Is the semiconductor industry entering a period of consolidation? In 2020, the semiconductor industry is in for another big deal after ADI offered to buy Maxim and Infinity for $40 billion. AmD is in in-depth talks to buy Cylins Xilinx, the maker of programmable logic devices, in a deal that could be worth more than $30 billion, the Wall Street Journal reported late Thursday, citing people familiar with the matter. Selings shares rose 14.11%, while AMD fell 3.94%.
The industry has entered a cyclical boom with a surge in demand for semiconductors in areas such as artificial intelligence, 5G, and the Internet of Things. The giants are all eyes dead on the next era.
What does AMD want?
Selings’ primary business is to design, develop, and sell programmable platforms that include advanced integrated circuits, software design tools, and predefined system capabilities to deliver core intellectual property. Selings is the boss of the FPGA (Field Programmable Gate Array), a 50% share of the old semiconductor company founded in 1984 as the inventor of the FPGA and the world’s first waferless semiconductor company.
Q2 2019, ranked sixth in the global Fableless (crystalless semiconductor) manufacturer rankings, just one place lower than AMD.
Compared with the dedicated integrated circuit ASIC, FPGA is semi-custom, the design and development cycle is shorter, the speed and process can be faster, because there is no “instruction” step, based on the FPGA development chip cost is much lower than ASIC, as Moore’s Law gradually lapsed, the traditional structure of processor performance can no longer continue to improve, at this time began to have many companies deploy faster, lower cost FPGAs.
The FPGA differs from the ASIC development process.
San Jose, California-based Selings produces programmable chips for data centers to speed up tasks such as artificial intelligence and 5G telecommunications base stations.
At present, the construction of 5G infrastructure, cloud servers and artificial intelligence chips are hot areas that need to be built on FPGAs, and the importance of Selins in them is self-evident, such as Huawei is one of Selings’ big customers.
Speaking of which, you should also understand that AMD wants this deal to go straight into markets that Intel holds firmly in. The deal is significant for AMD and is likely to be the semiconductor company’s heaviest since it acquired ATI in mid-2006.
The outbreak has ushered in a brief return to the PC market, but both inside and outside the industry are well aware that this is only temporary, PCs are still the sunset market, AMD light now yes is not enough, but also need to find the imagination of the future space. And the data center, server market is obviously the answer, growing rapidly, the industry space is huge.
In the server sector, Intel is still the dominant, for this To B market, stability, customer development and so on are homework, AMD will be difficult to shake Intel for a while and a half, AMD is still mainly a backup or supplementary choice, but AMD has begun to catch up. From 2017 to 2019, AMD’s share of the server market grew from 1% to 8%, and with AMD taking big orders from Amazon, Microsoft, and so on, CEO “Soma” announced in August that he had achieved double-digit goals in the data center market, and the acquisition of Selings is the most critical step in continuing to pursue Intel in the future.
Intel’s $16.7 billion acquisition of Altera in 2016, the second-largest FPGA market share, and Intel’s success in combining its own CPU with the FPGA, clearly put a lot of pressure on AMD to slow down and may lose the chance to catch up forever. In January, AMD also brought in Dan McNamara, a former senior vice president of Intel and head of the FPGA division.
Intel’s acquisition of Altera, in which Avda wanted to swallow Arm, and its offer to Selings was AMD’s response. If both Nda and AMD’s acquisitions are expected, the semiconductor market in the future will be Intel-Altera, N.D.-Arm, and AMD and Serinsa.
But then again, even if AMD succeeds in acquiring Salings, the impact will be hard to see in the short term, after all, Intel’s advantage in the server sector is too solid. What AMD really wants is access to 5G, the Internet of Things, cars and so on, a ticket to the next era that AMD has barely laid out its business in the past.
Now is the best time?
The ability to make a bid for Cyrus, the world’s top 10 company, also shows that AMD’s recent financial position is indeed good, with a market capitalisation of approximately $97,564 million, compared with Cyrus’ market capitalization of approximately $29.5 billion.
AMD’s market capitalisation has soared by more than 80% so far this year, its market capitalisation has exceeded $100 billion, its operating cash flow and free cash flow have both hit their highest levels since 2007, and revenues will remain high in the short term, driven by businesses such as new consoles. Interestingly, when news broke of Intel’s planned acquisition of Altera in 2015, there were rumors that Selings was planning to buy AMD, and within a few years, the buyer and seller had called in, and AMD had turned around.
In another context, Therings has lost a number of Chinese customers such as Huawei because of the ban, which has hit its performance hard. In February, it was reported that Mr. Selings had made the latest round of layoffs, widely seen as related to the U.S. government’s ban on Huawei.
From a financial point of view, now may be the best time to buy. AMD’s acquisition of ATI that year was forced because it was not financially adequate, leading the company into a financial crisis, heavily indebted, continuous layoffs, and failed to make the acquisition work as it should have. At the moment, AMD is much better off than it was a decade ago.
But financial health is only a necessary and inadequate condition, and while it may not yet be possible to have the same impact as the ARM acquisition, AMD will still face a lot of resistance if it is to succeed in swallowing Selings.
Take The example of InDada and Arm, not only in the face of regulatory pressure, but also in opposition from industry competitors. Several technology companies, including Intel, Qualcomm and Tesla, are opposed to The Arm deal and plan to voice their concerns to U.S. and global authorities,media fudzilla reported.
Whether regulators will let go, whether competitors will step in, and, crucially, whether Selings will agree is a matter for the deal.
All in all, given their respective positions in the industry, this remains an acquisition with far-reaching implications for the industry. The semiconductor industry is entering a “harvest period” in which giants no longer hide their ambitions in the face of a booming future.