Hold the chips

AMD has spent its entire corporate life as a second-class citizen to Intel. That’s just one reason why CEO Lisa Su seized an opportunity with a $35 billion stock deal to snap up programmable chipmaker Xilinx more than a year ago at one of Intel’s weakest moments in decades.

When the deal was announced in October 2020 AMD expected it to close by the end of 2021, but late last month AMD pushed the expected close date to the end of March. It will now have to re-file its regulatory paperwork with the U.S. Federal Trade Commission, which has already approved the deal once; China has yet to do so.

The purpose of the largest deal in AMD history is clear.

• It would immediately add programmable chips called FPGAs to its existing portfolio of graphics and server processors. That’s a potential market of $30 billion, on top of the market of $80 billion in annual sales AMD was already chasing.
• Xilinx would also give AMD a significant foothold within a group of products that is essentially controlled by a duopoly — Xilinx and Intel’s Altera — and runs parallel to its other businesses.
• And, perhaps most importantly, it would make AMD a stronger competitor against Intel for the various pieces of silicon needed to power data centers.

Absorbing Xilinx would vault AMD into a bigger corporate category at a moment in the chip industry when size equals survival, because small companies can no longer afford to develop the most-advanced chips demanded by the world.

• Bringing a chip from idea to the point where a manufacturer such as TSMC can produce them at high volume can cost more than $500 million, putting it out of reach for many.
• AMD is not in immediate danger; in 2020, the company reported revenue of $3.33 billion for the segment that sells server chips, which includes the chips AMD designs for Sony and Microsoft’s video game systems, and executives have said the company expects overall revenue to rise 65% in 2021.
• Chips, however, are more complicated and expensive to make than ever.

FPGAs are interesting pieces of hardware.

• Customers can tweak them as they see fit, which means they are adaptable to new types of computing needs and can receive substantial updates while already deployed in the field.
• What often happens in practice is businesses deploy FPGAs for new computing requirements, and once a design is dialed in — or standards are set — chipmakers will produce application-specific integrated circuits, or ASICs.
• FPGAs have downsides, however: Compared with an equivalent ASIC, the programmable processors use considerably more power.
• And since FGPAs tend to be large, they also need more silicon, which usually makes them more expensive.

The deal will have to clear the final regulatory hurdle in China in order to realize Su’s strategy.

• Big chip deals that involve China and the U.S. have been tricky for years.
• In China, officials deliberately obfuscate regulatory proceedings, which are complicated by political machinations and strategic calculations beyond what even the most well informed executive or investor is privy to.
• One fear is that the deal may come to resemble Qualcomm’s $44 billion bid for the Dutch auto chipmaker NXP. Qualcomm eventually walked away from the takeover attempt in 2018 after Chinese regulators dragged their feet for years, neither approving nor denying the deal outright.
• And the political tension with China hasn’t improved much in the intervening years.

VLSIresearch president Risto Puhakka told Protocol it’s unlikely AMD’s bid will be successful, citing that tension.

• “They may get lucky if the Olympics go really well and Xi [Jinping] is happy for two days and they are able to squeeze the deal through,” Puhakka said.

But not everyone shares the negative outlook.

• “The feedback we’re getting is that the process is moving along nicely,” said Roy Behren, chief investment officer of Westchester Capital Management, adding that the company has submitted several concessions to China’s State Administration for Market Regulation that were well received.

— Max A. Cherney (email | twitter)

Off the grid

A volcano off the coast of Tonga erupted on Saturday, Jan. 15th, causing damage as far away as Peru. The blast also took the entire country off the internet completely, and could take weeks to fix, according to the MIT Technology Review.

The country started reporting internet traffic outages on the evening of the eruption, and its networks are still down as of Tuesday. Experts think the undersea internet cable to Tonga may have been destroyed by the blast, and the event could have affected the satellites used as a backup as well.

In the meantime, there’s nothing the country can do but wait. Fixing the cable will require a specialized shipping vessel outfitted with skilled technicians — but that’s going to take a while. The nearest ship is reportedly more than 3,000 miles away, and Tonga still needs basic disaster relief and aid.

Security and resiliency have been hot topics in the enterprise tech world. Tonga is a reminder those conversations apply to physical infrastructure as well.

— Aisha Counts (email | twitter)

A MESSAGE FROM APPIAN

Businesses need applications faster than ever before, and they need them to solve increasingly complex, sophisticated problems. This means IT teams need a more efficient way to quickly deliver powerful software and a better way to partner with their business counterparts. That’s where low-code comes in.

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Upcoming at Protocol

We’ve talked at length about the promise of low-code and no-code software development tools to make companies more efficient and allow a bigger percentage of the population to create software, but how can companies implement those tools inside their organizations most effectively? Join Protocol’s Kevin McAllister tomorrow at 10am PT for a virtual event with Nutanix CIO Wendy M. Pfeiffer and Kerim Akgonul, chief product officer at Pegasystems, in discussion about the best ways to make low-code and no-code tools work for you. Sign up here.

And as you get ready for the event, check out our latest Protocol Index: Low Code/No Code.

Financial corner

Checkout.com, an enterprise payment processor, was valued at $40 billion after a $1 billion funding round.

One-click checkout company Bolt was valued at $11 billion after raising $355 million to compete with companies like Stripe, Shopify and Checkout.com.

Highspot, a software platform for salespeople, raised $248 million at a $3.5 billion valuation for its sales enablement services.

Project44 raised $240 million at a $2.4 billion valuation to provide supply-chain visibility across transportation providers, shippers and third-party logistics companies.

Exotec raised $335 million at a $2 billion valuation for its industrial robotics software.

Justworks pulled out of its $2 billion IPO due to unfavorable market conditions.

Around the enterprise

The U.S. Commerce Department is investigating Alibaba’s cloud business over concerns about the Chinese government’s access to U.S customer data, according to Reuters.

Intel looks ready to unveil a new chip design for bitcoin mining hardware, a business it has largely ceded to Nvidia over the bitcoin boom years.

Four of the world’s largest hyperscale computing companies — Amazon, Google, Meta and Microsoft — now control around two-thirds of the private undersea networking cables that link the world, according to the Wall Street Journal.

A MESSAGE FROM APPIAN

Low-code is the fastest way to develop applications. Instead of writing lines of code, you build software by drawing a flowchart, and the platform then handles the code for you. Low-code is a much more intuitive and human way of interacting with a machine than coding.

Learn more