The coronavirus pandemic has forever changed the microchip industry, kicking its consolidation into high gear as people rely more on massive data centers to host their video conferences and other productivity services. Capping off a year of massive change for semiconductors, AMD agreed to buy rival chipmaker Xilinx in a $35 billion deal.

The two companies announced Tuesday that the all-stock transaction will create the industry’s largest high-performance computing company and further bolster AMD’s growing portfolio. Combined, it will have 13,000 employees with the deal expected to close at the end of 2021. Together, the companies are hoping to further establish itself against Intel and other rivals as demand booms for chips needed for computers, cars and aerospace.

Xilinx has also been working to penetrate data centers with programmable processors that help speed up specialized tasks such as compressing videos or providing digital encryption. Its primary rival in the area, Altera, was scooped up by Intel for $16.7 billion in 2015 in what was then Intel’s largest-ever deal.

“There are some areas where we’re very strong, and we will be able to accelerate some of the adoption of the Xilinx product family,” Su told Reuters in an interview. “And there are some areas where (Xilinx CEO) Victor (Peng) is very strong, and we believe that we’ll be able to accelerate some of the AMD products into those markets.”

The tie-up comes at a time when Intel’s manufacturing technology has fallen years behind TSMC’s. AMD, which spun off its factories nearly a decade ago, has rocketed ahead of Intel with chips that perform better. The performance edge helped AMD gain its best market share since 2013 at slightly less than 20% of the CPU market, which has in turn pushed its shares up 68% between the start of the year and the close of trade on Oct. 26.

Todd Horwitz Chief Strategist BubbaTrading.com
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