onsemi is buying Synaptics in an all-stock deal worth about $7bn. The onsemi Synaptics deal bets that AI’s next wave lives not in the cloud, but in cars, factories and robots.

The chip industry has spent three years building for AI that runs in giant data centres. Onsemi just placed a bet on the opposite idea. The American chipmaker has agreed to buy Synaptics, a specialist in chips for smart devices. The all-stock deal values the target at about $6.2bn.

Including debt, it carries a total enterprise value of roughly $7bn. The two companies set out the terms in a joint statement. Both boards approved it unanimously. It should close in mid-2027, subject to a Synaptics shareholder vote and regulatory clearances.

The logic comes down to a phrase onsemi keeps repeating: physical AI. Chief executive Hassane El-Khoury frames it as a way to put intelligence into the machines around us. The target is the device, not the data hall.

The 💜 of EU tech

The latest rumblings from the EU tech scene, a story from our wise ol’ founder Boris, and some questionable AI art. It’s free, every week, in your inbox. Sign up now!

He said the next phase will depend on “systems that can sense, decide, act and adapt in real time.” The four pieces he wants under one roof: power, sense, connected compute, and control.

Two halves of a smart device

The fit is easier to grasp once you know what each side makes. Onsemi, based in Scottsdale, Arizona, builds power and sensing chips. Those are the parts that manage electricity and read the world in cars, factories and AI data centres. The company is strong in silicon that moves and measures, weaker in silicon that thinks.

Synaptics fills that gap. The San Jose firm makes the chips behind touchscreens, fingerprint sensors and wireless links. Its Astra platform pairs purpose-built AI processors and NPUs with Wi-Fi, Bluetooth and GPS, plus an open-source software stack. Onsemi gains what it calls “connected compute” to sit alongside its power and sensing lines. For onsemi, the real prize is content. Software and embedded IP let it earn more on each platform, at better margins. Those are the higher-value systems it has chased for years.

Synaptics chief executive Rahul Patel cast the tie-up as a growth move for his side too. The combination spans “every layer of the Edge AI stack,” he said. The all-stock structure lets his shareholders share in the upside.

The terms

Synaptics holders will receive 1.350 onsemi shares for each share they own. That works out as a roughly 19% premium to the average price of both stocks over the previous 10 trading days. It leaves them with about 12% of the combined company. One Synaptics director will join onsemi’s board.

Onsemi expects the purchase to lift adjusted earnings within 18 months of closing, helped by about $200m in annual savings. It also reckons the deal widens its addressable market by $30bn, to $243bn by 2030. Both companies repeated their existing financial forecasts alongside the news.

Onsemi framed the rationale in familiar deal language: complementary portfolios, deeper customer ties, and a richer mix of system-level products. Morgan Stanley led its advisers, with J.P. Morgan and Skadden also acting. Qatalyst and Baker McKenzie advised Synaptics.

The catch

Investors did not buy in straight away. Onsemi shares fell 8.2% in extended trading after the announcement. Synaptics, the company being acquired at a premium, climbed 12%. That split is the market asking whether onsemi is paying up for growth it has yet to prove.

History feeds the doubt. A year ago onsemi walked away from a $6.9bn attempt to buy Allegro MicroSystems, saying it saw “no actionable path forward.” A second large deal in quick succession invites an obvious question. Does this one land where the last one did not?

The savings carry a human cost, too. El-Khoury told Bloomberg the merger would bring job cuts, “most of it” in operating expenses. The company will try to protect research and development. Plaintiff law firms have begun circling, as they do with most big public deals. Ademi LLP said it is investigating whether Synaptics is getting a fair price for shareholders.

Why everyone is chasing the edge

Onsemi is not alone in betting that AI’s centre of gravity is shifting. Models are spreading from the data centre into autonomous driving, robotics and wearables. As they do, value moves to chips that run intelligence cheaply and locally. That is the “edge,” and it has filled up fast.

The scramble is redrawing who owns what. Intel and Qualcomm have circled smaller chip designers rather than build rival architectures from scratch. Startups are pitching cheaper silicon for AI work. Buying a ready-made edge platform, as onsemi is doing, is the fast way in.

A long road to closing

The deal is a long way from done. A mid-2027 close means well over a year of regulatory review and integration risk. The chip cycle can shift sharply in that time. Onsemi has kept its options open, too. With an all-stock deal, El-Khoury noted, it keeps “full flexibility on the balance sheet” for more acquisitions.

The wager is simple to state and hard to win. Onsemi is betting that the next decade of AI plays out in the physical world. It is betting that owning both the muscle and some of the brains of a smart device is worth $7bn. Whether buyers agree is a question the next two years will answer.