AMD In Negotiations To Buy Chipmaker Xilinx As Semiconductor Industry Consolidates

KEY POINTS

The deal could emerge next week
With a market cap in excess of $100 billion, AMD shares have surged by almost 90% this year
AMD has flourished from increased demand for personal computers, gaming devices lately

Advanced Micro Devices (AMD) has entered into talks to purchase microchip maker Xilinx (XLNX) in a deal that could be worth at least $30 billion as the semiconductor industry continues to consolidate.

The Wall Street Journal reported that acquiring Xilinx would allow AMD to compete more effectively with its main rival, Intel (INTC), while gaining a stronger foothold in the telecommunications and defense markets.

The deal could emerge next week, the Journal noted.

Bloomberg reported the deal would also help AMD Chief Executive Officer Lisa Su take away some of Intel’s dominance in the profitable market for data-center computer components.

With a market cap in excess of $100 billion after its shares have surged by almost 90% this year, AMD has flourished from increased demand for personal computers, gaming devices and other products during the pandemic lockdown.

In the second quarter, AMD revenues jumped by 26% to $1.93 billion, while net income more than quadrupled to $157 million. Xilinx has a market value of some $26 billion, while its stock has climbed about 9% year to date.

As of 8 a.m. EDT Friday, Xilinx shares had jumped 16.5% in pre-market trading.

But Xilinx’s performance this year has been hurt by the Trump administration’s actions against China’s Huawei Technologies due to security concerns. Huawei is estimated to represent about 6% to 8% of Xilinx’s revenue.

The chip industry has already witnessed some major deals this year – in July, Analog Devices Inc. (ADI) agreed to purchase Maxim Integrated Products (MXIM) for more than $20 billion; in September, Nvidia Corp. (NVDA) signed a deal to acquire Britain’s Arm Holdings for $40 billion.

However, trade economist Chad Bown of the Peterson Institute warned that continued trade tensions between Washington and Beijing are likely to hurt U.S. semiconductor companies. Export restrictions imposed by Trump will make it harder for China to buy semiconductor components from foreign nations.