NEW YORK (CNNMoney) -- Shares of chipmaking companies soared on Tuesday following Texas Instruments' late Monday $6.5 billion bid for rival National Semiconductor.
Both companies make analog chips, which are used to help computers sense the world around them.
National Semiconductor (NSM) led the pack, gaining more than 70% in early trading, but other analog chipmakers also rose significantly: Intersil (ISIL) climbed 13%, ON Semiconductor (ONNN) rose 5%, and Fairchild Semiconductor (FCS) gained 3%
The deal would give Texas Instruments (TXN, Fortune 500), already the world's largest analog chipmaker, an even more sizable lead over its competition. The combined company would control 18% of the market, with the next largest rivals holding a 4% to 6% share.
As a result, analysts anticipate more deals in that segment of the chip market
"We do believe that more consolidation is possible in the analog space given the fragmented and diffuse nature of that market, and given that TI is so much larger than its next few competitors," said Craig Berger, analyst at FBR Capital Markets.
TI could buy up more analog chipmakers, or smaller competitors could merge for scale and efficiencies, analysts say. Shares of TI fell more than 2%.
Berger sees Fairchild Semiconductor and International Rectifier as the most attractive takeover targets. Both have high exposure to the industrial and automotive sectors, and their share prices are relatively cheap compared to their earnings expectations.
Chip stocks got knocked around in the past two days, after IHS iSuppli reported that semiconductor suppliers' string of six consecutive quarters of sequential sales growth ended in the fourth quarter of 2010.
Big Oil is handing out more pink slips as it grapples with a world of cheap oil. More
Carriers, Apple and phone recyclers are fighting to give you the best iPhone trade-in deal. More
Here's what you need to earn to afford a home in the 27 biggest metro areas in the country, according to HSH.com. More