Discussion [WSJ]AMD Is in Advanced Talks to Buy Xilinx

[tamz_msc]

WSJ News Exclusive | AMD Is in Advanced Talks to Buy Xilinx

A deal between the rival chip makers could be worth more than $30 billion and mark the latest big tie-up in the rapidly consolidating industry.

www.wsj.com

Advanced Micro Devices Inc. is in advanced talks to buy rival chip maker Xilinx Inc., according to people familiar with the matter, in a deal that could be valued at more than $30 billion and mark the latest big tie-up in the rapidly consolidating semiconductor industry.

The companies are discussing a deal that could come together as soon as next week, the people said. There is no guarantee they will get there, especially given that the talks had stalled before recently restarting, according to some of the people.

AMD’s market value now tops $100 billion after its shares soared 89% this year as the coronavirus pandemic stokes demands for PCs, gaming consoles and other devices that use the company’s chips. Second-quarter revenue rose 26% to $1.93 billion, while net income jumped more than fourfold to $157 million on the back of record notebook and server-processor sales, AMD said.

The surge in AMD shares could embolden the company to make an acquisition using its stock as currency. Xilinx has a market value of about $26 billion, with its shares up about 9% so far this year, just ahead of the S&P 500’s 7% rise.

With a typical takeover premium, a deal would value the company at more than $30 billion.

AMD, based in Santa Clara, Calif., is led by Chief Executive Lisa Su. In addition to desktop and notebook computers, it makes components used in gaming systems such as Xbox and PlayStation that have been in high demand as the pandemic forces people to stay at home. It also has a growing data-center-processor business that increasingly rivals that of Intel Corp., long the dominant player in that segment.

The addition of Xilinx, led by CEO Victor Peng, would put AMD on a more even competitive footing with Intel and give it a bigger position in fast-growing telecommunications and defense markets.

San Jose, Calif.-based Xilinx’s chips are used in wireless communications, data centers and industries such as automotive and aerospace. Its shares have been hurt by trade tensions between the U.S. and China, and namely the Trump administration’s limitations on shipments to China’s Huawei Technologies Co. because of security concerns. Analysts estimated Huawei accounted for roughly 6% to 8% of Xilinx’s revenue.


Xilinx makes microchips called field-programmable gate arrays, or FPGAs. Unlike standard chips, they can be reprogrammed after they are produced. That makes them valuable in rapid prototyping and in fast-emerging technologies where there isn’t enough time to go through a yearslong development process necessary for other chips.

FPGAs are commonly used in new superfast 5G telecommunications infrastructure, although they may be replaced later by standard chips once the technology is more mature. They are also often used in military communications and radar systems.

Intel is the other main player in the FPGA market, having built its business by acquiring Altera Corp. in 2015.

AMD, which specializes in central processing units that serve as computers’ digital brains, has been gaining share on Intel in recent years, releasing new generations of processors that match or beat its larger rival’s on many performance benchmarks. AMD had around a 20% share in personal computer CPUs as of the second quarter, according to Mercury Research, up from around 8% three years ago.

Consolidation has swept through the semiconductor industry as chip makers seek scale and expand their product portfolios to support the increasing number of everyday items that are connected to the internet. Xilinx, for one, has considered a number of potential tie-ups in recent years that didn’t come to fruition.

I don't know - 30 billion for Xilinx when NVIDIA is paying 40 billion for ARM?

 

[itsmydamnation]

WSJ News Exclusive | AMD Is in Advanced Talks to Buy Xilinx

A deal between the rival chip makers could be worth more than $30 billion and mark the latest big tie-up in the rapidly consolidating industry.

www.wsj.com

I don't know - 30 billion for Xilinx when NVIDIA is paying 40 billion for ARM?

Twice the revenue , 4x the profit , twice the assets
Has something AMD can use

If AMD can buy for 30 billion relative to ARM is looks like a good buy.

it makess sense for xilinx as well, one day at some stage Intel might gets its process and fpga integration in order......

 

[VirtualLarry]

Honestly, why not? Wouldn't it be great, to have a "Xilinx array" nastled among your (many, many) Ryzen processor cores? It would make (mining) wildly superior to other solutions. FPGA miners are a fairly new thing, but combine with Ryzen CPU mining, and Radeon GPU mining, you could have quite the mining rig!

And now, there is a company selling either an ASIC or FPGA on an M.2 PCI-E card, that "helps" mining, by offloading certain tasks. If the "offload" was built into the CPU, effectively, in the "Xilinx array", well, that would be a definite platform advantage for miners.

 

[Ajay]

Eh, paywall.

 

[tamz_msc]

Twice the revenue , 4x the profit , twice the assets
Has something AMD can use

If AMD can buy for 30 billion relative to ARM is looks like a good buy.

it makess sense for xilinx as well, one day at some stage Intel might gets its process and fpga integration in order......

