Advanced Micro Devices Inc
AMD 033%
is considering buying a rival chipmaker
Xilinx Inc
XLNX -194%
in a $ 35 billion deal, adding momentum to the consolidation of the semiconductor industry that has only accelerated during the pandemic
AMD and Xilinx said on Tuesday the companies have reached an all-equity deal that will significantly expand their product line and markets and provide a financial boost immediately upon closing The Wall Street Journal previously reported that the two were close to a deal
The US semiconductor industry is going through a seismic transformation, driven by both a wave of corporate transactions and a pandemic that has overloaded demand for some chips
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« … When you look at where the markets are going in the future, I think scale matters »
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Planned purchase of Xilinx by AMD, which has yet to pass the regulator’s scrutiny in the US and overseas, is said to be one of the largest among chipmakers and only marks the latest proposed deal benchmark in recent months It comes just a few weeks after the graphics chip manufacturing giant
Nvidia Corp
agreed to pay $ 40 billion for Arm Holdings, the UK-backed mobile chip design giant
SoftBank Group Corp
, in what would be the biggest contract the industry has ever won
This reconciliation proposal landed after
Analog Devices Inc
in July agreed to pay more than $ 20 billion for
Maxim Inc integrated products
AMD-based Santa Clara, Calif. specializes in the CPUs and graphics chips at the heart of modern computers Its stocks have risen sharply this year as the pandemic has fueled the sale of laptops, as well as gaming systems. such as
Microsoft CorpS
Xbox and
Sony CorpS
PlayStation using AMD chips The company has also benefited from a data center processor sales business that has taken off with the introduction of new generations of high performance chips in recent years under the leadership of Lisa Su, which makes it a more formidable competitor for a bigger rival
Intel Corp
AMD is experiencing a push at a time when Intel is struggling Both companies have benefited from rising demand for laptops and cloud computing as people increasingly work from home Intel, however, has been stung by issues with its manufacturing process that analysts say could help competitors like AMD move forward AMD abandoned its chip-manufacturing facilities over a decade ago and now relies on others to manufacture its products, such as
Taiwan Semiconductor Manufacturing Co
, which operates some of the world’s leading chip factories
AMD’s nearly 80% share price increase this year has given it the financial strength to grow into a move similar to Nvidia, which plans to use around $ 21 billion in stock to pay Arm
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With the consolidation of the chip industry and changing customer needs, Ms. Su said size is necessary to keep pace
« We’ve built a very strong business around the foundations of AMD, but when you look at where the markets are going in the future, I think scale matters, » she told the Journal, adding that the cultures and technology strategies of companies and business models align well
Customers, she said, increasingly want a variety of computer engines – specialized chips in artificial intelligence, for example, or networking – instead of general-purpose chips and the costs chip development increases, giving a competitive advantage to those with larger checkbooks
Xilinx specializes in chips that differ from the standard by allowing users to reprogram them after production Due to this flexibility, they are useful in arenas where rapid prototyping is valuable and where customers do not have need to produce large numbers of chips
Xilinx caters to some of the same customers as AMD, including operators of large data centers filled with servers that analyze corporate data and power the Internet AMD promises $ 300 million in cost savings with this wetsuit within 18 months
Xilinx would also give AMD a foothold in areas where it is small or absent altogether, including telecommunications infrastructure and defense Xilinx chips are used in the USLockheed Martin Corp’s latest fighter jet Attack Plane Joint F-35 They are also commonly used in ultra-fast 5G network infrastructure
Financially, the deal, upon completion, would immediately improve AMD’s profit margins, profits and cash generation, the company said This move could also help AMD meet its 20% annual revenue growth target over the next few years.
As part of the deal, Xilinx shareholders will receive approximately 17,234 AMD shares for each of their Xilinx shares, a premium of almost 25% over the current value of the company
The addition of Xilinx, led by CEO Victor Peng, would put AMD on a par with Intel, which has entered the fray in the chips that Xilinx specializes in – known as field programmable gate arrays – thanks to its $ 16 7 billion acquisition of Altera in 2015
Despite the meteoric rise in the share price and AMD’s ambition, it lags far behind Intel in other size metrics Intel has around 10 times the number of AMD employees and has won $ 71 9 billion in revenue last year, compared to AMD’s $ 6 7 billion And Intel still maintains a dominant lead against AMD in terms of market share
Along with the deal, AMD on Tuesday announced a third quarter profit increase, propelled by the same pandemic-fueled demand for video game consoles and computer processors, which has supported its inventory much of year
The company said it had $ 2.8 billion in revenue in the quarter, up 56% from a year ago It generated 32 cents in earnings per share, almost triple of last year’s figure Sales and earnings per share topped Wall Street estimates according to analysts polled by FactSet
The merged company is said to have a workforce of around 13,000 engineers, according to firms SP Su would continue to be CEO of the merged company, while Mr. Peng would become AMD chairman responsible for business Xilinx Mr. Peng, who worked at AMD earlier in his career, would report directly to Ms. Su
AMD advisors included Credit Suisse, DBO Partners and Latham law firm & Watkins Xilinx advisers were Morgan Stanley, BofA Securities and law firm Skadden, Arps, Slate, Meagher & Flom LLP
Advanced Micro Devices, Xilinx, NASDAQ: AMD, Stock, Intel
World news – US – AMD agrees to buy Rival Chip Maker Xilinx for $ 35 billion
