized into two major strategies according to their M&A purposes. One is the extension of product and technology scope, and the other is the improvement of economies of scale. The former is mainly to respond to the business needs of multiple fields, especially under the trend of the Internet of Things, products need to be diversified and integrated, and the technology scope required by manufacturers is wider. The aforementioned M&A cases such as Quaclomm, NXP, and [**]vago are mostly strategic activities under such considerations. The latter is mainly focused on the expansion of business scale. With the slowdown of growth momentum in the semiconductor market, M&A is a shortcut to expand the scale of operations. At the same time, it can also reduce competitors, narrow the gap with the leaders or widen the leading advantage over the laggards. Observing the recent M&A cases in the semiconductor industry launched by mainland China, most of them hope to use their financial advantages to acquire market or technology leaders, thereby shortening the gap in scale and technology and leaping into the leading group in the shortest time.

From the above two categories of strategic models, we can find that under the development trend of emerging applications such as the Internet of Things and cloud computing, the development direction of semiconductor giants is "wide" and "large". The main reason is that the development of the Internet of Things and cloud computing has extended ICT technology from the original 3C applications to non-3C application fields, and at the same time, it must be highly integrated with other industries across domains. Whether in smart factories, smart transportation, smart campuses, smart wearables, smart buildings, etc., there are already situations where the ICT industry and other industries are combined. In this situation, on the one hand, deep professional knowledge in this specific field is required, and on the other hand, a wide range of ICT technologies are also required to support it. Therefore, the original horizontal division of labor in the ICT and semiconductor industry system is challenged, and cross-domain horizontal integration and upstream and downstream vertical integration have re-emerged. From the mergers and acquisitions of international giants, it is obvious that the giants are developing towards a wider range of technology, products and application layouts.

At present, semiconductor giants are impacted by the weakening market growth momentum on the one hand, and the development and payback period of emerging applications is too long on the other hand, which makes companies with insufficient capital unable to support long-term technology and application development. In particular, the development of semiconductor process technology has reached its limit recently, and the marginal benefits of R&D investment may begin to decrease, resulting in only a few giants having the ability to maintain long-term R&D in the future. Other companies will certainly start to choose strategic cooperation or mergers and acquisitions. The Chinese government, which has capital advantages, has therefore become an attractive potential partner. In the future, semiconductor application fields that require capital should be controlled by a few international giants and other companies with capital support.

From the recent merger and acquisition trend in the semiconductor industry, we can see that international giants are developing in two directions: broad and large. That is, the future semiconductor industry may need economies of scale and scope to dominate in emerging application fields. my country's semiconductor industry has internationally competitive giants in wafer foundry, packaging and testing, and IC design. If they can be effectively integrated, they will have an advantage in future competition. However, other semiconductor manufacturers that are not first-tier giants, in addition to actively seeking mergers or strategic cooperation partners, can they only be eliminated by the market?

In fact, this is not the case. Although many international companies are actively developing in the direction of both breadth and scale, the characteristics of emerging applications such as the Internet of Things have another aspect - precision. Future ICT applications will not only develop towards cross-domain integration, but also evolve towards vertical applications. This will benefit some companies with professional technology and integration capabilities in specific fields. Such companies may not have economies of scale and scope, but the key to their success lies in their professional technology and knowledge in that specific field. This is the so-called hidden champion or backbone enterprise.

In summary, facing the development of emerging applications such as the Internet of Things, semiconductor companies are expected to develop in three directions: broad, large and precise. For Taiwanese companies, choosing strategic partners, forming strategic alliances with economies of scale and scope, or selecting specific application areas, accumulating professional technology and experience in vertical applications, and becoming hidden champions in the field should be the three long-term strategic development directions.