AMD’s $35 Billion Deal Pushes 2020 Toward a Record for Chip M&A

(Bloomberg) -- Advanced Micro Devices Inc.’s $35 billion 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 $110 billion of deals announced in the semiconductor industry this year, led by Nvidia Corp.’s $40 billion 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 $122 billion 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 $24 billion 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.

Read more: AMD’s Su Redoubles Intel Challenge With Xilinx Deal

With the Arm deal, Nvidia gets access to semiconductor designs that are in most smartphones and licenses 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-center 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 $9 billion.

These rivalries have made the industry stand out in an otherwise sluggish deal market. Globally, mergers and acquisitions in all sectors are down roughly 23% to about $1.9 trillion from the same period last year, Bloomberg data show.

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