Private Equity (PE) has mostly avoided the semiconductor industry for years, but a perfect storm of supply and demand trends plus government intervention has created an environment that better aligns to PE investors’ requirements. With hundreds of billions of dollars of funds available, the time is now for PE funds to explore opportunities to take advantage these shifting demand and supply dynamics.
- Growth drivers for the next 20 years in the industry will be different than those of the last 30 years, with Automotive and Industrial segments leading the way. These end markets have more stable demand patterns and less reliance on leading edge investment.
- The pandemic highlighted the risk of having such intense supply chain concentration in a few markets in Asia. The Ukraine War has further escalated concerns over having secure supply chains and domestic capabilities that align with Western needs.
- The CHIPS Act was passed to incentivize more investment in U.S. based manufacturing capabilities and will create a number of opportunities across the value chain from suppliers to semiconductor makers to distributors and customers.
- These recent events create a major opportunity for PE firms to take a fresh look at semiconductor companies and for semiconductor companies to think of PE firms as key strategic capital partners or potential buyers of businesses that no longer fit into core strategies.
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