The effects of consolidation

Unlike well-publicized mergers and acquisitions in businesses such as pharmaceutical, food and accounting, consolidation in the machine vision industry is less frequent. One of the main reasons is that the size of the companies involved are often smaller, privately held corporations where the employees have developed specialized products for a specific market.

Consolidation between larger semiconductor imaging corporations, however, has become prevalent over the past five years. During this period, ON Semiconductor, for example, has acquired both the assets and talents of rival image sensor manufacturers Cypress Semiconductor, Truesense Imaging and Aptina. For the employees of these companies, change will no doubt be underway.

With such consolidations, major corporations become more profitable by eliminating redundancies in administration costs, sales and marketing, manufacturing and research and development. Such mergers and acquisitions also allow large corporations to increase their customer base dramatically.

While such mergers may seem beneficial from a financial perspective, the companies that acquire their rivals must be aware of emerging consequences. Cultural differences between large corporations and smaller companies may cause friction between acquired employees that may be uncomfortable with newly imposed rules and regulations. And, for those involved with research and development, the effect of new austerity measures may be dramatic on product development.

Engineers involved in projects currently underway, for example, may be re-assigned to "more profitable" projects. With such re-assignments, hundreds of thousands of dollars of research and development may be shelved for years. Needless to say, this may diminish the enthusiasm and morale of any engineer involved since start-up companies are often those that attract the best engineers by offering them the opportunity to build innovative products. No wonder then, that many such acquisitions and mergers lead to the best and the brightest deciding to leave and form their own companies.

For those incorporating OEM vision components into their products, the effects may be even more significant. Unless carefully managed, such mergers may result in market uncertainty, leaving third-party developers looking for alternative sources for their components. With continued acquisitions in the image sensor market, however, one is left wondering how many major suppliers will be left in the next five years.