Well there's a chance that AMD might fail to integrate just like Intel. AMD's last big acquisition nearly made them bankrupt.

 

[Markfw]

Well there's a chance that AMD might fail to integrate just like Intel. AMD's last big acquisition nearly made them bankrupt.

Do you have to post negative things about every piece of news about AMD ? Are you an out of work Intel employee or something ?

 

[mxnerd]

I don't know - 30 billion for Xilinx when NVIDIA is paying 40 billion for ARM?

Xilinx's market cap is 25.6 billion with its current stock price.

AMD's last big acquisition nearly made them bankrupt.

AMD probably has better chance this time with Su being the CEO.

 

[HurleyBird]

On the surface this seems dumb. And only more dumb in light of what NVIDIA is doing. If you control ARM, and you play your cards right, you control the future. And you get a world class CPU design team along with it, which you can't even put a price on. A lot of companies were dumb not to pursue ARM, and I gave AMD a pass because I figured they might not want to take on such a large financial burden, but evidently they're perfectly willing.

As a source of profit, Xilinx's P/E is better than the likes of market darlings Nvidia, AMD, Tesla, etc , but isn't that great in and of itself. 4x worse than Intel's. AMD could acquire Xerox for a sixth the price and get close to 60% more profit if my napkin math is right.

Where's the synergy? There's maybe a bit in the server space, but there are much cheaper ways to FPGA tech. And the entire chiplet thing is supposed to work well with strategic partnerships anyway.

You know what would seem like a much better acquisition target? MediaTek. Similar cost but massive synergy. AMD gets a foot in the door for mobile, and gets a world class in-house chipset team, plus a huge staple of basic foundational platform infrastructure just like Intel has.

Or, if they're very forward looking they could be eyeing up someone like D-WAVE. That would do wonders for the brand image as a high-tech, cutting edge operation, and you'd be getting some very intelligent people.

What about Ampere? Nuvia? Someone who actually augments the CPU business that AMD will live or die on. One world-class semiconductor engineering team can change the face of the entire market. And lack thereof, or a stumble from an existing team, can likewise decimate you. AMD does realise that the entire reason they're valued at $100B in the first place is because of this, right? On the graphics side of the equation, Imagination Technologies is practically begging to be bought, and their engineers are right up there with the best of them. You could get several world class teams with synergistic IP for far cheaper than this acquisition.

Is there some super awesome tech that Xilinx has up its sleeves that I haven't heard of? It's entirely possible I'm missing something, but this feels more like a brain-dead business major CEO move (eg. Hector Ruiz or Brian Krzanich) than something I would expect of someone like Su.

 

[tamz_msc]

FPGAs have been touted as the next big thing ever since Intel acquired Altera in 2015, but I've yet to see that potential materialize into products that are massive drivers of growth.

 

[KompuKare]

Well there's a chance that AMD might fail to integrate just like Intel. AMD's last big acquisition nearly made them bankrupt.

Do you have to post negative things about every piece of news about AMD ? Are you an out of work Intel employee or something ?

Well I read that as a negative about both Intel and AMD. Actually, since AMD only ever really bought ATI (Seamicro for $350million or so was rather minor), it is a far bigger criticism of Intel as they are the serial acquisitioner but it seldom works out well.

Actually, if AMD are going to be playing stock market merger games, it might explain why they keep trying to push margins even at the cost of marketshare. The price rises for the lower end Zen3 seem rather risky: the R&D is a fixed cost so unless TSMC have serious capacity issues, going high-margin but low-marketshare is strange. The cheapest entry point to Zen3 having a RRP of $300 is surprising considering the entry to 6-core Zen2 was $200.

 

[mxnerd]

https://www.bloomberg.com/news/arti...ks-to-buy-rival-u-s-chipmaker-xilinx-wsj-says

AMD would gain a bigger foothold in data center (AWS, for example), AI markets and 5G

 

[jpiniero]

The problem with acquiring someone else is that they have to agree to be acquired for what is basically Funny Money. As long as it is indeed all stock, it's not going to financially cripple the company like buying ATI did.

Where's the synergy? There's maybe a bit in the server space, but there are much cheaper ways to FPGA tech. And the entire chiplet thing is supposed to work well with strategic partnerships anyway.

I don't believe there are any other FPGA competitors other than Altera, which Intel owns now. Sure, AMD could have a partnership to get FPGA chiplets but buying them ensures that will happen.

 

[DrMrLordX]

Well there's a chance that AMD might fail to integrate just like Intel. AMD's last big acquisition nearly made them bankrupt.

AMD's last big acquisition has worked out very well for them in the long run, despite the accrual of debt. AMD would be lucky if Xilinx could have the same overall positive impact on their business, especially when they now appear to have multiple stable revenue streams they can use to carry additional debt for a long time.

 

[Zucker2k]

Do you have to post negative things about every piece of news about AMD ? Are you an out of work Intel employee or something ?

