AMD said it is buying Xilinx for $35 billion; the deal is all about high performance computing. The company also reported Q4 earnings...
AMD said it is buying Xilinx for $35 billion, confirming the news leak several weeks ago. AMD made it clear that this deal is all about high performance computing (HPC): it was the headline of its announcement; it is at the top of AMD’s web site today; and it was the first thing CEO Lisa Su said (after “Good morning”) on the company’s conference call with analysts. After all the speculation about what the deal might mean, one can now be fairly confident that the main focus of AMD buying Xilinx is HPC.
Our previous analyses, after the original rumor was first published, were fairly spot-on, it seems.
The confirmation of the Xilinx acquisition was piggybacked on AMD’s regularly scheduled conference call to discuss its quarterly earnings. The company reported record revenue for the third quarter of $2.8 billion, up an even $1 billion from the like period in 2019, and up $900 million from the immediately preceding second quarter. Net income was $390 million, more than triple the $120 million logged in Q3 of 2019.
Su said increased Epyc and Ryzen sales offset lower sales in graphics. She said the company picked up new customers in the automotive, banking, and pharmaceutical industries. In the HPC segment, she touted growth in the data center market, and contracts to provide chips for new supercomputers being built in Australia and Finland. Su said the newest version of AMD’s Epyc processor, called Milan, is being evaluated for over 100 systems. AMD is “in the middle of launching” Milan, Su said, but the company has not yet formally announced it.
AMD projects its revenue for the fourth quarter will be $3 billion, plus-or-minus $100 million. For fiscal 2020, the company believes its year-over-year revenue growth will be 41%, driven by PC, gaming, and data center products. The company reported 2019 revenue of $6.7 billion.
As for the Xilinx deal, Su said while there will continue to be strong demand for its CPUs and GPUs in HPC, the company sees growing need in that market for adaptive SoCs and FPGAs, and that is why buying Xilinx makes sense. She also mentioned the value of picking up Xilinx’s expertise in mixed-signal processing, advanced packaging, software stacks for vertical markets, and other technologies.
She also pointed out that Xilinx has partnerships with companies involved in the 5G, data center (with its smart NICs), automotive, industrial, aerospace and defense market segments — the obvious implication being that AMD will expand its customer base.
Growth opportunities in the next 3 to 5 years include data centers and supercomputing — which is to say, in HPC. Beyond that, one of the few specific opportunities that Su mentioned in her prepared remarks was that Xilinx is supplying Samsung and Ericsson with chips for their 5G systems, and there might be an opportunity to take advantage of those relationships. Later, during the question-and-answer session, she and Xilinx CEO Victor Peng said they believe the automotive sector will be a long-term growth opportunity.
Peng on several occasions during the conference call mentioned opportunities on the edge. Su barely mentioned the edge until asked directly during the question-and-answer session. She said “Victor’s focus has actually been quite a bit at the edge. I think we share the idea that a common software environment is so important to try to accelerate the usage of those solutions in the market.”
Su and Peng consistently talked about how the two companies complement each other, but when asked about specific technology integration, Su’s response was somewhat unexpected. The questioner asked specifically about the possibility of mixing hard IP and configurable logic on a chip, and also about packaging technologies (AMD is a leading advocate of chiplets technology), but Su’s response went elsewhere.
“The days of monolithic integration are probably over,” she said. “There will be some opportunities for us to do things on the hardware side, …but we are very focused on doubling down on the software environment, because that’s really the key to accelerated adoption,” to help customers with their specific workloads, she explained.
AMD said the combined companies will have a team of 13,000 engineers and over $2.7 billion of annual R&D investment.