Japan's Renesas Electronics is buying Integrated Device Technology of the U.S. for $6.7 billion, as it deepens a push into chips used in self-driving cars.
Renesas is second only to NXP Semiconductors in auto-related chips and commands 30 percent of the global market for microcontrollers used in cars, according to Reuters.
Renesas will pay $49 per share in cash for IDT's outstanding shares, a 16 percent premium to their closing price on Monday.
Renesas' stock climbed 4 percent higher in the Japanese market.
The company said it was considering buying IDT on August 31.
IDT generates just 11 percent of its revenue from automotive and industrial businesses.
The companies need to gain approval from the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for potential national security issues, as well as from antitrust authorities in markets such as China.