What does the US$50b deal of AMD, Xilinx mean to the chip industry?

• With the Xilinx acquisition, AMD will be able to increase its breadth in key markets like data centers where Xilinx has a strong network.
• It will be beneficial for AMD’s AI presence as well as in the 5G communications, automotive, industrial, aerospace and defense markets.
• The combined company will have more than 15,000 engineers and a completely outsourced manufacturing strategy that relies heavily on TSMC.

In October 2020, Advanced Micro Devices Inc or more commonly known as AMD inked a US$35 billion deal to buy Xilinx Inc., a maker of programmable chips used in systems ranging from data center servers to satellites. The deal was made to buy AMD a foothold in many parts of the chip market where it currently doesn’t have as big a presence, especially the data center segment.

Some 16 months later, the deal finally went through and AMD, a semiconductor designer purchased Xilinx for US$50 billion, a record chip industry deal. The transaction, considered as the biggest in AMD’s history, met all the various regulatory approval it needed to happen.

According to Reuters, the deal’s value climbed to about US$50 billion from US$35 billion because AMD’s share price increased substantially since the acquisition was first announced. Coincidentally, the closing of the deal comes on the heels with Nvidia Corp’s decision to abandon its plans to buy SoftBank-owned Arm Ltd–it was meant to be the biggest semiconductor merger of all time.

What would this deal mean for AMD and Xilinx?

AMD’s CEO Lisa Su told Reuters that between AMD’s processor technologies and Xilinx’s system on chips and field programmable chips, the two businesses are complementary. “That was our focus in talking to the regulatory authorities across the world,” Su said, adding that Arm was an important partner for AMD but declined to say more about Arm’s possible next steps.

Additionally, with the Xilinx acquisition, Su said AMD will be able to increase its breadth in key markets like data centers where Xilinx has a strong network and AI presence, as well as in the 5G communications, automotive, industrial, aerospace and defense markets. “Those are all markets that AMD has had very little presence in and they all need high performance computing as well,” she added.

Besides the Field Programmable Gate Arrays (FPGAs) for which it’s best known, Xilinx also makes chips that are used to power 5G cell towers. It is coincidentally an area where AMD rival Intel Corp. has also sought to increase its presence. Intel in 2020 introduced several processors with specialized networking features designed for carriers. 

“The acquisition of Xilinx brings together a highly complementary set of products, customers and markets combined with differentiated IP and world-class talent to create the industry’s high-performance and adaptive computing leader. Xilinx offers industry-leading FPGAs, adaptive SoCs, AI engines and software expertise that enable AMD to offer the strongest portfolio of high-performance and adaptive computing solutions in the industry, ”Su said in a statement. 

Since the acquisition is complete, AMD said it is turning the chipmaker into a new business unit dubbed the Adaptive and Embedded Computing Group, or AECG for short. The unit will be led by former Xilinx CEO Victor Peng. The combined company has more than 15,000 engineers and a total addressable market that is expected to reach US$135 billion next year, Su stated.