$4.9 billion semiconductor merger!

On August 20, US chip giant AMD announced that it has signed a final agreement to acquire ZT Systems for US$4.9 billion!

It is reported that AMD will pay the $4.9 billion in a mixture of cash and stock. According to media reports, cash will account for 75% and the other 25% will be paid through stock transactions. This is also in addition to AMD's $1 billion investment in ZT in the past year.

It is understood that ZT Systems was founded in 1994 and is a supplier of artificial intelligence (AI) and general computing infrastructure design. Its products include high-performance computing (HPC) servers, storage servers, etc. It mainly provides customized equipment for large cloud computing companies and corporate customers.

Media analysis said that AMD's decision to acquire ZT was to expand its AI chip and hardware product portfolio and compete with Nvidia, the leader in this field. Due to the needs of AI computing, technology companies need to connect thousands of chips together to form clusters in order to obtain the required data processing capabilities.

In June this year, ZT Systems launched the ACX200 platform using the GB200 Grace Blackwell super chip, a liquid-cooled rack-integrated server platform that uses NVLink to achieve high-speed interconnection between GPUs. In this field, ZT competes with AMD.

"The acquisition of ZT Systems is the next important step in our long-term AI strategy," AMD CEO Lisa Su wrote in a press release. "ZT brings world-class system design and rack-scale solution expertise that will greatly enhance our data center AI systems and customer support capabilities."

"AI systems are our top strategic priority," Su told the media. After joining AMD, ZT Systems' engineers will be able to test and launch the latest AI GPUs faster to meet the needs of cloud computing giants such as Microsoft. "The main benefit to the company is that we can sell more GPUs."

Su Zifeng mentioned that AMD has no intention of competing with companies such as AMD. After the transaction is completed, AMD will spin off and sell ZT's manufacturing assets, but retain system design capabilities, and ZT's CEO Frank Zhang will join AMD's data center solutions business team.

The deal means AMD will absorb about 1,000 engineers from ZT's approximately 2,500 employees. If the merger is successfully approved by regulators, the transaction is expected to be completed in the first half of 2025 and it will take an additional 12 to 18 months to sell the manufacturing business.

Some analysts believe that it would cost billions of dollars to gather thousands of system engineers with rich practical experience. Acquiring ZT is indeed a feasible solution. Moreover, compared with AMD, acquiring ZT is relatively cheaper, and the level of system engineers of the two companies may also be similar.