Lattice Semiconductor is offering $7.30 per share, a premium of 23.7 percent to Silicon Image's Monday close, valuing the company at about $600 million.
"What you have here are two sub-scale companies that create a lot of scale in combining and I would say there is very little product overlap," Dougherty & Co analyst Charles Anderson said.
"It's a type of transaction that has gained a lot of favor recently," he said.
For example, Avago Technologies Ltd said in December it would buy LSI Corp in one of the
semiconductor industries' largest deals of 2014.
RF Micro Devices Inc bought TriQuint Semiconductor Inc last year, while Cypress Semiconductor Corp  said it would buy peer Spansion Inc.
Anderson said he expected other semiconductor companies to look at similar transactions.
Silicon Image, under pressure from activist hedge fund Engaged Capital LLC, had been exploring strategic alternatives including a sale, sources told Reuters this month.
The company said in December that it expects a year-over-year revenue decline of about 10 percent in 2015 due to a reduction in mobile design wins at one of its largest customers.