Summary of Key Points
International power semiconductor leader ON Semiconductor plans to acquire edge computing chip manufacturer Synaptics for $7 billion in a all-stock deal, marking its largest acquisition to date. The goal is to enter the field of "physical AI" – where AI moves from the cloud to physical devices such as cars and robots. Synaptics, a seasoned touch chip provider, has already transitioned to edge AI and serves customers in industries like automotive and robotics. Meanwhile, global chip giants including Qualcomm, GlobalFoundries, Intel, and SoftBank are collectively making strategic moves in physical AI through acquisitions, indicating a shift in the industry from a focus on mere computing power to the development of comprehensive end-to-end capabilities.
1. ON Semiconductor’s $7 Billion Acquisition: A Strategic Transition towards Physical AI
ON Semiconductor’s decision to acquire Synaptics is not impulsive but aimed at identifying the next growth opportunity. A year ago, it abandoned its attempt to buy Allegro (focusing on sensors). The choice of Synaptics is aimed at addressing its own weakness: while ON Semiconductor excels in power semiconductors (chips that supply energy to devices), physical AI requires a combination of "sensing, computing, and control" capabilities, which Synaptics possesses through its expertise in edge computing and AI algorithms.
After the acquisition, ON Semiconductor expects the potential market size (TAM) to increase by $30 billion to reach $243 billion by 2030. In other words, this deal will transform the company from a supplier of power chips into a full-stack provider that can enable cars and robots to function autonomously, significantly expanding its market scope.
2. Synaptics: From a Touch Chip Leader to a Player in Edge AI
Synaptics is no newcomer; it was the pioneer in touch chip technology, with its capacitive touch technology being used in the Apple iPod (2004) and Samsung smartphones (2007). However, it hasn’t rested on its laurels. In 2020, it shifted its focus to the Internet of Things and edge AI, gaining customers such as BMW, Volkswagen, BYD (in the automotive sector), and robotics manufacturers. Its AI solutions provide the necessary sensing and computing capabilities for these devices.
For ON Semiconductor, the value of Synaptics lies not only in its technology but also in its existing customer base. For example, BYD’s electric vehicles require intelligent cockpits and autonomous driving features, which can be readily implemented with Synaptics’ edge AI chips, allowing ON Semiconductor to enter these high-growth markets immediately.
3. Physical AI: The New Frontier of AI Moving from the Cloud to Physical Devices
What exactly is physical AI? Simply put, while most AI applications are cloud-based (such as ChatGPT, which requires an internet connection), physical AI enables devices like cars, robots, and industrial machinery to function autonomously. For instance, a self-driving car can detect obstacles and brake in real-time without waiting for commands from the cloud; a robot can avoid people automatically. The concept of "power supply, sensing, interconnected computing, and control coordination" mentioned by ON Semiconductor’s CEO is at the core of physical AI – devices need power (ON Semiconductor’s strength), the ability to sense their environment (provided by sensors), local computing capabilities (offered by Synaptics’ chips), and the ability to execute actions (such as controlling motors). All these components must work seamlessly for the device to function effectively.
4. Global Giants Investing in Physical AI
ON Semiconductor is not alone in this race; chip companies worldwide are investing heavily in physical AI:
- Qualcomm: Acquired Modular, an AI software company, to expand its offerings in robotics and industrial AI platforms, stating that "future intelligent updates will drive the evolution of edge devices."
- GlobalFoundries: Purchased New Silicon’s ARC processor IP to offer a complete physical AI solution (from chip design to software).
- Intel Mobileye: Invested $900 million in Mentee Robotics to expand into humanoid robotics.
- SoftBank: Bought ABB’s robotics division for $5.37 billion to deepen its presence in the robotics sector.
These moves indicate that physical AI is the key to the next round of growth. The company that successfully integrates "sensing, computing, and control" capabilities will gain a competitive advantage in industries like automotive and robotics.
5. Industry Trend: From Competing on Computing Power to Competing on Comprehensive End-to-End Capabilities
In the past, chip companies competed based on the power of their chips. Now, the focus has shifted to comprehensive end-to-end capabilities, covering everything from chip design to AI algorithms and application scenarios (such as autonomous driving and robotics control). For example, if a company only provides computing chips, customers still need to purchase additional sensors and software, which is inconvenient. However, by offering a "chip + software + solution" package, companies can attract more customers. This is why giants are acquiring other companies to fill their gaps and become "all-round players" in the field of physical AI.
In summary, physical AI represents the inevitable path for AI to be applied in the real world. ON Semiconductor’s acquisition and the actions of these giants are all part of this strategic investment in the future. For consumers, this means that cars, robots, and industrial equipment will become increasingly intelligent, and the competition among chip companies will evolve from a focus on technology to an emphasis on building complete ecosystems.