Chipmaker to buy the FPGA vendor for $35B as processor market continues to consolidate
AMD is buying programmable chipmaker Xilinx in a $35 billion deal that will boost its capabilities in the high-performance computing (HPC) space and further drive an ongoing realignment in the data center processor space.
The Lowdown: AMD’s announcement Tuesday confirmed reports earlier in the month that AMD, which has seen a resurgence over the past several years under President and CEO Lisa Su, was interested in acquiring Xilinx, which produces field-programmable gate arrays (FPGAs), which are chips that can be programmed through software.
The Details: The all-stock deal will create a combined chip company that will have more than 13,000 engineers, more than $2.7 billion in annual R&D investment, and a deeper portfolio of products – from processors and FPGAs to GPUs and systems-on-a-chip (SoCs) to extend its reach into a broad range of markets, from HPC and data centers to PCs, gaming, communications, and automotive technology.
The acquisition is expected to close by the end of 2021, after which AMD stockholders will own about 74% of the company, with Xilinx shareholders owning the remaining 26%. AMD and Xilinx boards of directors have approved the deal, which now needs approval from shareholders of both companies and regulatory boards.
AMD expects to hit operational efficiencies of about $300 million within 18 months after the deal closes. Su will lead the combined company as CEO, while Xilinx President and CEO Victor Peng will be president, responsible for the Xilinx business and strategic growth initiatives. In addition, at least two Xilinx board members will join AMD’s board of directors.
The Impact: The deal comes at a time of rapid consolidation and change in the processor industry. For the past couple of decades, that market has primarily been the domain of Intel, which has owned more than 80% of it. However, the company has stumbled in recent years — for example, with production delays that caused it to fall behind AMD and others in offering 7-nanometer processors. Intel took a financial hit last week when it reported softening demand in its data center business, which accounts for about a third of its revenue.
At the same time, the competition has ramped up as workloads have evolved and technologies like artificial intelligence (AI) and machine learning and new computing models like the cloud and the edge have emerged. AMD, which had been a non-factor for a decade, has remade itself in large part through the development of the Zen microarchitecture and its EPYC data center chips and Ryzen client processors.
Unlike CPUs, FPGAs can be reprogrammed, which is important in such environments as HPC and cloud and with AI-based workloads. FPGAs, like GPUs, also can be used as accelerators to complement CPUs in running data center workloads.
Meanwhile, Nvidia – which, like AMD and Intel, offers GPUs that have become key components in HPC and enterprise data center servers – is in the process of spending $40 billion to buy Arm, the chip designer whose low-power (SoC) architecture can be found in most smartphones and other mobile devices and now is growing in data center systems, including HPC and supercomputers. The move will create another processor powerhouse that will better challenge Intel.
There also are other architectures, like RISC-V, to challenge Intel’s and AMD’s x86-based chips, and there’s a growing list of smaller companies like Ampere, which makes Arm-based chips and is led by former Intel executives. In addition, companies like Amazon Web Services (AWS) – with its Graviton chips – also are developing their own processors.
For channel partners, these changes in the processor market are giving them what they’ve been seeking for years: a broader range of options beyond Intel to offer their end customers.
Background: AMD announced the Xilinx deal at the same time it released its third-quarter financial numbers, which illustrated its growing strength. The Santa Clara, California-based company saw revenue reach more than $2.8 billon, a 56% year-over-year increase. Net income jumped 225% to $390 million.
The Buzz: “Our acquisition of Xilinx marks the next leg in our journey to establish AMD as the industry’s high-performance computing leader and partner of choice for the largest and most important technology companies in the world,” Su said. “This is truly a compelling combination that will create significant value for all stakeholders, including AMD and Xilinx shareholders who will benefit from the future growth and upside potential of the combined company. The Xilinx team is one of the strongest in the industry and we are thrilled to welcome them to the AMD family. By combining our world-class engineering teams and deep domain expertise, we will create an industry leader with the vision, talent, and scale to define the future of high-performance computing.”
“We are excited to join the AMD family. Our shared cultures of innovation, excellence, and collaboration make this an ideal combination. Together, we will lead the new era of high-performance and adaptive computing,” Peng said. “Our leading FPGAs, adaptive SoCs, and accelerator and SmartNIC solutions enable innovation from the cloud to the edge and end devices. We empower our customers to deploy differentiated platforms to market faster and with optimal efficiency and performance. Joining together with AMD will help accelerate growth in our data center business and enable us to pursue a broader customer base across more markets.”