Car chip market faces major changes? Leading car CIS giant ON.US aims to swallow sensor leader Allegro(ALGM.US).

According to media reports citing informed sources on Sunday, Allegro Microsystems, a sensor integrated circuit supplier specializing in the automotive and industrial sectors, is attracting acquisition interest from its industry giant, ON Semiconductor Corporation. The reports stated that ON Semiconductor Corporation has recently hired a professional advisory team to advance the acquisition process of Allegro, and sources indicated that there may be other potential bidders emerging, while Allegro has not indicated whether it is willing to accept ON Semiconductor Corporation's potential acquisition offer. The media reports suggested that any semiconductor companies seeking to strengthen their automotive chip business may consider acquiring Allegro. Analog Devices responded to media comments by stating "no comments on market rumors," while Allegro did not immediately respond. According to LSEG data, Allegro's current market value is $4.11 billion, while Analog Devices' market value has reached $19.83 billion. Allegro, headquartered in Manchester, New Hampshire, announced on Monday the appointment of Mike Doogue as the new President and CEO, replacing Vineet Nargolwala. ON Semiconductor Corporation disclosed last Tuesday the initiation of a cost-cutting restructuring plan, expecting to reduce approximately 2,400 employees globally by 2025. This Arizona-based semiconductor company previously warned in February that first-quarter revenue and earnings per share would be significantly lower than Wall Street expectations, mainly due to ongoing soft global demand for automotive chips. In-car CMOS image sensors (CIS) and power semiconductors are the two main revenue pillars of ON Semiconductor Corporation. In the automotive chip sector, ON Semiconductor Corporation focuses primarily on the in-car CIS segment. According to research institutions, ON Semiconductor Corporation holds a leading position in the entire automotive CIS market, with a market share of up to 50%, and even higher market share in the CIS segment for electric vehicle advanced driver assistance systems (ADAS), reaching an impressive 68%. The business of ON Semiconductor Corporation also covers power management, analog and mixed-signal, sensors, industrial manufacturing, and consumer electronics. Allegro, on the other hand, mainly focuses on designing and manufacturing magnetic sensors and their related integrated circuits, especially well-known for their Hall effect sensors. These IC products are widely used in automotive applications (such as motor control, current detection, and position sensing), industrial control, and consumer electronics. From a market and technology perspective, if ON Semiconductor Corporation successfully acquires Allegro, they can further expand their sensor product line, especially in the demand for magnetic sensors and motor control systems in automotive applications. The products of both companies complement each other in technology and applications, and the integration can provide a more complete automotive hardware solution. Additionally, the integrated chip development technology and manufacturing resources are expected to lower research and production costs, strengthen supply chain integration, and enhance overall profitability. This potential strategic move by ON Semiconductor Corporation aligns with the current trend of accelerated integration and expansion in the semiconductor industry, particularly in high-growth markets such as the electric vehicle smart driving market that Analog Devices is betting on, to counter challenges from NXP Semiconductors NV, STMicroelectronics NV ADR RegS, and other leading companies in the automotive chip sector.