Semiconductor company, Advanced Micro Devices, acquired FPGA maker Xilinx for $35 billion in stock, making a push in the data center chip business. How can this deal affect its rival and industry titan, Intel?
The semiconductor industry is undergoing a massive consolidation. Marked as a historic transaction, semiconductor maker Advanced Micro Devices (AMD) plans to acquire chipmaker Xilinx for $35 billion in stock to create a high-performance computing company.Â
Xilinx is known for developing SoCs and field-programmable gate arrays (FPGAs), which are used in enterprise-specific applications, including cloud data centers, 5G telecom equipment, aerospace, defense, and automotive. Xilinx FPGA business is a direct rival to Altera Corp, acquired by Intel for $16.7 billion in 2015, and has combined Altera into its programmable solutions group (PSG).Â
With this acquisition, AMD is making an entry into many lucrative markets, from 5G to autonomous vehicles. Additionally, AMD redefines its future by expanding its footprint in the data center and edge computing business, which has industry heavyweights such as NVIDIA and Intel. The deal is expected to close at the end of 2021.
This deal echoes the increasing consolidation in the semiconductor industry.Â
- In July 2020, Analog Devices acquiredOpens a new window its rival Maxim Integrated Products for $20 billion.Â
- In September 2020, NVIDIA announced its plans to acquire U.K.-based chipmaker Arm Holdings for $40 billion.Â
- In October 2020, Intel sold its NAND memory and storage businessOpens a new window to SK Hynix for $9 billion.Â
Dr. Lisa Su, president and CEO of AMD, saidOpens a new window , “Our acquisition of Xilinx marks the next leg in our journey to establish AMD as the industry’s high-performance computing leader and partner of choice for the largest and most important technology companies in the world. By combining our world-class engineering teams and deep domain expertise, we will create an industry leader with the vision, talent, and scale to define the future of high-performance computing.â€
Also Read: Why Businesses Need to Take Hardware-Based PC Security Seriously
AMD Conquering the Data Center Market
AMD is known for its high-performance CPUs and GPUs for PCs and data center servers and system on chips (SoCs) for game consoles and notebooks. After fortifying its position in the PC business against Intel, AMD gradually shifted its interest in the data center chip market, which is currently booming due to the increasing demand from cloud giants, including Google, Microsoft, and Amazon. With Xilinx’s high-end FPGAs, AMD can develop next-generation chips to build general-purpose CPUs, GPUs, and ASICs required for AI-powered workloads.
The AMD-Xilinx deal will also strengthen AMD’s market position against industry titan, Intel, which struggles from internal manufacturing and low demand for its data center business. In its Q3 2020 earnings, Intel reported $18.3 billion in revenues, a 4% year-over-year (YoY) declineOpens a new window , which the company attributed to the pandemic. On the contrary, AMD announced a 56% YoY revenue growth in Q3.
Nancy Tengler, chief investment officer at Laffer Tengler Investment, toldOpens a new window CNBC, “Intel had two bad quarters. There’s likely to be another one. The real problem is the manufacturing issue that just doesn’t seem to be getting any better,â€
Daniel Newman, principal analyst and co-founder at Futurum Research, explainedOpens a new window , “An acquisition of Xilinx by AMD would be another indicator of a hot semiconductor industry. The race is tightening, and as AMD, Intel, Qualcomm, Nvidia, Marvell, and others push for growth, the market benefits from the innovation that’s created. However, I do not believe any deal would provide as significant an impact on the future of AMD as the Arm acquisition will have on Nvidia.â€
He further saidOpens a new window , “The combination of the companies also clearly strengthens its play in the data center and high-performance. I still worry that the price may be high, the return on the large investment may take some time to realize, Xilinx revenue has been a bit stagnant in recent quarters, and the lack of a strategy to build ASICs at scale also raises a few alarms. This is why I have said that $40 billion for NVIDIA/Arm seemed a more exciting deal overall.â€Â
Once the deal is finalized, Dr. Lisa Su will lead the combined company as CEO. Xilinx’s president and CEO, Victor Peng, will serve as president responsible for the Xilinx business and strategic growth initiatives. The acquisition is estimated to boost AMD’s market position from $80 billion to $110 billion.
The AMD-Xilinx deal reflects the changing face of the data center market, long dominated by Intel. While Intel continues to struggle with its manufacturing process and delays in 7nm chips production, AMD gives Intel massive competition with Xilinx under its umbrella. Interestingly, with Xilinx, AMD opens up a pool of opportunities in different market segments that can take its business to a whole new level. As for Intel, the company might need to work on its strategic decisions and internal manufacturing process, which could bolster its stumbling business and stocks.
Can the Xilinx acquisition make AMD a leader in the data center market? Comment below or let us know on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We’d love to hear from you!