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Semiconductor analyst: Diversification was key for Qualcomm acquiring NXP

Analyst: Texas Instruments may participate in next M&A

If Qualcomm was thinking about entering into other sectors outside of mobile, then purchasing NXP Semiconductors is a smart move, Christopher Caso, a senior semiconductor analyst for CLSA, says.

"Diversification is a big factor," Caso told CNBC's "Power Lunch" on Thursday. "It gives them less exposure to mobile, more exposure to other sectors, such as automotive where NXP is very big."

Qualcomm announced Thursday that it would be acquiring NXP, another chip-maker, for roughly $38 billion, making the acquisition the biggest chip deal in history. The market responded positively to the news, with both companies' shares trading higher on the day of the announcement.

While the diversification reason was an important aspect to motivate the acquisition, Caso explains that "there's also a big financial aspect too. And that's why we've seen so many M&A's [mergers and acquisitions] in the semiconductor space so far and across the whole market. Right now, cash is cheap and companies like Qualcomm have a lot of cash overseas they can use for activities such as this."

Since 2015, there have been $200 billion worth of chip deals. When asked which company may be next in these deals, Caso answered that almost anybody in the mid-cap space could be a potential candidate, but he targeted one huge semiconductor manufacturer in particular.

"With respect to acquirers, I want to point out that Texas Instruments has been probably the one large company that hasn't done a deal yet," Caso said. "And maybe as more things [like M&A's] go on, TI's going to take a look and say perhaps they need to participate."

Caso couldn't single out a specific company if TI was to theoretically acquire another chip-maker, acknowledging the numerous companies currently occupying the mid-cap analog space. However, Caso mentioned companies such as Xilinx, which is not particularly in the analog space, could be potential contenders as well.

"Xilinx is one of the names that has been mentioned because their competitor, Altera, was taken out by Intel," Caso said. "So certainly they're on that list."