The semiconductor market and its suppliers have been struggling in recent years, as prices and profits have declined. As a result, companies are looking for ways to improve their margins, whether it is through cutting costs or developing synergies.

The announcement last month that Applied Materials, Santa Clara, CA, the world’s largest semiconductor and display equipment manufacturer, and Tokyo Electron Limited, the third-largest semiconductor equipment producer, are merging is big news in the field. The agreement values the new combined company at approximately $29 billion (¥2.8 trillion).

Interestingly, the deal is expected to go through without any regulatory concerns by the middle of 2014, according to reports, which may be indicative of the state of the semiconductor field itself.

Under the terms of the merger, Tokyo Electron shareholders will receive 3.25 shares of the new company for every Tokyo Electron share held. Applied Materials shareholders will receive one share of the new company for every Applied Materials share held. After the close of the deal, Applied Materials shareholders will own approximately 68% of the new company, and Tokyo Electron shareholders will control the other 32%.

Tetsuro Higashi, chairman, president and CEO of Tokyo Electron, will serve as the chairman of the new company, while Gary Dickerson, Applied Materials’ president and CEO, will be the CEO. Bob Halliday of Applied Materials will serve as chief financial officer.

Applied Materials provides equipment, services and software to enable the manufacture of advanced semiconductor, flat panel display and solar photovoltaic products. Its sales for its 2012 fiscal year, ending Sept. 30, 2013, were $8.72 billion, a decline of 17 percent% from 2011.

Tokyo Electron specializes in semiconductor, flat panel display and photovoltaic production equipment. The company had net sales of $5.29 billion in 2012, with operating income of $133 million.

There are always advantages cited for these sorts of acquisitions. On the technical and sales side, experts say that there is not a lot of overlap between the two companies’ product lines, but the companies will benefit from collaborating on R&D and sales, as well as expanding their portfolio of products.

There are also financial benefits to the deal. The savings from the deal are thought to be substantial: According to the companies, they anticipate achieving $250 million in annualized run-rate operating synergies by the end of the first full fiscal year and $500 million in run-rate operating synergies realized in the third full fiscal year, and they intend to institute a $3.0 billion stock repurchase program within 12 months after the transaction is approved.

Ultimately, the market for flat panel displays, mobile displays and solar cells are growing, and the major semiconductor manufacturers are consolidating. With that in mind, the merger of Applied Materials and Tokyo Electron may indeed have a major impact on this field.