If the deal goes through, AMD is likely to end up paying roughly $30 billion for Xilinx...
AMD is said to be negotiating to buy Xilinx, and a deal could come as soon as next week. If the two companies agree, the deal would likely be worth approximately $30 billion, according to The Wall Street Journal.
The value of AMD shares has soared of late, which means it should be able to much more easily swing a deal, and pay largely in stock. The WSJ reported that AMD’s stock grew 89% this year, and the company now has a valuation over $100 billion. Xilinx, meanwhile, has had to contend with the vicissitudes of President Donald Trump’s trade war with China; it tried and failed to secure a dispensation to keep supplying Huawei.
AMD buying Xilinx would be the second mega-merger announced this year, following Nvidia’s announcement it intends to buy Arm Holdings for $40 billion.
The AMD-Xilinx combination is much more reminiscent of Intel’s purchase of Altera in 2015 for approximately $16.7 billion, however. It would be another instance of a leading provider of CPUs buying a specialist in FPGAs, and for similar reasons — to gain control of a complementary chip technology important in data centers in general, and with artificial intelligence (AI) workloads specifically. FPGAs are often used for AI acceleration.
In recent years, AMD has been slowly gaining market share in PCs and laptops, mostly at Intel’s expense. Intel has retained its iron grip on the data center business, but AMD has designs on that market, has scratched a few percentage points of market share away from Intel already, and it no doubt hopes the acquisition of Xilinx will help it become even more competitive with Intel in data centers.
FPGAs are used for AI acceleration, but so are GPUs — which brings us back to GPU specialist Nvidia. Nvidia has been explicit that it expects to become a stronger competitor in the AI and data center markets by combining its technology with Arm’s.
AMD taking control of Xilinx appears to be a way of keeping up with companies that are rivals in so many market segments. Intel, AMD, Nvidia, and Arm are also among the leading vendors in the high performance computing (HPC) market as well.
FPGAs are popular when prototyping. Companies will often continue to use them when they first commercialize their products. So it is with 5G systems, in which FPGAs are currently widely used. In the past it has been common for companies to eventually replace FPGAs with standard ICs in subsequent product generations, however.
That’s been the pattern over the years. FPGA vendors have been making the case that that might change though. One of the reasons why 5G equipment makers are sticking with FPGAs is because the standard keeps evolving, so it makes sense to build 5G systems with reprogrammable ICs. Similarly, automotive OEMs are designing cars that would be upgradeable through over-the-air updating. If their vehicles are going to be constantly upgraded, it might make sense to not only start with FPGAs, but to stick with them.
Altera and Xilinx are the two largest FPGA vendors. Lattice Semiconductor is a distant No. 3. Generally speaking, it designs products for a different set of end uses.