The $35 billion merger passed! The General Administration conditionally approved AMD's acquisition of Xilinx

Following Global Wafer's acquisition of Siltronic, another merger and acquisition in the semiconductor industry was approved.

On January 27, the State Administration for Market Regulation issued an announcement on the approval of Chaowei Semiconductor (AMD) to acquire the equity of Xilinx with additional restrictive conditions.

Nandu reporter learned that the deal is worth about $35 billion (about 222.6 billion yuan), which some media once called "a deal that affects the pattern of the semiconductor industry."

It is reported that the acquirer Chaowei Company was registered in the United States in 1969, listed on the New York Stock Exchange and the NASDAQ Stock Exchange in 1979 and 2015 respectively, with decentralized equity and no final controller, mainly engaged in the research and development, production and sales of central processing units (CPUs) and graphics processors (GPUs).

The acquired party, Xilinx, was incorporated in the United States in 1984 and listed on the NASDAQ Stock Exchange in 1989, with a dispersed stake and no ultimate controller, mainly engaged in the research and development, production and sales of programmable gate arrays (FPGAs). In 2020, in the FPGA market, Xilinx's global and Domestic market share is 50%-55%, ranking first, with strong market power.

On October 26, 2020, the parties to the transaction signed an agreement that Chaowei intends to acquire all of Xilinx's shares by way of a share exchange. After the completion of the transaction, the original Chaowei shareholders held 74% of the equity of the centralized entity, and the original Xilinx shareholders held 26% of the equity of the centralized entity.

On January 19, 2021, the State Administration received the anti-monopoly declaration for concentration of undertakings in this case. After review, the General Administration of The People's Republic of China believes that Chaowei's CPU and GPU accelerators have a neighboring relationship with Xilinx's FPGAs, and the relevant markets in this case are the global and Chinese CPU, GPU accelerator and FPGA markets.

The circular mentioned that the CPU, GPU accelerator and FPGA markets have great potential for development. The exponential development of the digital economy, especially the artificial intelligence industry, has led to rapid growth in demand for CPUs, GPU accelerators and FPGAs, and the market size has expanded year by year. As the demand for computing power and speed continues to rise, the importance of CPU, GPU accelerator and FPGA package solutions will continue to increase. The centralized entity is the only manufacturer in the world that can provide three products at the same time: CPU, GPU accelerator and FPGA.

According to economic analysis, the General Administration believes that if the centralized entities engage in the above-mentioned tying, refusing to supply and reducing interoperability, they can significantly increase the sales volume of related commodities, expand market share, increase profits, and then have the effect of eliminating and restricting competition in related markets.

Not only that, the General Administration also noted that CPUs, GPU accelerators and FPGAs are capital and technology-intensive products, with high research and development difficulties, long cycles, large investment amounts, and high customer requirements for product quality and stability. New entrants need to invest a lot of money, time research and development and trial production to ensure the yield rate, and get customer recognition and acceptance, in the short term, it is difficult for new competitors in the market to form effective competitive constraints on the centralized entity.

After comprehensive consideration, the State Administration for Market Regulation decided to attach restrictive conditions to approve this concentration.

According to the requirements of the General Directorate, the parties to the transaction and the centralized entity fulfill a number of obligations. Specifically, when selling Chaowei CPUs, Chaowei GPUs and Xilinx FPGAs to the domestic market in China, it shall not be forced to tie in any way, or attach any other unreasonable trading conditions; shall not hinder or restrict customers from purchasing or using the above products alone; and shall not discriminate against customers who purchase the above products separately in terms of service level, price, software features, etc.

At the same time, on the basis of the existing cooperation with chinese enterprises, the parties to the transaction and the centralized entities should further promote the relevant cooperation, and continue to supply Chaowei CPUs, Chaowei GPUs, Xilinx FPGAs and related software and accessories to the Chinese domestic market in accordance with the principles of fairness, reasonableness and non-discrimination. On the basis of ensuring the flexibility and programmability of Xilinx FPGAs, the parties to the transaction and the centralized entities shall continue to develop and ensure the availability of the Xilinx FPGA product family, ensuring that they are developed in a manner that is compatible with ARM-based processors and consistent with Xilinx's pre-transaction plans.

The regulation also requires that the parties to the transaction and the centralized entities continue to ensure the interoperability of Chaowei CPUs, Chaowei GPUs, Xilinx FPGAs and third parties sold to the domestic market in China, and the level of interoperability is not lower than that of Chaowei CPUs, Chaowei GPUs and Xilinx FPGAs; the information, functions and samples of interoperability upgrades should be provided to third-party CPU, GPU and FPGA manufacturers within 90 days after the upgrade.

In addition, the parties to the transaction and the centralized entity shall protect the information of the third-party CPU, GPU and FPGA manufacturers and enter into confidentiality agreements to store the confidential information of the third-party manufacturers in separate and non-communicative hardware systems.

Written by: Nandu reporter Huang Liling