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MediaTek gobbles up MStar, next stop CHINA

Taiwanese chip firms have their eyes on the prize

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Taiwanese chip giant MediaTek is set to snap up its smaller rival MStar after the two agreed a $3.8bn (£2.4bn) deal which they hope will boost their chances in the digital TV and smartphone market and create the world’s fourth largest chip design company.

Hsinchu-based MediaTek first plans to buy 40-48 per cent of MStar’s shares through a tender offer before proceeding with the full merger, set to close in early 2013.

MediaTek chairman, MK Tsai, said the deal would be seen as a “new milestone for the IC design industry”.

A canned statement continued:

Upon completion of the merger, the two companies will utilise their respective strengths and leverage their resources to hone in our focus on developing new products and next generation technologies. Facing intense worldwide competition and fast-changing market dynamics, we believe that the combined company will be in a strong position to compete and will further elevate MediaTek's global competitiveness.

Analyst reaction has generally been positive, with the consensus being that as both companies target the same two key markets a consolidation will help them compete better against their rivals.

Some estimates suggest the new company will have around three quarters of the global digital TV chip market, while MediaTek will be gunning for nearest rival Qualcomm when it comes to smartphones.

As part of its restructuring, the firm recently wound down its feature phone R&D teams and told them to focus on smartphones – an area the firm could dominate in if it targets the high growth low-end in countries such as China. ®

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