AMD is all set to acquire the majority stake in Xilinx. The deal is estimated at $35 Billion. The deal involves an all-stock transaction. This means there won’t be much cash exchanged, which is clearly acceptable to the Xilinx board members as AMD appears to have agreed to pay an equivalent of $143 per Xilinx share.
Advanced Micro Devices Inc. popularly known as AMD, has confirmed that it will acquire Xilinx Inc in a $35 billion all-stock deal. The deal will not only benefit Xilinx but also AMD as the latter gets a significant leap in the data center chip market.
AMD Buys Xilinx To Compete With Intel?
AMD expects to close the acquisition of Xilinx at the end of 2021. The deal would effectively grant AMD immediate access to a combined firm with 13,000 engineers and a completely outsourced manufacturing strategy. Incidentally, AMD and Xilinx rely heavily on Taiwan Semiconductor Manufacturing Co Ltd (TSMC).
AMD and @XilinxInc announce an agreement for AMD to acquire Xilinx—expanding our rapidly growing data center business and creating the industry’s leading high performance computing company.
— AMD (@AMD) October 27, 2020
AMD and Xilinx have vastly different product portfolios. Moreover, except for a few exceptions, the companies are focused on different markets. Needless to add, this would benefit AMD as it gets quick access to several new markets, which were dominated by Intel. AMD is focused on high-performance CPUs, GPUs for PCs and data center servers, and SoCs for game consoles and notebooks. Xilinx targets high-performance FPGAs, SoCs for datacenter (including SmartNICs), communications, automotive, industrial, aerospace, and defense markets.
AMD acquiring Xilinx appears to be quite similar to Intel’s acquisition of FPGA-manufacturer Altera back in 2015. However, Intel paid $16.7 billion, while AMD is giving $35 Billion worth of stocks. AMD is clearly hoping to get a head start within the market segments that Xilinx and Altera are active.
AMD agreed to buy rival chip maker Xilinx in a $35 billion deal, the latest landmark transaction as the U.S. semiconductor industry goes through a seismic transformation https://t.co/E7JjcqU042
— The Wall Street Journal (@WSJ) October 27, 2020
How Does AMD Benefit From Acquiring Xilinx?
AMD has been growing significantly in the past few years. From trailing behind Intel in nearly every segment, AMD is now competing head-to-head in most of the areas in which Intel once dominated. Moreover, AMD’s Zen-based EPYC server-grade processor lines have been readily bought and embedded in datacenters of leading tech organizations.
With AMD’s processors and Xilinx’s adaptable logic expertise, the former now has access to complete platforms. Hence it can continue to focus on improving its CPUs and GPUs while relying on the latter for optimized designs of FPGAs and SoCs.
AMD agrees to buy Xilinx for $35 billion in stock, creating a company with a larger research-and-development budget and a broader array of products to take on Intel https://t.co/mmrOIKwPKr
— Bloomberg Markets (@markets) October 27, 2020
Besides the tech-related advantages, AMD expects to save $300 million in synergistic operational efficiencies within 18 months of closing due to streamlining shared infrastructure. Incidentally, the deal has been unanimously approved by both sets of directors. Now the companies need the approval of both sets of shareholders.
— Underfox (@Underfox3) October 27, 2020
AMD and Xilinx both use TSMC’s factories, called “fabs” in the industry, to make its chips. Incidentally, both the U.S.-based companies have opted for modular designs for their respective platforms that allow quick swapping of different pieces of a chip to avoid bottlenecks or delays while still pushing performance and efficiency metrics.
As part of the acquisition, Xilinx shareholders will receive about 1.7 shares of AMD common stock for each share of Xilinx common stock. This transaction alone values Xilinx shares at about $143 per share. At the end of the transaction, AMD shareholders will own about 74 percent of the combined firm, with Xilinx shareholders owning the remaining 26 percent.