Ernie Ruehl, managing director at Credit Suisse has said that when it comes to chips everything favours suppliers with the most capability.

Credit Suisse advised NXP Semiconductors on its deal with Freescale Semiconductor, which kicked off the current wave of chip mergers in March, and was one of the advisers to Avago Technologies in its $37 billion deal for Broadcom last week.

Part of the problem is chip design which costs $200 million and you need to make five times that to get a decent return.

It is a certain type of chipmaker which will make the dosh too – those who create analog and mixed-signal chips are in demand

Maxim, Linear Technology, Intersil, Silicon Laboratories, Analog Devices and M/A-COM Technology could be targets for further buyouts or consolidation.

Microcontrollers which are heading for car engines or implanted medical devices are also hot items and these are being made by Atmel and Renesas.

Intel and Qualcomm are almost certainly going to have to buy these companies to make sure that they are not locked out.

As a result, valuations are growing, but not out of line with technology in general. Some times this is getting daft. Nvidia is trading at 24 times estimated profit for the next 12 months because it is rumoured that one of the big chip names will have to buy it. Also named as potential buy out targets , Xilinx, Analog Devices and Marvell Technology Group are trading at around 21 times.

It is not stopping the writing of cheques. Intel is offering about 35 times expected earnings for Altera.

Analog chip maker Exar is "looking at strategic options" and Cypress Semiconductor has made an offer for Integrated Silicon Solution. The chief executive officer of Lattice Semiconductor Corp told Reuters this week he was open to a sale, but only for a lot of dosh,.