Will Apple Buy AMD Out?

Among investors in Advanced Micro Devices (NYSE: AMD  ) , there is a pretty continual discussion of Apple (NASDAQ: AAPL  ) either using AMD's technology more broadly -- Apple already uses AMD's workstation graphics cards in the Mac Pro -- or outright purchasing AMD. The question, then, is whether AMD would be a likely take-out candidate for Apple.

What could Apple gain?
AMD's core competency is in the design of CPU cores, graphics IP, and system-on-chip products that implement that IP, among others. This is a competency that appears to be serving the company quite well in landing semi-custom design contracts such as the processors for both the Xbox One and the PlayStation 4 game consoles.

That said, Apple has demonstrated exceptional competency in designing its own CPU cores, as well as the system-on-chip that surrounds it. Indeed, it is arguable that Apple's latest mobile CPU is the most advanced smartphone/tablet core in production today. However, two "gaps" in Apple's silicon capabilities to date have been the lack of communications/connectivity IP and an in-house GPU IP team. Since Apple already has hired many ex-AMD CPU engineers, there could be an argument for the graphics portion of the equation.

Apple is building up its own graphics team
In searching the LinkedIn profiles of various Apple employees, as well as some of Apple's job listings, it's clear that Apple is staffing up a graphics IP development team that seems to be based in Orlando, Florida. Now, one could conceivably make the case that, in order to really bolster its GPU efforts, Apple could simply buy out AMD. However, this seems to be a sub-optimal allocation of capital for a number of reasons:

  • AMD would bring with it a net debt position of about $1 billion.
  • In addition to the debt, Apple would end up with a redundant CPU team; plus, Apple seems to have no problem luring talent from AMD.
  • Apple could buy a top-notch graphics IP vendor for cheaper,

Indeed, while (1) and (2) would be enough to stop the show, it's (3) that really breaks this thesis. Apple already owns roughly 10% of Imagination Technologies (LSE: IMG  ) , which is the supplier for the GPU IP in Apple's A-series chips, as well as many other SoCs. Picking up the rest of the company – which is valued at $877 million – would be significantly cheaper and more useful to Apple than purchasing AMD would be. Also, as Imagination is part of the AMD "HSA Foundation," buying AMD would not give Apple any "dibs" on this more powerful programming paradigm.

Foolish bottom line
While the idea of Apple picking up AMD would have made more sense if Apple hadn't already demonstrated exceptional CPU/SoC design capability, today it seems extremely unlikely. While Apple is unlikely to acquire a major, publicly traded semiconductor in order to bolster its in-house IP teams, it would be more likely to pick up the rest of Imagination than to buy AMD if it were to do so.

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Comments from our Foolish Readers

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  • Report this Comment On April 02, 2014, at 10:27 AM, mtechac wrote:

    Apple came up with the OpenCL concept. AMD has been one of the major loyal implementors of OpenCL.

    Apple ARM design, though very good, is just the old CPU/GPU architecture.

    If AMD can build an ARM HSA/hUMA APU, Apple will be more prone to buy AMD.

    Intel has been backstabing Apple for years, now. They have tried to replicated all of Apple successful designs in their x86 lines and not in the best interest of Apple.

    Which means, Apple knows that they don't want any x86 Intel relationship because they will get back stabbed by Intel. AMD is mostly x86, right now, but it is transforming itself into a very powerful ARM shop.

    If Apple buys AMD, Intel will be history, since Apple will have the most sophisticated processor architecture in the world, and will have embedded, laptop, workstation, servers, high-end GPUs, etc.. Apple will just need to have a higher-end chip foundry process with TSMC and/or GlobalFoundries. Intel is too much of a risk in the short and long run.

    AMDs current released, and in the process to being released, technology has a hugemongous potential that makes AMD a great investment, opportunity for big profits, since its current stock price is dirt cheap and AMD will never go bankrupt with their current offerings, and it, in comparison with Intel, AMD already reorganize itself to profit in a low profit product margin world.