Please, we're not on AMD.com. You spearhead the attack on Intel on this forum. Even in this thread, you couldn't help but take a dig at Intel. I have had many arguments with @tamz_msc on this forum where he's either attacking Intel products or defending AMD products. He's not all of a sudden a pro Intel member because he's sharing opinion that's not seen to be worshipping AMD like you know who.

 

[coercitiv]

I have had many arguments with @tamz_msc on this forum where he's either attacking Intel products or defending AMD products.

As someone who also strongly disagreed with @tamz_msc on a number of occasions I also concur that accusing him of brand bias is odd. I would accuse him of being stubborn... but that's a given on these forums. Heck, one needs thick skin just to browse it!

 

[maddie]

The FPGA market is the product area that Xilinx has targeted, but they have a broad & deep expertise in chiplet tech. They are ~2 years ahead of even AMD in high performance, high bandwidth, chiplet based computing. This is an essential skillset for the future.

 

[NTMBK]

I would rather see them invest that money into core R&D.

 

[itsmydamnation]

Well I read that as a negative about both Intel and AMD. Actually, since AMD only ever really bought ATI (Seamicro for $350million or so was rather minor), it is a far bigger criticism of Intel as they are the serial acquisitioner but it seldom works out well.

Actually, if AMD are going to be playing stock market merger games, it might explain why they keep trying to push margins even at the cost of marketshare. The price rises for the lower end Zen3 seem rather risky: the R&D is a fixed cost so unless TSMC have serious capacity issues, going high-margin but low-marketshare is strange. The cheapest entry point to Zen3 having a RRP of $300 is surprising considering the entry to 6-core Zen2 was $200.

This assumes that they won't sell everything they make. Past history has been that amd have under estimated demand. This way they get to be conservative on inventory and maximize revenue, if it doesn't turn out they can always release the non x varents. Personally I hope for 5600 in Jan.

 

[piokos]

I don't see how this is even possible. AMD simply can't afford Xilinx.

Almost identical net income (Xilinx from a smaller revenue, i.e. higher profit margin).
Xilinx financial situation is more solid, they have stronger position in their core business (50% market share).

The most probable outcome would be a merger, keeping both brands and independent boards, just intensify cooperation (maybe make it exclusive).
AMD needs FPGA.
Xilinx needs to defend from Intel (ex-Altera) - second largest FPGA maker.

 

[turtile]

I would rather see them invest that money into core R&D.

I think that's the whole point of this acquisition. I believe post-zen will integrate FPGAs on advanced packaging which requires the engineers from Xilinx.

 

[jpiniero]

I don't see how this is even possible. AMD simply can't afford Xilinx.

They can if they issue $30B in stock to pay for it.

 

[piokos]

They can if they issue $30B in stock to pay for it.

From an outsider perspective, it seems virtually impossible for such a takeover to provide enough added value to make up for this. If AMD wants FPGA, they can work with Xilinx without this (they probably already have).
I'm sure Xilinx would love to become a sole supplier for AMD's FPGA chiplets (or RT ASICs).

Maybe there's some secret strategy for world domination that will convince the investment funds - we'll probably never know.
Personally, I seriously doubt shareholders will give this green light. But if they do... well, it's their problem.

I bet quite a few forum members hold some AMD shares and they probably follow this thread. You guys started selling already?

 

[Abwx]

Methink that ARM would had been a better deal for AMD, although Xilinx would had been even more needed because of their expertise, they are more competitive and with a much bigger market share than former Altera.

Not sure that Lisa Su was visionary in this matter, guess that she should have some regrets..

 

[piokos]

Methink that ARM would had been a better deal for AMD, although Xilinx would had been even more needed because of their expertise, they are more competitive and with a much bigger market share than former Altera.

Not sure that Lisa Su was visionary in this matter, guess that she should have some regrets..

As was already mentioned above: AMD will likely take this cash from their current shareholders (almost 70% institutional).

Taking over ARM would mean obvious cannibalism.
So this would probably be a better deal in very long term (when - and IF - ARM starts to take market share from x86), but an awful deal for the next few years.

Xilinx is making a different product, with minimal cannibalism and obvious synergies (and cost cutting) possible. So the $30B investment should become profitable much earlier.

 

[SarahKerrigan]

The problem with acquiring someone else is that they have to agree to be acquired for what is basically Funny Money. As long as it is indeed all stock, it's not going to financially cripple the company like buying ATI did.



I don't believe there are any other FPGA competitors other than Altera, which Intel owns now. Sure, AMD could have a partnership to get FPGA chiplets but buying them ensures that will happen.

There are a couple other FPGA vendors, notably Lattice and Microchip, although neither have much in their lineup at the ultra high end, which is Xilinx/Altera territory. Both have been moving upward, though.

Lattice owns AMD's former FPGA business.