AMD agrees to buy Xilinx for $35 billion

Both firms expect the deal to close at the end of 2021

AMD announced on Tuesday that it has agreed to buy rival chip maker Xilinx Inc in a $35 billion all-stock deal.

As part of the deal, Xilinx shareholders will own about 26 per cent of the combined firm, while the rest 74 per cent of the company will be owned by AMD shareholders. Xilinx shareholders will get about 1.7 shares of AMD common stock for each share of Xilinx common stock.

Both firms expect the deal to generate $300 million in cost savings. It will also create a combined company with about 13,000 engineers.

AMD's CEO Lisa Su will serve as the new CEO of the combined company, while Xilinx's CEO Victor Peng will continue to lead Xilinx's operations - being responsible for Xinlinx's business and growth initiatives.

Both companies expect the deal to close at the end of 2021.

In an interview with Reuters, Su said that Xilinx is very strong in some markets, and AMD believes that the deal would enable it "to accelerate some of the AMD products into those markets."

Xilinx, founded in 1984, specialises in creating field-programmable gate arrays (FPGAs) chips that can be reconfigured for various specialised tasks. These chips come with multiple resources, including reconfigurable interconnects and programmable logic blocks and are very popular in telecommunications applications.

AMD expects the deal to enable it to expand its chip business into markets like automotive electronics and 5G wireless communications. It is also expected to intensify AMD's ongoing battle with Intel in the fast-growing data centre chip business.

AMD, which has been Intel's long-time rival for CPUs in the personal computer business, has already taken a lead over Intel in many key areas.

Intel has suffered many financial and technological setbacks in recent years, and now AMD has also started challenging it in the data centre business.

The AMD-Xilinx deal also comes at a time when Intel's manufacturing technology has fallen years behind TSMC's technology, favoured by Apple.

In July, Intel announced that it was pushing back the rollout of its 7 nm chips by six months relative to previously-planned release date.

Last week, Intel reported that its profits had dropped 29 per cent in the last quarter, causing its stock to fall more than 10 per cent.

AMD's profits, on the other hand, increased 148 per cent in the last quarter, the company stated on Tuesday.