June 16, 2011 / 7:30 PM / 8 years ago

Niche chipmaker eyes M&A to gain analog talent

SAN FRANCISCO (Reuters) - Niche chipmaker Inphi, fresh from its IPO last year, is eyeing small acquisitions to gain talented analog engineers, underscoring growing demand for their specialized skills.

Chief Executive Young Sohn told Reuters he reviews possible targets on a weekly basis to increase the Santa Clara, California-based company’s lineup of chip designers.

“It’s very difficult to assemble 100 high-speed analog experts in one place,” Sohn said in an interview on Thursday. “I can find a digital chip team overnight but an analog team is specialized.”

Analog chips translate real-world phenomena like sound, temperature and light into the ones and zeros that make up digital computer language. They are also vital for managing electrical power in devices.

Inphi makes high-speed analog semiconductors used to remove bottlenecks of data in routers, data centers, undersea cables and military drone aircraft. Its customers include Samsung, Cisco and Huawei.

Designing analog chips was sidelined at universities in the 1980s and 1990s as demand for logic chips, which process ones and zeros, exploded with rise of personal computers.

With more recent growth of smartphones and other mobile gadgets packed with real-world sensors like cameras and microphones, and batteries that need to be carefully controlled, analog chipmakers are back in vogue.

Inphi’s initial public offer last November made millionaires of a fifth of its employees and left the company with $120 million in cash, which Sohn said could be used to purchase companies with specialized engineering teams.

Inphi, with a market capitalization of under half a billion dollars, is also prepared to sell more shares to fund possible large acquisition opportunities, he said.

Last April, Texas Instruments said it would buy National Semiconductor, one of Silicon Valley’s oldest companies, for $6.5 billion to increase its share of the $42 billion analog chip market.

That sparked speculation of further consolidation in the analog semiconductor industry, where engineers with soldering irons make many of their breakthroughs by tinkering and by trial and error.

“Finding good analog engineers is really hard because it’s not a skill you learn quickly,” Sohn said. “A lot of it is black magic ... They just know it intuitively.”

Reporting by Noel Randewich, editing by Bernard Orr

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