AMD To Acquire Chip Maker Xilinx In A $35 Billion Deal, Targets Data Center Business

The battle between semiconductor designer Advanced Micro Devices Inc (AMD) and Intel Corp in the data center chip market just got more intense with AMD agreeing purchase Xilinx Inc in a $35 billion all-stock deal, AMD said on Tuesday.

After the merger, which is expected to be completed by the end of 2021, the new entity will have 13,000 engineers. The new company will also have a completely outsourced manufacturing strategy with a heavy reliance on Taiwan Semiconductor Manufacturing Co Ltd (TSMC).

A more nimble approach to grab market share from Intel has benefitted both the US companies. Intel has struggled with issue of internal manufacturing.

In the field of central processor units (CPUs) in the personal computer business, AMD has long been Intel’s main rival.

Competing with Intel in the fast growing business of data centers has been the focus of AMD’s Chief Executive Lisa Su ever since taking over the position in 2014. Data centre business has assumed great significance because it powered power internet-based applications and services and are also integral for the rise of artificial intelligence and fifth-generation telecommunications networks.

Efforts to penetrate data centers market with its programmable processors that help increase the speed of specialized tasks such as compressing videos or providing digital encryption are also being made by Xilinx. The primary rival of the company in this sector, Altera Corp, was acquired in 2015 by Intel for $16.7 billion which was then the largest acquisition by Intel.

“There are some areas where we’re very strong, and we will be able to accelerate some of the adoption of the Xilinx product family,” Su said in an interview. “And there are some areas where (Xilinx CEO) Victor (Peng) is very strong, and we believe that we’ll be able to accelerate some of the AMD products into those markets.”

Tis merger assumes significance because in recent times, the manufacturing technology of Intel has lagged behind that of TSMC’s by a few years.

On the other hand, being able to manufacture chips that perform better has helped AMD to surge ahead of Intel. AMD had spun off its factories nearly a decade ago. AMD was able to gain its best market share since 2013, which was slightly less than 20 per cent of the CPU market, because of the performance edge of its chips. So far this year, the stock price of the company has surged by 79 per cent.

With both Xilinx and AMD using modular designs that let them swap out different pieces of a chip to avoid bottlenecks or delays, Xilinx also uses TSMC’s factories which are known as “fabs” in the industry, for making its chips.

“We ended up with TSMC, and have stayed with them, not due to any contractual reason – we could go to any fab at any time – but because they are best-in-class,” Peng told Reuters in an interview. “It’s about the choices you make.”

(Adapted from Reuters.com)



Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability

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