Chipmaker Skyworks Solutions Inc. has agreed to purchase smaller rival Qorvo Inc. to form a $22 billion business aimed at staying competitive in an increasingly intense semiconductor world.
The Irvine-based company said Oct. 28 it had agreed to form a “combined enterprise” with Qorvo of Greensboro, North Carolina, for radio frequency chips used in communications, smartphones, data transmission and wireless technology.
“With enhanced scale, a more diversified customer base and operational synergies, we can bring even greater innovation to our customers and sustainable value to our shareholders,” Skyworks Chief Executive Phil Brace said in a statement.
The acquisition will “strengthen our ability to meet growing customer demand across mobile and diversified broad markets.”
The companies are combining at a time when both firms have reported declining sales. The Skyworks share price has dropped by about half over the last four years and Qorvo shares are down approximately 40% in the same time period.
Both are also heavily reliant on Apple Inc., which accounts for about 65% of Skyworks’ revenue and 40% of Qorvo’s.
The combined entity creates a company with $7.7 billion in annual revenue and adjusted yearly profit of $2.1 billion. It will be immediately accretive to earnings and deliver $500 million in cost savings within two to three years of closing.
Brace will be CEO of the new entity, while Qorvo CEO Bob Bruggeworth will join the board of directors of the combined company.
“We are excited to leverage the combined strengths of our teams and product and technology portfolios to build on our capabilities in Mobile and significantly expand our presence in defense and aerospace, edge IoT, AI data center, automotive and other industries powered by secular growth trends,” Bruggeworth said.
Skyworks Shares Jump
The planned combination got generally positive reviews with some caveats from stock analysts who follow the Irvine-based company.
Shares in Skyworks jumped as much as 12% to $84.90 apiece in the trading session after the announcement. At press time, they traded at $80.26 with an $11.9 billion market cap (Nasdaq: SWKS). Qorvo (Nasdaq: QRVO) shares also climbed, rising 5.7% to $97.42 and a market cap of $9 billion.
Under the terms of the agreement, Qorvo shareholders will receive $32.50 in cash and 0.960 of a Skyworks common share for each Qorvo share held at the close of the transaction, which implies a combined enterprise value of approximately $22 billion, Skyworks said.
Skyworks plans to fund the transaction using a combination of cash on hand and additional financing. Skyworks has obtained debt financing commitments from Goldman Sachs Bank USA. The transaction is not subject to any financing conditions, the companies said. The combined company’s net leverage at closing is expected to be approximately 1.0x last-twelve-month adjusted EBITDA.
Skyworks said the deal is subject to the receipt of required regulatory approvals and is expected to close in early 2027. It also requires approval from both companies’ shareholders.
Upon closing, Skyworks shareholders will own 63% of the combined company, while Qorvo shareholders will own 37%.
Declining Sales
Qorvo reported fiscal 2025 sales declined about 1.4% to $3.7 billion. Analysts are predicting Qorvo’s sales will be flat this year at $3.7 billion and rise 4.1% to $3.9 billion in fiscal 2027.
In fiscal 2024, Skyworks’ sales dropped 12% to $4.2 billion; last week, it reported that fiscal 2025 sales fell to $4.1 billion. Analysts are expecting sales to decline another 9.7% to $3.2 billion in fiscal 2026.
Analysts have attributed the sales decline to Skyworks losing business with Apple to rivals such as Broadcom Inc.
Brace took over the top spot in February, replacing long-time CEO Liam Griffin. Brace said the company’s reliance on one customer is risky and that is why he’s focusing on non-mobile industries like wi-fi, automotive and data centers.
“That’s an area where there’s more value to be had,” CEO Brace told the Business Journal in a September interview.
The new venture is designed to create a global leader in high-performance radio frequency, analog and mixed-signal semiconductors, according to Skyworks.
The combined companies will have a market share of around 21% to 25% in the radio-frequency semiconductor market, trailing Broadcom and similar to Qualcomm Inc.
Skyworks boasts about 10,100 employees across 17 countries, with about 6,000 customers.
For Skyworks, Qatalyst Partners and Goldman Sachs & Co. LLC are serving as financial advisors while Skadden, Arps, Slate, Meagher & Flom LLP is the legal advisor.
For Qorvo, Centerview Partners LLC is serving as the exclusive financial advisor, and Davis Polk & Wardwell LLP is the legal advisor.
Skyworks Makes Significant Step, Risks Remain: Analysts
Stock analysts quickly weighed in on the Skyworks-Qorvo plans announced on Oct. 28.
“I do expect this is a significant step for both companies, if the deal can get by regulatory approval, particularly in China, which I am very skeptical of,” Cody Acree, an equity research analyst at the Benchmark Company, told the Business Journal on Oct. 28, hours after the deal was announced.
Acree added: “However, if passed, they still will be heavily dependent on Apple, with over 40% of QRVO revs from Apple and about 65% of SWKS. Combining their broad markets businesses with the addition of QRVO’s Aerospace and Defense business is a good step in the right direction, but just a step, not yet the finish line.”
Craig Ellis, a senior managing director and director of research at B. Riley Securities, gave the deal a positive, but restrained thumbs-up.
Ellis said in a note to clients there is “strategic logic to scale up in secularly growing defense/aerospace, auto, and AI infrastructure, and seek new solution opportunities in lower-growth mobile is sound.”
Various risks include “pricing pressure within the market” and overall economic conditions including consumer spending, according to Ellis.
