Analog Devices has snapped up rival semiconductor company Maxim Integrated Products to create a $68bn (£54bn) company in one of the largest takeovers of the year.
The deal, which was rumoured over the weekend, will allow Analog to grow its chip-making capabilities for cars and mobile phones.
Analog, which specialises in making sensors and signal processing chips, is reportedly paying $20bn for Maxim.
The takeover has been approved by both companies' boards and is expected to close next summer.
Vincent Roche, president and chief executive of Analog, said: "Maxim is a respected signal processing and power management franchise with a proven technology portfolio and impressive history of empowering design innovation. Together, we are well-positioned to deliver the next wave of semiconductor growth."
The deal comes after a relatively solid few months for chipmakers as businesses were forced to shift all their operations online, buying more laptops and phones for staff amid lockdowns.
It is one of the largest takeovers to take place this year, after M&A activity slumped as Covid-19 hit financial markets.
According to Refinitiv, for the three months to the end of June, global M&A volumes fell to their lowest level since late 2009.
There have been recent signs of a pick-up, including Uber's takeover of Postmates earlier this month.