Japanese semiconductor manufacturer Renesas Electronics Corp is close to making its second major acquisition in a bid to cement its position in the lucrative market for automotive chips. Renesas on Tuesday said had reached an agreement to acquire Integrated Device Technology Inc (IDT) for $6.7 billion.

Renesas is the second largest producer of auto-related chips after NXP Semiconductors NV. It controls about 30% of the global market for automotive microcontrollers. But weak in manufacturing analog chips like those used in processing sound, temperature, and light. The company has been working hard to acquire IDT’s technology in analog semiconductors to develop self-driving car technology.

The Japan-based Electronics Corp said it’s paying $49 per share in cash, which represents 16% premium to IDT’s closing price on Monday.

What’s Renesas planning to do with IDT?

“We were weak in chips for wireless networks needed for the Internet of things and connected cars. We’ve been wanting to get such assets,” said Renesas CEO Bunsei Kure at a news conference.

IDT will allow us to manufacture broader chip systems for our clients, Renesas said. The California-based IDT is also good in chips for data centers and will create a new source of revenue for Renesas.

Renesas’ stock climbed as much as 7.8 percent within the two weeks it declared an interest in IDT. But some analysts are speculating that the Japanese firm would find it difficult to make gains from the deal though it has made about 20% revenue growth [on the average] in the past four quarters.

The IDT acquisition deal is coming after Renesas’ $3.2 billion acquisition of U.S. chipmaker Intersil Corp. Both companies will expand its analog chips portfolio.

Reactions from Analysts

Analyst Akira Minamikawa of HIS Markit said ‘the combination isn’t bad” since Renesas is not strong in making telecommunications chips. But worry that “IDT doesn’t have many automotive clients”. Hence, it could be difficult for Renesas to raise the standard of their automotive chips. Meanwhile, automotive chips and industrial businesses contribute just 11% of IDT’s revenue.

The Committee on Foreign Investment in the United States (CFIUS) will need to approve the IDT acquisition deal after scrutinizing it for antitrust and potential national security issues. But Renesas has said it is confident that the merger deal will be approved.

Renesas is expecting to close the deal before June 2019 and will fund the acquisition with its cash and $6.1 billion (679 billion yen) of bank loans, which it would repay $1.8 billion (200 billion yen) yearly.

According to Reuters, Mizuho Financial Group Inc and Mitsubishi UFJ Financial Group Inc are the core banks offering the loan.

S&P Global Ratings says IDT acquisition would cut Renesas’ rating by at least one notch, putting it on a negative credit watch if the deal pulls through with the current arrangement.

“Key financial ratios for Renesas Electronics would likely deteriorate significantly, even taking into account IDT’s possible contribution to earnings,” said S&P.

Renesas is still making recovering from damages it suffered at key plants in the 2011 Japan earthquake.