    Intel still has to go through the hugemongous reorganization if they want to survive this low profit product margin economic world.

    Again, if Apple buys AMD, APPLE will instantly become one of the biggest companies in the history of the world. Instantly, it will become larger than Intel, HP, or any other company since it will build and sell the most complete line of computing hardware and software.

    AMDs HSA/hUMA APU architecture is the future of high-end low cost processors, and AMDs Kaveri is just the first of a myriad of more powerful processors to come in the following years. Everydbody is years behind in achieving what AMD has achieved since nobody had AMDs CPU and ATI high-end technology.

  • Report this Comment On April 02, 2014, at 6:00 PM, typecheck wrote:

    Apple won't buy AMD because Apple still needs to use Intel chips in its products and still buys Nvidia's GPUs. The benefit of owning AMD doesn't justify the cost of buying AMD.

    If, some day, X86 architecture becomes dispensable for Apple, AMD will become extremely attractive for Apple.

    Or, if, some day, AMD graphics becomes major part of Apple's laptop and desktop line up. AMD will become extremely attractive.

    Either way. Apple may buy AMD in the future. Just not now.

  • Report this Comment On April 02, 2014, at 7:39 PM, CHADBOGA wrote:

    Hey mtechac,

    That was a hilarious April Fools joke.

  • Report this Comment On April 03, 2014, at 10:07 AM, keeperoftheq wrote:

    Why doesn't Ashraf Eassa talk about this on the AMD page?

    The Apple iPhone 6’s Revolutionary New Feature

    By Ashraf Eassa

    March 25, 2014

    http://www.fool.com/investing/general/2014/03/25/the-apple-i...

    .

    Do any of the other chip maker CUSTOME BUILD????? This is why I better cover my shorts before this is officially released.

    One thing that you should immediately notice is just how much silicon real estate Apple is willing to devote to both the central processing unit (CPU) and the graphics processing unit (GPU). Apple is very serious about packing as much computing horsepower into its chips as possible. So, what's the best way to do that?

    {{{Well, of course Apple is going to continue devoting significant area to its custom-designed CPU cores]]], but if you'll notice, Apple also dedicates a hefty amount of space to the GPU. Now, you might think the GPU is just there to make games run faster and prettier at increasingly more demanding display resolutions -- and this is indeed a major driver -- but it is very likely that Apple's plans are far more ambitious: It's likely to be one of the leaders in GPU computing}}}

    Apple's iPhone 6 could emphasize GPU compute

    The next generation iPhone 6 and, in particular, the A8 system-on-chip (SoC) will need a new "buzzword" feature -- one that will put it ahead of the competition and serve as a marketing point. With the A7 it was "64-bit" and with the {{{A8 it could be whatever marketing term Apple comes up with for what could actually end up being an implementation of AMD's (NYSE: AMD ) Heterogeneous System Architecture, which essentially builds exactly the kind of programming model described above.}

  • Report this Comment On April 03, 2014, at 10:18 AM, tempest669 wrote:

    Good to see you're starting to wise up on the whole Apple GPU development thing.

  • Report this Comment On April 03, 2014, at 10:20 AM, mtechac wrote:

    "That was a hilarious April Fools joke."

    Not if you understand the technology that AMD is releasing now..

    "Either way. Apple may buy AMD in the future. Just not now."

    I agree, but with Apple building its own 64-bit ARM chips, Intel has been served a notice. x86 Technology has too much baggage compared to ARM. In addition, the time to design and deliver a new ARM design is 2-3 times faster than that of one for Intel. Apple know they need to own their own chips if they want to succeed in the long run and become unique in their own way.

  • Report this Comment On April 03, 2014, at 10:23 AM, rav55 wrote:

    Actually the buyout of AMD would make more sense of Intel wanted nVidia and the Justice Department as a requirement forced Intel to grant proprietorship to AMD for x86.

    The purpose of that techology transfer being to create a strong competitor for Intel in both the graphic and x86 ecosytem.

    Since it is unlikely that Intel would acquire nVidia I don't that scenario shaking out.

