AMD’s deal pushes toward a record for chip M&A

NEW YORK: Advanced Micro Devices Inc’s (AMD) US$35bil purchase of semiconductor maker Xilinx Inc pushes 2020 toward a record year for chip deals, as large tech companies rush to consolidate the increasingly competitive industry.

There have now been US$110bil of deals announced in the semiconductor industry this year, led by Nvidia Corp’s US$40bil bid for Cambridge, England-based chip designer Arm, according to data compiled by Bloomberg. The Xilinx deal makes 2020 the biggest year at this point on record for pending and completed deals involving semiconductors, the data show.

The highwater mark for semiconductor deals was reached in 2016, when US$122bil in transactions were struck for the entire year. If acquisitions continue at the current pace, 2020 will easily top that level. The largest deal of 2016 was SoftBank Group Corp’s US$24bil purchase of Arm.

Competition in the semiconductor industry is heating up as companies that were once customers, such as Apple Inc, design their own chips and established players like Nvidia branch out into new areas.

One adviser estimates that there are about 75 public chip companies now and that number could be cut in half because of consolidation in the next few years.

With the Arm deal, Nvidia gets access to semiconductor designs that are in most smartphones and licences for chips that run thousands of appliances known as the Internet of Things.

Buying San Francisco-based Xilinx gives AMD access to programmable chips for wireless telecommunication networks ahead of phone carriers’ plans to build out high-speed fifth-generation mobile networks. It also helps the company expand further in the profitable market for data-centre computer components, currently dominated by Intel Corp.

Earlier this month, Intel agreed to sell its Nand memory unit to South Korea’s SK Hynix Inc for about US$9bil. — Bloomberg

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