Engineering services has emerged as the fastest growing segment of the global services industry. Semiconductor industry has been witnessing a significant rise in Engineering and R&D (ER&D) spending over the last few years with IoT as the key revenue driver and increased focus on development of sensors with low physical footprint, low energy consumption, and high responsiveness. Everest Group estimates the semiconductor engineering global outsourcing industry to grow at an annual rate of 9.7%, reaching US$3 billion by 2020.

As service providers prepare to ride on this wave of growth, they are making significant investments in building internal assets, expanding delivery capability, and upskilling their talent. Some service providers are also following the inorganic route to gain market share, acquiring companies to enter new markets and/or gain niche capabilities.

One such example is the recently announced acquisition of Belgium-based fabless and analog Application-Specific Integrated Circuits (ASICs) design services firm, AnSem N.V., by India-based engineering services provider, Cyient, for a total enterprise value of US$17 million. This acquisition stands out in the market, in terms of market focus and overall strategy shift from services to solutions perspective. It also portends an impending consolidation wave.

This Viewpoint discusses the details of the acquisition and the key factors that make this a favorable bet for Cyient, as well as implications that the acquisition will have on the broader market, both enterprise buyers and service providers.

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