(Reuters) - Analog chipmaker Macom Technology Solutions Holdings Inc <MTSI.O> said on Monday it would buy fellow chipmaker Applied Micro Circuits Corp <AMCC.O> for about $770 million to expand its data center connectivity business.

Macom's offer of $8.36 per share, comprising of $3.25 of cash and 0.1089 Macom shares, represents a premium of 15 percent to Applied Micro's Friday close.

The deal comes at a time when the semiconductor industry has been rapidly consolidating as chipmakers seek to cut costs, meet demand for cheaper chips and diversify into different product lines.

Lowell, Massachusetts-based Macom provides chips for wireless, satellite and fiber optic networks. Its chips are used by telecom, aerospace and defense companies.

Buying Santa Clara, California-based Applied Micro will help Macom expand into the market for data center connectivity chips.

Excluding Applied Micro's computing business, Macom said it expects the deal to add to its adjusted earnings per share and adjusted gross margin in the year ending September 2017.

Macom said it would sell Applied Micro's computing chip business after the deal closes.

Evercore was Macom's financial adviser and Ropes & Gray LLP provided legal counsel.

Morgan Stanley & Co LLC advised Applied Micro and Pillsbury Winthrop Shaw Pittman LLP was its legal adviser.

(Reporting by Supantha Mukherjee and Anya George Tharakan in Bengaluru; Editing by Sai Sachin Ravikumar)