Following the controversial Nvidia Arm acquisition, another deal with seismic implications for the semiconductor industry is looming on the horizon. The Wall Street Journal reports that AMD is in advanced talks to acquire chipmaker Xilinx in a purchase worth an estimated $30 billion.
As a specialist in field-programmable gate array (FPGA) chips, Xilinx is not so much a competitor as it is complementary to AMD. The deal would help AMD expand beyond providing consumer chips for Dell, HP and Apple laptops, and strengthen its presence in the high-margin data centre processor market, which is currently dominated by Intel.
In one of tech’s oldest rivalries, the competition between Intel and AMD stretches back fifty years. But in the last three, AMD has been pulling away from its nemesis, making a multiyear comeback driven by its Zen microarchitecture. This resurgence has intensified over the past year, with AMD stock outpacing Intel to rally 180% – putting the firm in a strong position to launch itself deeply into data centre territory.
Xilinx’s FPGA chips can be configured by designers to suit a specific purpose, adding capabilities and performance beyond a traditional CPU and GPU. This makes them particularly useful for accelerating demanding AI and analytics tasks for data centres, and specialised enterprise applications like optimising communication across 5G networks.
With Xilinx, AMD would acquire roughly half of the FPGA market, which is shared with Intel in a duopoly over programmable logic. Intel’s half of the market was also gained through acquisition, with the firm buying Xilinx’s primary competitor Altera for $16.7 billion back in 2015 to form the Programmable Solutions Group.
For the broader semiconductor market, AMD’s acquisition of Xilinx could turn a bumper year for deal making into a record breaker. In July, Analog Devices agreed to purchase Maxim for more than $20 billion, and then in September, Nvidia agreed to purchase Arm from SoftBank for $40 billion. These megadeals, combined with the Xilinx purchase and several smaller agreements, could push the total 2020 chip market deal value to over $100bn – marking a record year for chip sector consolidation.
Mathew Byatt, Managing Partner and Semiconductor Practice Lead at Acuity Advisors comments:
“Imitation is the sincerest form of flattery and it comes as no surprise that AMD is following Intel’s lead and acquiring their own FGPA giant. If this acquisition happens, it really is a definitive statement of their intent to be a real force in the datacenter market. If it doesn’t come off, then it is a helpful reminder of AMD’s level of ambition and how they continue to take the fight to Intel. Watch this space.”
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