China released amD Xilinx's acquisition, but banned bundled sales

Written by Kang Jialin, a weekly magazine of Finance and Economics

Editor/You Yong

On January 27, the Anti-Monopoly Bureau of the State Administration for Market Regulation issued an announcement that since January 19, 2021, after receiving the anti-monopoly declaration for the acquisition of Xilinx equity by Chaowei Semiconductor (AMD), after one year, after the applicant had supplemented the application materials, the case was filed, and through review, the State Administration for Market Regulation decided to attach restrictive conditions to approve the case.

In October 2020, AMD, the world's second-largest desktop and server processor vendor, announced its intention to acquire Xilinx, the world's largest FPGA vendor, for a $35 billion all-share transaction.

As one of the branches of logic chips, FPGA (Field-Programmable Gate Array, field programmable gate array) chips are called universal chips because of semi-customization, and they are also the core components of 5G infrastructure and terminal equipment, and their downstream application scenarios are extensive, mainly used in 5G, data centers, automobiles and other industries.

The FPGA industry has a certain threshold, its dedicated EDA software technical barriers are high, the hardware structure is complex and the yield is low, making the global FPGA market a duopoly competition pattern, of which Xilinx market share is more than half of the perennial, and Altera accounts for more than 80% of the market share, and the matthew effect of the industry is obvious.

Prior to AMD's acquisition of Xilinx, in June 2015, Intel announced the acquisition of Altera, the world's second-largest FPGA vendor, for $16.7 billion, becoming the most expensive acquisition time in the company's history; with the completion of the acquisition, Intel also established a programmable business unit on the basis of Altera, and was subsequently officially applied to mainstream data center OEMs. The same idea, after the acquisition of Xilinx, AMD will also enter the industrial, communications and other market segments.

The merger of the two sides will create another chip giant. According to market research firm IC Insights estimates, AMD revenue in 2021 increased by 65% year-on-year, about $16.1 billion, while Xilinx's 2021 revenue of nearly 4 billion, after the merger of the two will enter the world's top ten semiconductor companies, behind Qualcomm, Nvidia and Broadcom.

Acquisitions with cross-border operations are subject to approval by a number of key market regulators around the world. Previously, the United States, the United Kingdom and the European Union have successively released the acquisition case, China's approval of the case means that AMD can complete the acquisition plan in the first quarter of 2022, but the release is subject to additional restrictive conditions, looking at these five conditions, the core appeal is to prohibit the merged entity from using the advantages of the technology portfolio to bundle sales or differentiated supply, so as to ensure the rights and interests of old rivals Intel, NVIDIA and domestic power players.

The announcement said that "the centralized entity is the only manufacturer in the world that can provide three products at the same time: CPU, GPU accelerator and FPGA." In fact, with the change of the industry pattern, the manufacturers located in the industrial chain are transforming to this goal, not only Intel's acquisition of Altera and AMD layout is consistent, Nvidia also realized that it has lagged behind Intel and AMD in the general processor CPU, hoping to make up for the shortcomings by acquiring Arm, but Nvidia's acquisition of Arm has not yet been settled, many industry insiders told "Finance world" weekly, Nvidia's acquisition of ARM has encountered many expected or even unexpected difficulties. But Nvidia has not given up for the time being.

The success of the acquisition, in addition to the impact on international giants such as Intel and Nvidia, is also sounding the alarm for domestic substitution, as emphasized in the announcement: it is difficult to appear new effective competitors in the market in the short term. At present, the domestic 28nm FPGA has officially come out, which means that the domestic FPGA has reached the mid-range level of the first generation of foreign products, and the current iteration progress abroad has been located in the third generation, which is an adaptive platform for heterogeneous computing, and Cai Gang, vice president of Zhongke Yihai Micro, once said that the industry is still 2.5 generations away from the real comprehensive domestic substitution.