Japanese chip maker Renesas Electronics has agreed to buy rival US company Integrated Device Technology for $6.7bn (£5.1bn) as it seeks to bolster its portfolio of products for driverless cars.
Renesas will pay $49 a share for IDT, representing a 29pc premium to the California-based company's share price when talks were first disclosed late last month.
Masahiro Wakasugi, an analyst for Bloomberg Intelligence, said the price did seem a "little high".
However, he said there was "little overlap between their product portfolios, so it’s a strategically sound move for Renesas".
Renesas is the second largest auto-related chip maker, behind NXP Semiconductors, but it has been lacking on know-how in analog chips, which are used in things like sensors, turning sounds and sights into data.
“We were weak in chips for wireless networks needed for the Internet of things and connected cars. We’ve been wanting to get such assets," Renesas chief executive Bunsei Kure said.
“IDT has been focusing on products that have longer life spans, higher reliability and lower volatility. Even though we operate in different areas, our core strategies are very similar.”
The purchase is the latest in a wave of deals in the semiconductor industry, with Intel last year buying Israeli company Mobileye, which focuses on chips for camera systems, for $15bn.
Earlier this year Microchip Technology paid $10bn for Microsemi Corp, and Renesas itself bought another US company, Intersil, last year.
For the latest deal to go ahead, Renesas will need to gain approval from a number of regulators, including the Committee on Foreign Investment in the United States and antitrust authorities in China.
Last year, Chinese regulators were responsible for Qualcomm's takeover of NXP falling through, after they held up the deal for two years. Neither company was Chinese, but the country provides more than two-thirds of NXP's revenues.
Around 20pc of Renesas's revenue is from China, and the region is responsible for around 10pc of IDT's revenue.