Chip designer Advanced Micro Devices Inc. (AMD) said Tuesday it would buy Xilinx Inc for $ 35 billion, stepping up its battle with Intel (Intel Corp.) in the chip market.
The deal, which AMD expects to complete by the end of 2021, will create a combined company of 13,000 engineers and a fully externalized manufacturing strategy that relies primarily on Taiwan Semiconductor Manufacturing Co Ltd (TSMC), Reuters reported.
Both US companies are using this approach to gain market share from Intel, which relies on domestic production.
AMD has long been Intel’s main rival for processors in the PC business.
Since CEO Lisa Su took over AMD in 2014, she has focused on challenging Intel in the rapidly evolving data center business that supports Internet-based applications and services, the rise of artificial intelligence, and 5G telecommunications networks.
Xilinx is also trying to enter the market with programmable processors that help speed up specialized tasks such as compressing videos or providing digital encryption. The company’s main rival in this sector, Altera Corp., was bought by Intel for $ 16.7 billion in 2015.
The deal comes at a time when analysts say Intel’s manufacturing technology lags behind TSMC for years. According to their estimates, AMD, which separated its factories almost a decade ago, has overtaken Intel with better-performing chips. Performance performance helped AMD gain its best market share since 2013, just under 20% of the processor market, which in turn increased the value of its share by 79% this year.
Shares of AMD fell 1.8 percent, while shares of Xilinx rose nearly 12 percent after the two companies announced the deal.
Xilinx also uses TSMC factories to manufacture its chips, with both US companies using a modular design that allows them to replace different parts of the chip to avoid production difficulties or delays.
The deal will be wholly owned – AMD shareholders will own about 74% of the new company and Xilinx shareholders the remaining 26%.
Su will lead the combined company as CEO, and Victor Peng, CEO of Xilinx, will be the chairman responsible for Xilinx’s strategic business growth initiatives. The companies expect the deal to generate $ 300 million in cost savings.
AMD also reported earnings on Tuesday, earlier than planned. The company reported revenue and adjusted earnings of 2.8 billion and 41 cents per share, exceeding Wall Street expectations of $ 2.57 billion and 36 cents per share.