China finally green lights AMD/Xilinx merger

AMD has been given the green light by the Chinese government to acquire FPGA giant Xilinx. No formal announcement has been made, but eagle-eyed writers spotted the detail in an 8-K filing with the U.S. Securities and Exchange Commission.

The deal was first announced in October 2020. The U.S. and EU have already approved the acquisition, but in late December, AMD said it had to delay closing as China’s regulators slow-walked the deal. Then came the filing this week:

On January 27, 2022, Advanced Micro Devices, Inc., (“AMD”) and Xilinx, Inc. (“Xilinx”) received clearance from the National Anti-Monopoly Policy Bureau of the State Administration for Market Regulation of the People’s Republic of China with respect to the merger (the “Merger”) of Thrones Merger Sub, Inc., a wholly owned subsidiary of AMD (“Merger Sub”), with and into Xilinx, with Xilinx surviving the Merger as a wholly owned subsidiary of AMD, pursuant to, and subject to the terms and conditions set forth in, that certain Agreement and Plan of Merger (the “Merger Agreement”), dated as of October 26, 2020, by and among AMD.

But China’s foot dragging has caused another headache for AMD. As noted by Serve The Home, there is a regulation called the Hart-Scott-Rodino Antitrust Improvements Act of 1976 that requires parties of mergers and acquisitions to notify the U.S. Department of Justice and Federal Trade Commission of a merger, and there’s typically an expiration date one year from the filing.

The initial notification from AMD had an expiration date of one year from the original DOJ/FTC notifications, which was earlier this month. So now AMD needs to wait until a cooling-off period expires on February 9, 2022, before it can refile. The Biden administration has the option of waiving the cooling-off period but has not given any indications it will. But AMD has waited this long, a few more weeks won’t hurt it.

Playing politics

The chip industry has been caught up in geopolitics, since China is a major market for chip makers (notably Xilinx), and relations between the U.S. and China are tenuous. China did not approve Qualcomm’s proposed $44 billion acquisition of NXP Semiconductors in 2018, which was seen as retaliation by China for the Trump administration targeting Chinese companies such as Huawei and ZTE. The process greatly damaged NXP, which is a Dutch company.

But China didn’t deny approval, either. It simply said nothing, a sort of pocket veto. It has done the same thing with Nvidia and Arm, letting UK opposition do all the dirty work and saying nothing, which has dragged out that deal interminably. (Read more: Will Nvidia give up on the Arm deal?)

This has had a chilling effect on semiconductor M&A activity. In 2020, there were all kinds of big deals. There were none in 2021 because no one wants to be put through the ringer, spend millions on lawyers and legal fees, and have their business held up because regulatory approval is withheld.