Germany's Infineon Technologies has agreed to buy US rival Cypress Semiconductor for almost €9bn (£7.97bn).

Infineon will pay $23.85 per share in cash for Cypress Semiconductor, a premium of more than 50pc over last week's stock price the day before it was reported that the company was considering a takeover offer.

The acquisition, which the latest mega-deal in the fast-consolidating chipmaking industry, is expected to bring €180m in cost savings per year by 2022.

Infineon's shares dropped by over 8pc on Monday to their lowest level since 2016 amid scepticism from traders over a deal so soon after the company issued a profit warning for this year.

The German chipmaker has previously claimed that a slump in demand from China has led to an inventory pile-up that is expected to plateau this summer.

Infineon was among the European chipmakers to have reportedly suspended US chip shipments to Huawei as the government ramped up its high-stakes trade dispute with China.

Reinhard Ploss, chief executive of Infineon, labelled the acquisition as a "landmark step" for the business which will allow it to grow in the automotive, industrial and internet of things (IoT) sector.

This is the first big US acquisition for Infineon since its failed attempt to take over Wolfspeed, a company owned by chipmaker Cree, in a $850m deal that was scuppered by US authorities in 2017 citing risks to national security.