AMD's $35 billion purchase of Xilinx is a play to combine two companies executing well and become a data center juggernaut...
The big question will be whether AMD can leverage Xilinx's adaptable and programmable systems on a chip in a way that Intel couldn't with its Altera purchase. AMD CEO Lisa Su and Xilinx CEO Victor Peng have a plan and a history of working together.
Here are the key takeaways about the AMD purchase of Xilinx.
AMD and Xilinx hope to do better than Intel and Altera.
The idea that a CPU and GPU company can thrive by buying a field-programmable gate array (FPGA) company has been tried before with Intel's purchase of Altera. That acquisition didn't turn out to be the game changer originally expected.
What's different this time? Su said:
We've been thinking about this for some time. And I think it's actually a very different situation. Xilinx is the market leader. I mean, if you look at how their business has grown, over the last few years, their market share has continued to grow. I think both companies are executing really well. So you ask why now? We feel very good about our base businesses. People look at our businesses and say they're complementary, and they are very complementary from a product and market standpoint. But we have sort of important intersections around the data center focus and then also around the technology sort of strategy, right? I mean, we're both leading-edge technology users. We both are partnered with TSMC. We both have really leaned into this modular design environment and Xilinx is a leader in some of that -- some of the 2.5D, 3D integration. We're both invested in software and open source. There are a lot of synergies as the road maps execute. And our cultures are very aligned. We love the technology. We have a common vision. I think we have a bold vision of what we think we can do for the industry and for our joint company. I haven't been big on M&A. We're not doing M&A for M&A's sake.
Victor Peng, Xilinx CEO, said:
I think this is completely different than that transaction. And I guess I'll just lean into the fact that, as Lisa said, we have very common vision for the transformations that are happening, not only in the data center, but I would say at the edge and even endpoint applications.
AMD and Xilinx will integrate architecture based on workloads not a monolithic approach.
Su noted that the "days of monolithic integration are probably over." She added:
We've been on this chiplet methodology because it's the right thing to do. You get the right compute for the right workloads. Xilinx team is also very advanced in thinking on this area. I think there will be some, let's call it, opportunities for us to do things on the hardware side. But I view it more as market-specific optimization as we think about what customers need. And then certainly, on the software environment, we are very focused on doubling down on the software environment because that's really the key to accelerate adoption. So lots of opportunities for us to bring the portfolios together. But really, I think the opportunity is at the solution level with customers and the important workloads.
AMD and Xilinx will both focus on the data center.
Su said part of the rationale for the Xilinx purchase is becoming a strategic data center vendor. She said on a conference call:
We've both chosen data center as our strategic focus. We have the CPU and GPU strength. Xilinx brings the accelerator capability and very strategic smart NIC technology. I think that's a strong growth vector for the combined company. I think the broader markets in communications, in automotive, in industrial and aerospace and defense, those are all very attractive markets that can use CPUs and GPUs. And so I think the market presence that Xilinx has and the leadership in those markets also help -- sort of have the ability to bring some of the base AMD technology in there.
The companies also see revenue gains in data centers, communications infrastructure via Xilinx and embedded markets. It also doesn't hurt that AMD is performing well and delivered stellar third quarter results.
AMD delivering in the data center
AMD is gaining share on Intel in the data center. In the third quarter, Intel's data center business wobbled as enterprises pulled back. AMD's server processor sales more than doubled in the third quarter from a year ago.
The data center business, particularly on the server side, is very important to us. We performed very well here in the third quarter and doubled it from a year-over-year standpoint, sequential double-digit growth. We see good momentum across the cloud hyperscalers as well as in the enterprise business. We have more platforms that continue to launch here in the third quarter. As we look forward from a data center environment, I would say that the overall data center environment is actually good. As we go here into the fourth quarter, we are starting to launch Milan in terms of shipments to cloud as well as some HPC customers this quarter. OEMs are preparing to launch Milan platforms in the first quarter. And I would say it's very much a customer-specific message. Some of our cloud customers are going to continue to ramp Rome in the fourth quarter. Several are also preparing for a transition from Rome to Milan. But overall, we believe that the demand environment is good.
Notebooks are strong and highlight AMD's overall strength in portfolio.
Su noted that AMD's Ryzen 4000 series notebook chips are faring well in the market due to gaming and commercial sales. In the fourth quarter, AMD will roll out the Radeon 600 series for a graphics boost.