Intel’s Dominant Market Share Buffer For AMD & Xilinx Product Bundling Believes British Body

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Chip designer Advannced Micro Devices, Inc's (AMD) acquisition of programmable devices designer Xilinx Corporation is unlikely to harm the pair's competitors, concluded the United Kingdom's Competiton and Markets Authority (CMA) as part of its investigation, which kicked off earlier this year. The CMA concluded its investigation at the close of last month. The body's detailed decision was publicly released yesterday. It explained the reasons behind its belief that the deal will not harm either AMD or Xilinx's competitors. The primary determinants behind the CMA's go-ahead are that AMD's market share and customer purchasing decisions are unlikely to enable the merged entity to sell bundled products forcefully.

AMD's Datacenter CPU Market Share Isn't Sufficiently Large To Enable Merged Entity To Sell Bundled Products Believes British Authority

The CMA's investigation focused primarily on the sale of central processing units (CPUs) by AMD and the sale of field-programmable gate arrays (FPGAs) by Xilinx. Specifically, the body focused on data center and embedded CPUs sold by AMD and datacenter and embedded FPGAs sold by Xilinx, as it evaluated scenarios such as whether the merged entity could bundle these together and force its customers to pick an FPGA from Xilinx if they purchased a processor from AMD.

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In its report, the CMA started by analyzing Xilinx's strong market share in the FPGA market and whether the post-merger entity could use this position to force its customers to purchase an AMD datacenter CPU with a Xilinx FPGA. The body interviewed data center companies for its investigation, who informed it that the purchase of a CPU holds a higher importance than an FPGA for their products. Through this, the CMA concluded that if AMD and Xilinx were to bundle their FPGAs and CPUs, they are likely to lose FPGA sales since a potential customer is unlikely to respond well to a sale if they are forced to chose the CPU.

In the x86 microarchitecture datacenter CPU market, Santa Clara chip giant Intel Corporation is the largest player, and the CMA believes that should the new entity bundle the two products together, then Intel has adequate space to offer a "competing bundle."

An excerpt from the CMA's report highlighting why it believes that the merger will not affect the competitive environment for data center CPUs. Image: Anticipated acquisition by Advanced Micro Devices, Inc. of Xilinx, Inc.
Decision on relevant merger situation and substantial lessening of competition published on July 16, 2021

Commenting on whether embedded CPUs could be bundled with embedded FPGAs, the CMA highlighted that not only is AMD a small player in the embedded market but that embedded FPGAs are not used with embedded CPUs, and therefore AMD is likely to sell more embedded CPUs on its own rather than generate more sales by bundling them with Xilinx FPGAs.

It also addressed customer and competitor concerns about whether the new entity could bundle its CPUs and FPGAs, CPUs, GPUs, and FPGAs to harm the smart network interface card (smart NIC) market. On the issue of CPU and FPGA bundling, the CMA outlined that:

One third party raised concerns that the Merged Entity could, by leveraging its position in the supply of Datacentre CPUs, foreclose rival suppliers of SmartNICs through offering a combination of Datacentre FPGAs and Datacentre CPUs to customers that the third party suggested might otherwise combine a Datacentre CPU with a SmartNIC. However, as noted above, the CMA does not believe the Merged Entity would have the ability or incentive to use its Datacentre CPU position to foreclose Datacentre FPGA suppliers given its small position in the supply of Datacentre CPUs. The CMA therefore does not believe that the Merged Entity would have the ability or incentive to use its Datacentre CPU position to foreclose SmartNIC suppliers.

As regulatory authorities in Europe, the U.K. and the U.S. give their go-ahead for Xilinx's acquisition, evaluation by the Chinese authorities will decide its fate. As opposed to chip designer NVIDIA Corporation's bid to acquire British design house Arm Ltd., the Xilinx deal has faced little opposition in the country, leading to optimism for its outcome.