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AMD announced they have entered into a definitive agreement to acquire Xilinx in an all-stock transaction valued at $35 billion.
The acquisition brings together two semiconductor companies with complementary product portfolios and customers. When completed, AMD will offer a strong portfolio of high-performance processor technologies, combining CPUs, GPUs, FPGAs, Adaptive SoCs, and deep software expertise to the industry. That, thinks the company, should enable leadership computing platforms for cloud, edge, and end devices. Together, the combined company will capitalize on opportunities spanning some of the industry’s most important growth sectors. That includes segments from the data center to gaming, PCs, communications, automotive, industrial, aerospace, and defense.
This is a megadeal, and only a little less than Nvidia’s megadeal for of $40 billion for Arm announced last month. And five years ago, Intel acquired Xilinx competitor Altera for $16.7 billion, which would easily be doubled today. AMD’s last major acquisition was ATI in 2006 for a mere $5.4 billion.
The deal will still leave AMD with over $1.7 billion in cash and only $373 million debt, so it is very healthy. This deal, when it is completed at the end of 2021, will be accretive to AMD, and, the merger will significantly expand AMD’s product portfolio and customer base.
For instance, the deal gives AMD more heft in the data center. FPGA’s are the second most popular device for AI training, which is why we saw a flurry of FPGA deals and news a couple of years ago including the Altera deal. Microsoft’s Project Catapult announced in 2018 is combining FPGAs with CPUs in its cloud services for AI work. This is the kind of expansion AMD is interested in.
What do we think?
If Altera was good for Intel, Xilinx would be great for AMD. Xilinx will expand AMD’s footprint with existing customers because Xilinx and AMD share many of them. Xilinx gives AMD another product line for AI solutions. With AMD’s stronger presence in the data center and supercomputers, FPGAs are a natural addition. Xilinx will also open automotive and other markets for AMD. And AMD’s buying power will drive down Xilinx’s costs.
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One other nice bit of synergy: Xilinx has been using the Mali GPU IP from Arm. AMD can replace the Mali with AMD’s GPU IP and get a better GPU for less money.