    However if Apple did acquire AMD they would indeed be able to negotiate and acquire an x86 license from Intel as Intel was ordered to allow the new acquiring entity to continue business as usual without interruption and Intel is required to negotiate a license in good faith.

    Of course Apple would with an AMD acquisition then acquire x86-64 with all of it's graphic extensions and could simply deny Intel access to it.

    But nah. Highly unlikely.

  • Report this Comment On April 03, 2014, at 12:15 PM, mtechac wrote:

    "Actually the buyout of AMD would make more sense of Intel wanted nVidia .....However if Apple did acquire AMD they would indeed be able to negotiate and acquire an x86 license.... Of course Apple would with an AMD acquisition then acquire x86-64 with all of it's graphic extensions and could simply deny Intel access to it."

    It has the makings of one the biggest chest games in technological history, which may very well be, if it happens...

  • Report this Comment On April 03, 2014, at 12:55 PM, Uconfan wrote:

    Another possibility would be for Apple to purchase global foundries and they would in essence be AMDs partner and not tick off Intel. This would benefit both companies.

  • Report this Comment On April 03, 2014, at 2:02 PM, TEBuddy wrote:

    This is a rare event indeed. AE put out an article about AMD without being incredibly biased and rude. Its like he is capable of writing in a professional manner, but chooses not to most of the time.

  • Report this Comment On April 03, 2014, at 3:22 PM, melegross wrote:

    Sheesh! Buying AMD? Seriously? This is a company that has fallen behind in so many Reas. The only area in which it's doing well is in graphics. Why would Apple want to buy this entire company?

    Intel's CPU's are much better than those of AMD. And the gap is widening. So far, none of AMD's attempts to move to other areas have worked. While this keeps coming up, there is no sense to it.

  • Report this Comment On April 03, 2014, at 3:45 PM, Stuart511 wrote:

    Melegross,

    Your comment makes no sense at all. Why would AMD be in all 3 game consuls and Intel in none?

    Why would Verizon choose AMD instead of Intel for its servers?

    You seem to live in the past...get ready for more of AMD in the coming months and years. The company finally has a leader to take them on the road to greatness!

  • Report this Comment On April 03, 2014, at 4:03 PM, mtechac wrote:

    With AMD HSA, Intel has now fallen behind in high-end processor architecture. Intel can't build a true HSA/hUMA APU because it does not have the high-end GPU IP and related IP needed to build one. It failed miserably when it tried to build a high-end GPU with the Larrabee project. Sure Intel has a higher-end chip foundry process, but that is temporary and it comes with a huge cost that is eating away Intel profits as we speak. I will not touch Intel stock until they reorganize so that they can profit in mobile and other Intel subsidize areas. If Intel has to subsidize and pay for other companies to use their products, then Intel is finished.

    Intel's 64-bit server and workstation business is about to get clobbered by the new 64-bit ARM devices, starting this year, and Intel's profit will go the Dodo way, in the same way Intels 32-bit business went. Intel makes their profits by overcharging in a self-created monopolistic market/pattern. The market is smarter now and that will fail with the ARM environment.

    Intel is just a laptop company without NVIDIA and/or AMD high-end GPU, no matter how Intels marketing wants to make themselves look. Sure Intel has a faster CPU but at a much higher price levels and Intel without a high-end GPU can't have any high-end gaming or high-end computing machines.

    Frankly, technically/business wise speaking, I like more AMD now than Intel as an investment and as a lower risk investment. Intel has shown up to now that they can't profit in mobile and on tablets, while the ARM environment can.

    How many billions of dollars Intel can spent on new chip foundry processes, research, new chip architectures, etc. AMD already reorganized to make money with its current offerings and it is going to regain market now that it finally released its first HSA/hUMA, etc. hardware and software. Intel has done nothing similar and it is showing it.

  • Report this Comment On April 03, 2014, at 6:59 PM, TEBuddy wrote:

    Intel has failed to branch out much as well. And spent a lot more trying.

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