Chipmaker PMC-Sierra  (PMCS) has sided with Skyworks Solutions  (SWKS - Get Report) by turning away interloper Microsemi  (MSCC) , but industry followers suggest there's still considerable room for a higher offer in the heated bidding war.

PMC-Sierra announced Sunday its board has determined Microsemi's proposal isn't superior to the offer from Skyworks Solutions. The response from Sunnyvale, Calif.-based PMC, a semiconductor company with a $2.3 billion market capitalization, came just three days after Skyworks Solutions and Microsemi exchanged a quick back-and-forth of bids on Oct. 30.

Friday, Skyworks Solutions raised its offer for PMC-Sierra to $2.27 billion in cash, or $11.60 per share, topping a $2.2 billion cash-and-stock offer from Microsemi. PMC-Sierra had initially agreed to be acquired by Skyworks for $2 billion on Oct. 5 and Microsemi came in with a $2.2 billion proposal to crash the party about two weeks later on Oct. 19.

Just hours after Skyworks Solutions increased its offer, Microsemi came back on Friday with an offer of approximately $2.3 billion, or $11.88 per share.

"While Microsemi's proposal is nominally higher than the Skyworks' proposal based on prices as of Oct. 30, 2015, the board believes that Skyworks' all cash proposal provides more value certainty to shareholders than the stock-and-cash consideration provided in the Microsemi proposal," PMC-Sierra said Sunday, adding that the stock component of Microsemi's offer poses concerns because semiconductor stocks have been volatile.

PMC-Sierra also pointed to concerns about the amount of debt involved in a tie-up with Microsemi, adding that Microsemi would be one of the most highly leveraged publicly traded semiconductor companies post-acquisition, which could affect integration with other chipmakers in the future.

With the ball now in Microsemi's court again, PMC-Sierra could attract a price tag as high as $2.6 billion, industry followers said. At the same time, these people questioned why there is a bidding war for PMC-Sierra in the first place.

"PMC-Sierra is not a strategic must-have asset for either of these guys. It's a nice-have asset," said Suji Desilva, an analyst at Topeka Capital Markets. All things being equal, he noted, Microsemi would be willing to go up higher given that the two companies have closer synergies and end-market overlaps.

Desilva added the offer for PMC-Sierra could still fetch about $1 per share higher than the price on the table, which would equate to about $2.48 billion based on the target's 193.42 million outstanding shares. He said that price would start pushing the envelope, though he wouldn't comment on how likely such an offer would be.

If the fast exchange of offers Friday is an indication, Microsemi and Skyworks appear ready for each other's bidding, he added.

If Microsemi decides to raise its bid, it could offer between $12.50 and $13 per share with its stock, suggested RBC Capital Markets analyst Mitch Steves.

Although the chipmaker with a $3.5 billion market cap will likely need to increase the bid for PMC-Sierra to more than $12 per share, anything above $13 makes a deal much less attractive, Steves opined.

At the same time, Skyworks has a clean balance sheet and has the ability to match or top Microsemi's offer in cash by taking on debt, Steves explained.

Ian Ing, executive director at MKM Partners LLC, agreed, asserting Skyworks could propose $13.20 per share, or about $2.6 billion, by leveraging 1.5 times debt-to-trailing Ebitda. He added that Skyworks will likely prevail in the sweepstakes for PMC-Sierra because at that ratio of debt-to-trailing Ebitda, the offer is better than Microsemi's four times debt-to-Ebitda.

For comparison, Stephens analyst Harsh Kumar referred to Dialog Semiconductor's (DLGNF) pending acquisition of Atmel  (ATML) . "As you've seen with Atmel, the stock component doesn't necessarily work out," Kumar said. "That's truly one of their concerns."

The Deal reported last week there are some potential concerns around Dialog Semiconductor's pending cash-and-stock acquisition of Atmel for $4.6 billion since the U.K. buyer's shares continue to plummet after the initial deal announcement in September.

"They're missing out on a big opportunity," Kumar said of Microsemi. "They wanted it, and it didn't happen." 

He said PMC-Sierra is a good fit but there are plenty of opportunities for Microsemi since semiconductor companies have enjoyed a period of M&A vigor.

Officials with PMC-Sierra, Microsemi and Skyworks did not return requests for comment Monday.