onsemi buys Synaptics for $7 billion in physical AI push

Onsemi agreed to acquire Synaptics in a $7 billion all-stock deal, its largest acquisition, as the chipmaker pushes beyond power semiconductors into edge AI processing for robots and industrial systems.

"Together with onsemi, we will combine Synaptics' strengths in AI-native compute, connectivity, and human-machine interface with onsemi's leadership in intelligent power and sensing," said Rahul Patel, president and chief executive officer of Synaptics.

Synaptics shareholders will receive 1.35 onsemi shares for each share held, a 19 percent premium to the 10-day volume-weighted average price. The deal values Synaptics at roughly $7 billion and will leave its shareholders with about 12 percent of the combined company. Onsemi expects the transaction to add $30 billion to its addressable market, bringing the total to $243 billion by 2030.

The acquisition thrusts onsemi into direct competition with diversified chipmakers that already offer microcontrollers and system-on-chip processing — a capability onsemi has lacked. Onsemi shares fell more than 25 percent after the announcement, erasing billions in market value, as investors weighed dilution and execution risk against the long-term physical AI opportunity.

Wall Street Split on Deal's Merits

TD Cowen analyst Joshua Buchalter downgraded onsemi from Buy to Hold with a $110 price target, arguing the deal adds complexity to an already complicated model. "We think the deal adds complexity to an already complicated model reliant on loadings to drive EPS," Buchalter wrote. Onsemi shares trade at roughly 25 times estimated 2027 earnings, he noted.

Deutsche Bank's Ross Seymore took a different view on Synaptics, downgrading the stock to Hold from Buy with a $125 price target. Seymore said the firm views "the strategic rationale of the deal favorably, particularly its potential to create a leader in 'Physical AI' and expand into key automotive and industrial markets," but that the 19 percent premium largely captures the near-term upside.

Shareholder Lawsuit Adds Uncertainty

Kahn Swick & Foti, a law firm led by former Louisiana Attorney General Charles C. Foti Jr., has opened an investigation into whether the consideration offered to Synaptics shareholders is adequate. The probe, announced July 1, adds a layer of legal risk to a deal already facing skepticism from some onsemi investors.

Onsemi expects the transaction to close by mid-2027, subject to regulatory approvals and shareholder votes from both companies. The combined entity will target what Chief Executive Officer Hassane El-Khoury called the four pillars of physical AI: power, sensing, connected compute and control. "This shift towards Physical AI will require Power, Sense, Connected Compute and Control to work together seamlessly," El-Khoury said.

The deal's success hinges on whether onsemi can integrate Synaptics' edge AI processors — which target niche embedded applications — into its automotive and industrial power business without losing focus on its core growth story. Onsemi has guided for $200 million in annual cost synergies from the combination.

This article is for informational purposes only and does not constitute investment advice.