Merrill Lynch believes that Carle is PHILPS semiconductor buyers

Well-known U.S. investment bank Merrill Lynch (Merrill Lynch), Carle (Freescale Semiconductor, Freescale Semiconductor) should be suitable for buyers of PHILPS semiconductors. Merrill Lynch semiconductor market analyst published a research report said that PHILPS is inclined to sell its semiconductor sector, while Carle is a potential buyer. The report said the combination of PHILPS semiconductor and Freescale Carle will be very meaningful".

Merrill Lynch believes that although the fly think of Carle and PHILPS semiconductor business overlap in wireless and automotive field, but they can reinforce each other. In the wireless field, they have advantages in different areas; in the automotive sector, although the same customer, but the product is almost no overlap. The report notes that in the field of wireless, PHILPS can make the customer base of Carle think diverse, and make it close to the strength of Samsung and NOKIA.

Market analysts also pointed out that the fly think of Carle and PHILPS compatible in semiconductor manufacturing, mainly because of their manufacturing process unified them through cooperation study in France Crolles, but the two sides in recent years have taken a light FAB (fab-lite) strategy.

Merrill Lynch said that if the PHILPS semiconductor sale to fly think of Carle, will form the world's fourth largest chip companies - Intel, Samsung and TI ranked after. The new company is expected to reach $12 billion 100 million in sales in 2006.

One key point is that the cost of. Merrill Lynch said that the price of PHILPS semiconductor may be between $90-150 billion, while Carle is still in the spin off from Motorola after the merger.

Report pointed out: "there are cultural consistency problems. PHILPS's acquisition of VLSI at the end of 1990s when they found such problems. The turnover of key employees is a real risk, some of the merger event is due to the failure of this factor. Adjusting overlapping product lines is also a problem that could lead to painful and costly layoffs. We can see what kind of merger makes sense, but it must be admitted that it would be difficult for both PHILPS and Carle to succeed in such a large merger."

Although Merrill Lynch has said that PHILPS tend to sell its semiconductor division in 2006, but other research institutions believe that PHILPS may be inclined to let the semiconductor sector with a considerable scale of the merger, it will continue to hold a considerable number of equity in the new company merged in order to have decision-making particularly in Holland, then a few years may gradually equity holdings. PHILPS for wafer foundry TSMC (TSMC) has successfully applied this strategy.

This possibility report did not discuss, but simply involves other problems, including PHILPS semiconductor and STMicroelectronics, Infineon or Intel combination may think, the possibility of PHILPS semiconductor partners Infineon become larger than Intel. STMicroelectronics has said that its future does not depend on mergers and acquisitions.

In the report was published at the same time, fly think of Carle and STMicroelectronics announced plans through cross licensing agreement to IC car design activities together, and focus on PowerPC architecture. This makes things more complicated.

But, if it believes that PHILPS should view the semiconductor and fly Si Carle merger is correct, PHILPS semiconductor CEO Frans van Houten and PHILPS CEO Gerard Kleisterlee's remarks may be implied and comment on scale economy. As they say, PHILPS is pursuing a "scale"".