German chipmaker Infineon will buy San Jose, California-based Cypress Semiconductor for €9 billion (£7.9 billion) in cash under a deal agreed Sunday that is expected to yield €180 million in cost synergies yearly within three years – and allow Infineon to further diversify its range of silicon products.

The acquisition will bear particular fruit in the automotive sector where access to Cypress Semiconductor’s portfolio of microcontrollers and NOR flash memories will offer “great potential” amid growth in demand from advanced driver assistance systems and new electronic architectures.

Based on 2018 revenues of €10 billion, the transaction will make Infineon the number eight chip manufacturer in the world. Infineon will now also become the number one supplier of chips to the automotive market.

Economies of scale and growth opportunities as a result of the deal will further generate over €1.5 billion annual revenue synergies in the long-term, Infineon said. The deal is being fully underwritten by a consortium of banks including Credit Suisse, J.P. Morgan, and Bank of America Merrill Lynch.

The deal also gives Neubiberg-based Infineon access to a strong US R&D team and both US and Japanese distribution infrastructure.

Cypress Semiconductor CEO: Team “Excited”

“Cypress has a differentiated portfolio of microcontrollers as well as software and connectivity components that are highly complementary to Infineon’s leading power semiconductors, sensors and security solutions”, Infineon said, adding that the two’s combination of portfolios will “accelerate entry” into industrial and consumer IoT.

Reinhard Ploss, CEO of Infineon, said: “The planned acquisition of Cypress is a landmark step in Infineon’s strategic development.”

“We will be able to offer our customers the most comprehensive portfolio for linking the real with the digital world. This will open up additional growth potential in the automotive, industrial and Internet of Things sectors.”

Hassane El-Khoury, President and CEO of Cypress, said: “The Cypress team is excited to join forces with Infineon to capitalize on the multi-billion dollar opportunities from the massive rise in connectivity and computing requirements of the next technology waves… Jointly, we will enable more secure, seamless connections, and provide more complete hardware and software sets to strengthen our customers’ products and technologies in their end markets.

Neubiberg-headquartered Infineon offers semiconductors and system solutions for automotive and industrial electronics, chip card and security applications as well as applications in communications. Cypress Semiconductor provides a range f programmable system-on-chip (PSoC) products, capacitive sensing and touchscreen solutions, universal serial bus (USB) controllers, wirelessUSB, CyFi low-power radio frequency, programmable clocks, and buffers.

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