It may have been a bust for many industries, but 2020 was a boon for semiconductor mergers and acquisitions. Analog Devices announced a $21 billion deal to acquire Maxim Integrated products. Marvell Technology is buying Inphi in a $10 billion stock-and-cash deal. AMD is purchasing Xilinx for $35 billion, and NVIDIA acquired Arm from SoftBank in a $40 billion deal.
According to NVIDIA CEO Jensen Huang:
Today, the Internet connects billions of people to giant cloud data centers. In the future, trillions of devices will be connected to millions of data centers, creating a new Internet of Things that is thousands of times bigger than today’s Internet of people.
Clearly, NVIDIA hears opportunity knocking. And by harnessing the power of technology integration, they are well positioned to expand their share-of-wallet amongst customers staring at an industry growth rate of 1,000x.
At the 2020 European Executive Forum event held by the Global Semiconductor Alliance, Lars Reger (EVP & CTO at NXP) discussed how his career has changed over the last 12 years from
being a component seller to the car industry into a systems partner. This change was driven by the acquisition of Freescale and changes within customer requirements.
The expressway to increased revenue with cross-selling
Cross-selling can be the quickest, most profitable way to drive increased revenue. Growth consulting firm MarketBridge defines cross-selling as
expanding customer wallet share through increased usage across a tech firm’s entire product portfolio. Furthermore, they calculate that with a 30% wallet share for a customer, account revenue can jump by as much as 17%, just by increasing account share 5%.
It costs more to acquire a new customer than to sell more to existing clients, so cross-selling is quickly becoming a strategic priority for the C-suite in many semiconductor companies. The problem is…it doesn’t always turn out as planned. A poll by McKinsey found that fewer than 20% of organizations involved in an M&A achieved their cross-selling goals.
Three ways to win at cross-selling
The difference between the winners and the losers comes down to both strategy and execution, honed by taking action across several domains:
- Understand your customers’ roadmap.
- Help drive design decisions they make early on.
- Incentivize your customers to buy a variety of products from you.
- Empower your distributors and internal sales teams to cross-sell.
- Provide the tools necessary to easily sell complementary products throughout the design process.
- Make cross-selling an executive-level mandate.
- Do everything possible to support the initiative.
- Put the right incentives in place internally and externally.
M&A activity in 2021 kicked off within the first 3 weeks of the year with Lumentum entering into a buyout deal with Coherent and Renesas acquiring Dialog Semiconductor. Supply is constrained and prices are going up. Improving your cross-selling can help improve sales this year and even more in the future once supplies open up.
Please do not hesitate to reach out to connect, I’d love to hear your thoughts on cross-selling and the ongoing M&As in the semiconductor industry.