The dust settles on the largest merger in semiconductor history AMD completes its acquisition of Xilinx

On February 14, AMD (Chaowei Semiconductor, NASDAQ: AMD), a US semiconductor chip design giant, announced that it had completed the acquisition of Xilinx, a programmable chip (FPGA) company, in a full-share transaction.

It is reported that the acquisition transaction was announced as early as October 27, 2020, and the initial transaction valuation was $35 billion, and the value of this transaction is also soaring as AMD's stock price continues to rise. As of the close of trading on February 14, EST, AMD closed at $114.27 per share, with a total market capitalization of $137 billion, an increase of more than $40 billion from $96.54 billion when the acquisition was originally announced.

Although AMD officials did not disclose the specific value of the transaction, it is estimated that the transaction valuation has risen to about $50 billion, making it the largest acquisition in semiconductor history.

The deal finally "dropped the hammer"

"The semiconductor industry is an inevitable trend from dispersion to concentration." Yang Fenglin, who started a business in the chip industry, told reporters that in this context, the integration and mergers and acquisitions in the field of semiconductor industry have also been frequently carried out, and the particular concern is AMD's acquisition of Xilinx.

The reporter learned that because AMD's acquisition of Xilinx also needs to be approved by major market regulatory departments such as the United States and China, it took more than a year.

Originally, AMD officially expected the transaction to be completed at the end of last year, which was delayed by more than 2 months, but compared with Nvidia's previous acquisition plan for SoftBank's Arm, AMD and Xilinx finally "held hands" successfully.

"The acquisition of Xilinx brings together a range of highly complementary products, customers and markets, as well as differentiated IP and world-class talent." In the view of AMD President and CEO Su Zifeng, after the completion of the acquisition, AMD's leadership position in the field of high-performance and adaptive computing will be further enhanced and consolidated.

Recognizing Xilinx's capabilities in FPGAs, adaptive SoCs, and AI engine and software expertise, She believes AMD's empowerment will result in a "superior portfolio of high-performance and adaptive computing solutions" that will help it capture a larger share of the foreseeable market opportunity for about $135 billion in cloud computing, edge computing and smart devices.

Su will serve as CEO of the combined company, while all of Xilinx's operations will be part of the new company's Adaptive and Embedded Computing Group, which will continue to be led by its former CEO, Victor Peng.

Victor Peng, who joins AMD, also said the combination of the two companies "will provide a very comprehensive portfolio of adaptive computing platforms that power a wide range of intelligent applications, accelerating our ability to define a new era of computing." He also stressed that the above business units will continue to focus on the core markets, driving the FPGA and adaptive SoC and embedded product roadmaps.

The increase in benchmarking is significant

"AMD makes up the cards, and the stronger the stronger." Sheng Linghai, a VP analyst from market research institute Gartner, believes that mergers and acquisitions can further strengthen AMD's product lineup, making it have a platform-based product solution, even if it is difficult to rewrite the industrial pattern, but let AMD have stronger strength in benchmarking Intel.

It should be known that as a semi-customized, programmable and definable computing architecture, FPGAs have the advantages of higher management efficiency, greater flexibility and lower latency than CPUs and GPUs, but because of the long and more complex development cycle, the threshold is also high.

Although dozens of industrial giants around the world, including Intel, IBM, Samsung, etc., have invested heavily to tap their share of the FPGA market, "FPGAs need to accumulate and ecology, and cannot be done in a day or two." Sheng Linghai said that at present, the relatively leading companies in this field are Xilinx, Altera and other companies in the United States.

It is not difficult to imagine that Xilinx's advantages in advanced technology development have helped AMD to further enhance its research and development capabilities in including chip stacking and packaging technology, small chip and interconnection technology, artificial intelligence and domain-specific architecture and software platforms.

According to AMD, the combined company will have more than 15,000 engineers and adopt a fully outsourced manufacturing strategy that is highly dependent on TSMC. In addition, the company will be further expanded and able to offer a range of scalable solutions including AMD CPUs and GPUs.

Among the multiple benefits from the acquisition of Xilinx, Su Zifeng mentioned that AMD's overall effective market will increase from $80 billion to $135 billion.

It is understood that Xilinx's partnership covers areas including wired and wireless communications, automotive, industrial and test, aerospace and defense, broadcasting, measurement and simulation, and consumer markets, and the completion of the merger not only complements and expands AMD's customer base in the PC and data center markets, but also helps it diversify and enter a new market.

AMD expects the acquisition to increase non-GAAP gross margin and operating margin, non-GAAP earnings per share, and free cash flow generation in the first year. In other words, the acquisition of Xilinx will further strengthen AMD's financial model, providing it with a variety of different revenue streams in new end markets through long-life, high-margin products.