Mergers & Acquisitions

Qualcomm or Broadcom behind secret $15bn Xilinx bid?

An anonymous $15 billion acquisition offer for FPGA (field-programmable gate array) vendor Xilinx has reportedly been submitted this week. Rumors have since followed that US chip giant Qualcomm is the guilty party, but we believe that Broadcom, now part of Avago, is much more suited to head up the takeover.

The diversity that Xilinx would bring either company is not necessarily a good idea in the long term as it could limit their ability to focus on specific market demands. This is especially true at smartphone chip giant Qualcomm, who’s new board has urged it to stick to its knitting and remove any management distractions. However earlier this year Qualcomm branched into data centers using designs from long term partner ARM. Whereas Avago Technologies, which has adopted the Broadcom name after the $37 billion purchase last year, simply wants to be the world’s largest silicon provider and is already quite diverse.

Following the takeover bid first reported by Street Insider this week, Xilinx’s share price shot up 6%. Ever since Intel pounced on Xilinx’s arch-rival Altera at the cost of $16.7 billion, it looked to be only a matter of time before the fate of Xilinx was sealed, with Broadcom thought to be hunting out Xilinx way back before it was snapped up by Avago.

On the other hand, chip makers need to diversify technologically as high end products become increasingly complex. This will ensure vendors maintain a foothold in the smartphone market – where expensive products require a range of specialized processors, and cheaper products get low cost SoC offerings, while a convincing wireless infrastructure platform requires FPGAs as well as SoCs – the specialisms of Xilinx.

In FPGAs Xilinx is experiencing increasing demand to supply the needs of performance-hungry infrastructure such as cloud servers and carrier networks. FPGAs are able to perform precise jobs very quickly and are becoming much more common in data center platforms used by Microsoft and Baidu together with Intel chips. This was a field led by Altera and now Intel has secured those revenues for itself, as well as the ability to integrate CPU and FPGAs more closely – to gain an edge on its rivals.

Broadcom has been going through some transformations in recent weeks, first with the sale of its IoT business to Cypress Semiconductor for $550 million and then the offloading of its wireless backhaul chip activities to MaxLinear.

Qualcomm has previously teamed up with Xilinx, introducing its first SoC for the server market back in October 2015, using Xilinx for the accompanying FPGAs – providing complementary technology and knowhow alongside Qualcomm’s own prowess in integrated, power efficient processors.

IBM has also been linked with the purchase of Xilinx, and the two companies formed a strategic alliance in November last year.

It has been suggested by financial analysts at Cowen & Co. that Qualcomm would be better off buying NXP Semiconductors, for tax efficiency purposes and because Xilinx is poised to spend a large amount on edge design migration as it tries to keep up with Intel. The addition of NXP to Qualcomm would certainly boost its presence in the auto industry, where Qualcomm chips are already present in some Android Auto IVI systems. NXP recently bought Freescale which moved it into seventh place in the semiconductor vendor rankings.

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