Advanced Micro Devices Inc. (AMD) is a global semiconductor company. The company develops and markets central processing units (CPUs), graphics processing units (GPUs), accelerated processing units (APUs), system-on-chips (SoCs), and chipsets. Its products offer the computational and visual data processing required by many electronic devices, products, and equipment. AMD operates through two primary business segments: Computing and Graphics, which focuses on personal computers (PCs), laptops, and workstations; and Enterprise, Embedded and Semi-Custom, which focuses on servers, embedded processors, semi-custom SoC (system on a chip) products, development services, and technology for video game consoles. AMD posted net income of $3.2 billion on revenue of $16.4 billion in its 2021 fiscal year (FY), which ended Dec. 25, 2021. The company’s market cap was $150.0 billion as of Feb. 7, 2022.
AMD was founded in 1969 and released its first product in the following year. In September 1972, the company went public through an initial public offering (IPO). By the mid-1970s AMD was serving as a second-source manufacturer of computer chips, fabricating chips designed by other companies. Between 1982 and 1986, AMD manufactured chips designed by Intel, the company responsible for making the microprocessor used in PCs made by IBM. The company continued to grow and release new chip products. But in 2008, AMD announced that it was spinning off its manufacturing business to become a “fabless” chip company. Fabless chip companies design and market semiconductor chips while outsourcing the fabrication of those chips to a manufacturing plant or foundry. The spinoff was completed in 2009, with the creation of GlobalFoundries out of AMD’s manufacturing business.
With a renewed focus on chip design and marketing, AMD continued to expand through organic growth and the acquisition of other chip companies. The industry has become increasingly consolidated, with AMD and Nvidia holding an effective duopoly in certain semiconductor products. For example, both companies control the entire market for standalone GPUs (GPUs that are not part of a CPU). Nvidia announced an agreement to acquire U.K.-based semiconductor design firm Arm in September 2020, but the deal is facing intense antitrust scrutiny from global regulators. Nvidia has told its partners that it does not expect the deal to close, according to a person familiar with the matter as recently reported by Bloomberg.
We look in detail at four of AMD’s major acquisitions below.
- Type of Business: semiconductor
- Acquisition Price: $35 billion (announced)
- Acquisition Date: Oct. 27, 2020 (announced; deal is still not complete)
- Annual Revenue for FY 2021 (ended April 3, 2021): $3.1 billion
- Annual Net Income for FY 2021 (ended April 3, 2021): $646.5 million
Xilinx Inc. (XLNX) was founded in 1984 by Ross Freeman, Bernie Vonderschmitt, and Jim Barnett. The company designs and develops programmable devices and related technologies, such as integrated circuits in the form of programmable logic devices (PLDs), software design tools used to program PLDs, embedded platforms, printed circuit boards, and more. Xilinx is a dominant player in the market for field programmable gate arrays (FPGAs), which Xilinx co-founder Ross Freeman has been credited with inventing. FPGAs are capable of being reprogrammed after they are produced, unlike standard chips. They are commonly used in 5G telecommunications infrastructure, military communications, and radar systems.
The acquisition of Xilinx, announced in October 2020, would help AMD to compete with Intel, the other dominant player in the FPGA market. The deal was originally expected to close by the end of 2021. However, the company said at yearend that it was still seeking approval from global regulators and expected that the deal to close in the first quarter of 2022. On Jan. 27, 2022, Chinese authorities approved the deal, following regulatory approval in several other major markets. AMD is now waiting for a decision by the U.S. government.
ATI Technologies Inc.
- Type of Business: semiconductor
- Acquisition Price: $5.4 billion
- Acquisition Date: July 24, 2006 (announced); Oct. 25, 2006 (completed)
Canada-based ATI Technologies was founded in 1985 under the name Array Technologies Inc. The company developed integrated graphic cards for both IBM and Commodore. By the time AMD announced that it would buy ATI in July 2006, the Canadian semiconductor company had become a major player in various emergent technologies expected to grow amid significant changes in the electronics industry. For example, ATI produced chips for integrated digital televisions as well as image processors used for video display on cellphones or mobile game machines.
ATI was also a significant player in the market for chipsets, which manage the flow of data between different components on a computer’s motherboard. The acquisition was seen as bolstering AMD’s competitiveness with Intel, which also sold chipsets. ATI’s lead position in graphics, chipsets, and consumer electronics, combined with AMD’s microprocessors, was expected to provide AMD with a more complete technology platform to offer customers. The deal was finalized in October 2006 with a purchase price of approximately $5.4 billion. In August 2010, AMD said that it would begin to phase out the ATI brand name.
- Type of Business: microservers
- Acquisition Price: $334 million
- Acquisition Date: March 23, 2012 (completed)
SeaMicro was founded in 2007. The company contributed to the popularization of a new hardware category known as microservers, which perform a similar role as ordinary servers but are much more compact and energy efficient. AMD made clear its intentions to enter the server business in late February 2012 when it announced that it had agreed to acquire SeaMicro. Intel, which was one of SeaMicro’s chip suppliers, said following the acquisition announcement that it would continue to act as a supplier when the company joined AMD. The transaction was completed less than a month later. SeaMicro became AMD’s new Data Center Server Solutions business and AMD said that the deal would enhance its ability to penetrate the fastest growing segment of the server market.
- Type of Business: semiconductor
- Acquisition Price: undisclosed
- Acquisition Date: April 10, 2017
Fabless semiconductor company Nitero was founded in 2009. The company specializes in supplying 60 GHz mmWave radio technologies. By early 2017, Nitero’s offerings began to benefit from a fast-growing market. Its radio technologies were viewed as capable of enabling wireless virtual reality (VR) and augmented reality (AR) headsets, eliminating the need for wired headsets. In April of that year, AMD acquired Nitero’s intellectual property (IP) and key engineering talent. Nitero’s co-founder and Chief Executive Officer (CEO) joined AMD as corporate vice-president of Wireless IP. The Nitro deal and its technologies complemented AMD’s Radeon and Ryzen processors used by video gamers. It also bolstered AMD’s competitiveness with companies like Intel and Qualcomm, both of which already had wireless businesses and 60GHz technologies for VR.