The future is unpredictable, but it is possible to try to find the answer from history.
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Author | Wu You
Edit | Bao Yonggang
On Valentine's Day 2022, the largest acquisition in the history of the semiconductor industry came to an end, AMD successfully acquired xilinx, the world's largest FPGA manufacturer, in the form of a full stock price, and with the rise of AMD's stock price and even surpassed Intel for the first time, the initial $35 billion transaction rose to nearly $50 billion.
In the semiconductor industry, successful transactions of huge acquisitions are not new, but there are also many cases of integration failures and even affecting their normal business, after AMD's acquisition of ATI suffered a heavy blow.
This time, AMD's acquisition of Xilinx at a higher price will it repeat the mistakes of the past? If the integration is successful, can the millennium old man AMD change his life against the sky?
1
Ever been on the verge of bankruptcy and repeating the mistakes of acquiring ATI?
16 years ago, AMD and ATI announced a merger for a transaction value of about $5.4 billion, both sides said that the two companies have very good complementarity, through mergers and acquisitions, AMD's leading technology in the field of microprocessors will be combined with ATI's advantages in the field of graphics processors, chipsets and consumer electronics, and after the merger and acquisition, there are very optimistic prospects in terms of business and technology research and development.
This is no different from the beautiful imagination today about AMD's acquisition of Xilinx.
Ms. Wang Feirong, who was the marketing director of AMD Greater China at that time, said in response to a reporter's question that there is no difficulty in the integration of the two major companies, and the graphics chip will be integrated in AMD's CPU products in the next two years.
In fact, since the acquisition of ATI, AMD's debt has grown massively, rising to $3.7 billion in 2006 and $5 billion in 2007. AMD, mired in debt, is on the verge of bankruptcy.
"AMD integration ATI almost bankruptcy, mainly because the size of the two companies is not much different, AMD is prone to indigestion, now AMD acquisition of Xilinsi, at least from the perspective of market value, AMD competition Lingsi to be higher than an order of magnitude, plus the past two years AMD's main business has been going up, in the rising period, it will be easier to digest." Senior GPU expert Shi Xin said.
Shi Xin also said that the integration of the two companies will be affected by many aspects such as corporate operations, corporate culture, organizational structure, etc., and it is too early to predict the success of the integration results.
However, Feng Xinpeng, the founder of Zhaoguan Electronics, who has personally experienced the complete process of AMD's acquisition of ATI by AMD, pointed out that although the process of AMD's acquisition of ATI is painful to the outside world, in fact, this transaction is not the root cause of AMD's pain.
"Although the operation of the engineering team was relatively independent at the beginning of AMD's acquisition of ATI, and the two sides progressed relatively smoothly in the design of APU, AMD's own foundry at that time had some problems in the process, resulting in the slow launch of APU products, which made AMD very painful." Feng Xinpeng said.
"If you stretch the front line, AMD's acquisition of ATI is a very successful thing, CPU and GPU are very important, it is unrealistic to separate, in fact, Intel planned to acquire ATI at the earliest, but it was cut off by AMD in the middle, ATI itself also has a lot of valuable assets, and the acquisition is a very correct decision." Feng Xinpeng added.
AMD learned from history, this time acquiring Xilinx in the form of a rights share price.
Ba Haoyan, senior vice president of Yunxiu Capital, explained to Leifeng Network the reasons for AMD's transformation of acquisition transaction methods, pointing out that AMD is mainly to avoid the risk of tight cash flow, and it is more cost-effective to use stocks as the main acquisition method.
AMD acquired ATI with 78% cash + 22% stock, a deal that allowed AMD to borrow $2.5 billion and deplete its own cash. After the merger of the two, in order to compete with Intel, AMD also operates a manufacturing plant, which needs to invest billions of dollars a year, due to chip design problems caused by the delay in the release of the new product CPU K8, AMD gradually lost market share, AMD revenue and profit spiraled down, it is difficult to repay the debt of ATI's manufacturers. Until 2014, AMD's stock price hovered around $2. Ba Haoyan said.
