Texas Instrument and National Semiconductor announced their merger on Monday.

The semiconductor business is always a strange market to follow. The ups and downs of chips reflect the gambling idioms. You can be in the chips one day and your chips can be down the next.

In thinking about the last 20 years of chips pricing, I am thinking there were more lessons to be had for the housing crisis for the way the chip supply and demand has always been volatile.

In general, the semiconductor market has been consolidating at the top and innovating with many start-ups; 2009 was an abysmal year in the chips as orders slowed.

Today, the impact of the Japan’s triple disaster hurt many semiconductor businesses, including National Semiconductor.

Although ARMs have been getting a general boost thanks to wireless in general, recovery has been modest. It’s no wonder then that National Semiconductor could be acquired. 

The devil is always in the detail of merging companies and I have seen too many times where the merger of equals is dominated by bad strategies from both companies. 

However in this case, I think both companies have made a good choice. Here is why.

1)    National Semi needed TI sales. As the companies emphasize several times the TI sales force is 10x that of national semiconductor. The sales force is one aspect, but the bigger story is in the verticals. National semi has a very stable customer base, but alternatives exist and it’s safe to say that they were not recommended by TI in all their deals. 

2)    Now, in the portfolio of Texas Instruments (News - Alert), the National Semiconductor power management portfolio is coming at an appropriate time. Given the power crunch in Japan, the price of oil and general desire for alternative energy National Semiconductor is trust brand in power management and has some strong solutions in solar.

3)    National Semiconductor has some strong development tools that will probably integrate nicely into the general purpose of Texas Instruments development suites.

Overtime I expect the development software will be one more part of the M2M consolidation I keep ranting about. Texas Instruments has a long history of being involved in many M2M marketplaces- ones I know of particularly involve Asset Management and Telematics. The beauty of National Semiconductor’s power portfolio is that goes across all verticals. This will lead to some significant discussions for the sales team and I am sure they will find customers looking to reduce costs in power management. And that will mean more green in many ways.