Ba Haoyan believes that there are three key factors that ultimately made AMD choose to buy Xilinx at full share price:
AMD is short of cash on paper. AMD's acquisition of Xilinx is a super-large-scale acquisition, and when the transaction plan was announced in mid-2020, AMD's book cash was only $1.8 billion, and by Q3 2021, the book cash would not exceed $2.5 billion, basing the assumption that AMD's book cash was insufficient;
Consider cutting debt. Bloomberg estimates that $10 billion in debt financing is the maximum AMD considers. Over the past few years, AMD has made debt reduction a core part of its strategy, and AMD is less willing to borrow money to raise cash;
At present, the overall valuation of semiconductor companies is high, and the use of stocks (at least part of the use of stocks) to carry out mergers and acquisitions is also the best period financially, but it may be because of the imagination of mergers and acquisitions to add another fire to the stock price at the end of the crossbow, Nvidia announced the acquisition of ARM, and AMD announced the acquisition of Xilinx, and the stock price and market value have risen sharply.
The change in the way the transaction is only one of the reasons for predicting the reduction of the risk of this acquisition, more critically, under the leadership of Su Zifeng, AMD's own strength has been enhanced, slashing the business, focusing on high-performance computing, in 2017, nearly 20 products based on zen architecture have been released from moving to desktop to high-end desktop, and the new generation of microprocessor Ryzen, high-performance graphics card Radadeom RX Vage and server processor EPYC are included. AMD, which lost money for five consecutive years, was able to turn a profit.
2
Emulate Intel, the second oldest of the millennium
There is still a chance to surpass
Also available as a reference is Intel's acquisition of Altera for $16.7 billion seven years ago.
Following the acquisition of Altera, Altera has been independent as Intel's Programmable Solutions Group (PSG).
Altera/Intel PSG business sales from 2009 to 2021, from The NextPlatform
According to foreign media statistics, since 2009, the Altera/Intel PSG business has averaged $450 million in sales per quarter, with net income of about one-fifth of sales, but in the past 12 months, the sales of Intel PSG business have been $1.93 billion, an increase of 4.4% year-on-year, and net income is expected to reach $302 million, an increase of 33.4% year-on-year. The segment's revenue accounted for 15.6% of total revenue, below the historical average since 2009, and performed rather mediocrely.
In terms of technology products, although Intel also launched Stratix and Agilex product lines, it still did not meet the expectations of the acquisition that year.
"Intel's acquisition of Altera, Altera is essentially operating independently, the two sides just shared some marketing channels, and did not make a good performance in CPU + FPGA, which does not seem to bring additional value." An industry insider said.
Another industry insider also said that in fact, Intel's acquisition of Altera has not seen much value so far. "Recently, we have noticed that Intel has launched some new products, and the products and technologies are very advanced and innovative, and we need to give Intel time to let it ferment."
Will AMD and Xilinx perform better than Intel+Altera?
Shi Xin believes that AMD's acquisition of Xilinx has a certain advantage in terms of product base.
"AMD and Xilinx have carried the banner of heterogeneous computing, especially in OpenCL, AMD and Xilinx have pushed heterogeneous computing and OpenCL, and the technology is easier to integrate." Shi Xin said.
"AMD and Xilinx are highly overlapping in terms of customer base, and there are many resources that can be reused in the market sales channel." Shi Xin also said, "But on the other hand, the two companies provide the same customer with two different chips." AMD faces software programmers with an emphasis on flexibility, while Xilinx faces hardware programmers with an emphasis on stability and reliability. Therefore, the integration of the two companies is also the integration of different technical teams in different departments, and it is also the integration of the company's corporate culture. "
Feng Xinpeng also said that many genes of the two companies are similar, and many VPs of Xilinx have work experience in AMD, and team integration will not be too much of a problem.
Not only that, Foreign media The NextPlatform believes that in the field of FPGAs, because Xilinx has obtained the blessing of the wafer manufacturing process in cooperation with TSMC, it has certain advantages in sales compared with Intel.
However, some insiders believe that AMD, as the "second oldest of the millennium", has no accurate judgment on many forward-looking products, and it is not accurate whether it should enter a new historical stage at this stage, and it is not yet possible to judge whether AMD is already investing in CPU+FPGA heterogeneous computing.
Shi Xin also shared his own views, believing that AMD's acquisition of Xilinx needs to consider many issues, such as unified user interface, the unification and cooperation of software and hardware tools, can not fight separately, but together to attack the high-performance server market.
"Of course, the leadership of both companies must be very careful, and most of the areas will do better." Shi Xin said.
3
Big buyout, the muzzle of the gun is aimed at Intel
For AMD today, it seems that digesting Xilinx is no longer a problem, tracing back to the source of this acquisition, why did AMD choose Xilinx at this time node? What exactly does CPU+ FPGAs mean?
"AMD's acquisition of Xilinx complements each other's business, and from the perspective of shareholders on both sides, it is actually a matter of joining forces and generating great value." Feng Xinpeng said to Lei Feng Net.
"AMD and Xilinx in the upstream of the industrial chain synergy is also very strong, to oem as an example, AMD are 7nm, 5nm chips, Xilinx's chip nodes will continue to evolve forward, the two Fabless jointly place orders to TSMC, whether it is the balance of production capacity or the same TSMC to negotiate prices, have greater advantages, but also conducive to improving gross margin." Feng Xinpeng added.
On the other hand, some insiders told Leifeng that AMD's acquisition of Xilinx is essentially imitating and copying Intel's acquisition of Altera, which is necessary from the perspective of products and technologies that continue to develop. Therefore, some of the reasons for AMD's acquisition of Xilinx can also be found in the industry competition.
When Intel acquired Altera, Schholder, senior vice president and general manager of Intel's client computing division, mentioned the reasons for the acquisition in a keynote speech later.
Schhold believes that there are three reasons:
First, the FPGA has a special structure and special process technology, which can be combined with the x86 processor to create a new heterogeneous processor, while having the high performance of x86 and the flexibility of the FPGA, and continue to implement Moore's Law.
The second is to continue to consolidate Inter's advantages in the field of data centers, and the FPGA embedded in high-end server chips can enhance the performance of servers.
The third is to see the huge business opportunities of the Internet of Things, and many embedded Internet of Things solutions can be optimized through FPGAs.
A founder of an AI processing chip company said: "Some of the existing Intel high-end server chips will embed an FPGA chip, which can improve the speed of computing." The CPU itself is very flexible, but the computing power is relatively weak, and by adding a layer of flexibly programmable FPGAs, it is a good direction to complete some computation between pure ASIC and CPU. "
Feng Xinpeng also said that there are many emerging and fragmented business scenarios, and the heterogeneous computing of CPU+FPGA can support the maximization of customer application flexibility.
From the perspective of the capital market, Ba Haoyan also said that the capital market is optimistic about this acquisition, and the combination of the two can better wrench the wrist with Intel and NVIDIA in the data center field.
"AMD shares will rise 56% in 2021, TTM P/E will reach 41 times at the end of 2021, Xilinx shares will rise 50% in 2021, and TTM P/E will reach 55 times by the end of 2021. After a slight decline while awaiting Regulatory Approval in China, the two prices rebounded and rebounded on January 28, 2022, after Chinese regulators announced that they had conditional approvals. "
"After the acquisition is completed, AMD will have both CPU+GPU and CPU+FPGA product portfolios to directly strengthen its core competitiveness in the data center field, and use this to more extensively reach customers in industrial, automotive and other industries, and further compete for market share from Intel." Ba Haoyan said.
Leifeng network noted that the day after AMD completed the acquisition of Xilinx, AMD closed at a price of $121.47, with a total market value of $197.75 billion, surpassing Intel with a market value of $197.24 billion, the first time in history.
Although AMD's market value has since fallen, AMD, which is aimed at Intel's data center business, has posed a big enough threat to Intel.
4
1+1>2, only owes to people
Analyzing AMD's acquisition of Xilinx, in terms of transaction methods, AMD chose a smarter approach to avoid the possibility of debt; in the integration of product technology, AMD and Xilinx have a better natural fit than Intel + Altera; the capital market is also optimistic about the largest merger and acquisition in the history of semiconductors.
AMD + Xilinx, whether it can achieve the benefits of 1+1>2, I am afraid it depends on the specific cooperation of the two companies.
END