CELEX: 32021M10097
Language: en
Date: 2021-06-30 00:00:00
Title: Commission Decision of 30/06/2021 declaring a concentration to be compatible with the common market (Case No COMP/M.10097 - AMD / XILINX) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                      Brussels, 30.6.2021
                                                                      C(2021) 4968 final
                                                                                        PUBLIC VERSION
                                                                      Advanced Micro Devices, Inc.
                                                                      2485 Augustine Drive
                                                                      Santa Clara, CA 95054
                                                                      United States
Subject:             Case M.10097 – AMD/Xilinx
                     Commission decision pursuant to Article 6(1)(b) of Council Regulation
                     No 139/20041 and Article 57 of the Agreement on the European Economic
                     Area2
Dear Sir or Madam,
(1)       On 26 May 2021, the European Commission received notification of a proposed
          concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 (the
          “Merger Regulation”) by which Advanced Micro Devices, Inc. (“AMD”, United
          States) intends to acquire, sole control of Xilinx, Inc. (“Xilinx”, United States)
          within the meaning of Article 3(1)(b) of the Merger Regulation (the “Transaction”).3
          AMD and Xilinx together are hereinafter referred to as the “Parties” and AMD is
          also referred to as the “Notifying Party”.
1         OJ L 24, 29.1.2004, p. 1 (the ’Merger Regulation’). With effect from 1 December 2009, the Treaty on the
          Functioning of the European Union (the ‘TFEU’) has introduced certain changes, such as the replacement of
          ‘Community’ by ‘Union’ and ‘common market’ by ‘internal market’. The terminology of the TFEU will be used
          throughout this decision.
2         OJ L 1, 3.1.1994, p. 3 (the ‘EEA Agreement’).
3         Publication in the Official Journal of the European Union No C OJ C 210, 3.6.2021, p. 10.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- 1.   THE PARTIES
(2)  AMD is a publicly listed global semiconductor company headquartered in Santa
     Clara, California, United States. AMD is active primarily in the supply of central
     processing units (“CPUs”), also known as microprocessors, based on the x86
     instruction set architecture and graphics processing units (“GPUs”). AMD is also
     active in the supply of semi-custom processors for the gaming console market that
     combine a CPU, a GPU and other customer IP as well as chipsets.
(3)  Xilinx is a publicly listed global semiconductor company headquartered in San Jose,
     California, United States. Xilinx is active primarily in the supply of field
     programmable gate arrays (“FPGAs”). Xilinx is also active in the supply of a range
     of FPGA-based devices, primarily FPGA systems-on-a-chip, FPGA-based
     accelerator cards and an adaptive compute acceleration platform (“ACAP”). Xilinx
     does not offer CPUs, GPUs, APUs or semi-custom processors comparable to AMD’s
     offerings.
2.   THE CONCENTRATION
(4)  Pursuant to an Agreement and Plan of Merger dated 26 October 2020, Thrones
     Merger Sub, Inc., an indirect wholly owned subsidiary of AMD, will merge with and
     into Xilinx, with Xilinx surviving the merger as a wholly owned indirect subsidiary
     of AMD. As a result, AMD will acquire sole control of Xilinx within the meaning of
     Article 3(1)(b) of the Merger Regulation.
3.   UNION DIMENSION
(5)  The undertakings concerned have a combined aggregate world-wide turnover of
     more than EUR 5 000 million (AMD: EUR 8 547 million; Xilinx: EUR 2 846
     million). 4 Each of them has a Union-wide turnover in excess of EUR 250 million
     (AMD: EUR […] million; Xilinx: EUR […] million), and they do not achieve more
     than two-thirds of their aggregate Union-wide turnover within one and the same
     Member State.5 The Transaction therefore has a Union dimension pursuant to
     Article 1(2) of the Merger Regulation.
4.   RELEVANT MARKETS
4.1. Introduction
(6)  AMD and Xilinx are both global suppliers of semiconductor products, more
     precisely integrated circuits, also known as chips or microchips. Chips can be found
     in virtually every electronic device or equipment today, such as personal computers,
     smartphones, servers, cameras, washing machines, medical equipment,
     telecommunication and network equipment, but also in automotive and industrial
     applications.
4    Turnover calculated in accordance with Article 5 of the Merger Regulation.
5    Form CO, Section 4.
                                                            2
 ---pagebreak--- 4.1.1. The Parties’ products
(7)     AMD’s main products are i) CPUs and ii) discrete GPUs (i.e. GPUs that are not
        integrated with another processor on the same chip), in various configurations. In
        addition, AMD offers iii) semi-custom CPUs for the gaming market and iv) chipsets.
(8)     Xilinx supplies a wide range of FPGAs with various technical parameters and in
        various configurations, as well as FPGA-based SoCs and FPGA-based accelerator
        cards. It also offers software and hardware development tools that enable customers
        to customize Xilinx’s FPGA products.
4.1.2. Description of the products
4.1.2.1. CPUs
(9)     CPUs operate as general purpose centralised “brains” of computer systems or other
        non-computer equipment (e.g. industrial machines, cameras etc.). They are able to
        perform all types of operations. Typical CPU operations include running software,
        analysing data, managing networking traffic, and fetching data from memory, as
        well as transferring information to and from other system resources. 6 In addition, the
        CPU is the required component to execute the operating system of the host. In
        general, the complexity and performance of a CPU vary according to the field of
        application.
(10)    CPUs consist of one or multiple cores,7 which represent the basic processing unit of
        a CPU, and other components that are included in the same chip. Depending on the
        intended use of the CPU, these additional components can include memory, memory
        controller, links based on the PCIe standard, hard disk drive (HDD) or solid state
        drive (SSD) interface, video and audio codecs, sensor fusion hub, integrated chipset
        etc.8 This design of incorporating other components of a computer system next to the
        CPU core on the same chip is often referred to as a “system on a chip” (“SoC”).
        There is no standardised definition of the term “SoC”, which means that different
        respondents to the Commission’s market investigation understand the term
        differently.9 The Parties consider that an SoC is a device that combines several,
        almost all, or even all elements of a computer system on a single chip. 10 The
        Commission will adopt this definition for the purpose of this Decision, while
        acknowledging, where appropriate, that other definitions are also possible. Under the
        Parties’ definition, all CPUs are SoCs as nowadays there are virtually no chips that
        only have a CPU core or only several cores without other interfaces or components.
(11)    The main advantage of such a configuration is that it allows higher bandwidth
        communication between the CPU and the various components. In addition, the SoC
        design saves space and results in lower power consumption relative to having the
6       Form CO, paragraph 215.
7       Marwedel, P., Embedded System Design, 2021, 4th Edition, Springer Open Access, https://doi.org/10.1007/978-
        3-030-60910-8, p. 157 et ss.
8       Notifying Party’s Response to the Commission’s RFI 2, paragraphs 3.15-3.16.
9       See the responses to the Commission’s Questionnaire Q1 to competitors and trade associations (“Q1 –
        Questionnaire to competitors and trade associations”), question 31; and to the Commission’s Questionnaire Q2 to
        customers (“Q2 – Questionnaire to customers”), question 21.
10      Notifying Party’s Response to the Commission’s RFI 3, paragraph 3.4
                                                               3
 ---pagebreak---         components on separate chips. These aspects make the SoC design particularly
        suitable for mobile devices (tablets, smartphones), where the form factor of the chips
        and power consumption are important parameters. For the same reasons, a CPU SoC
        design can incorporate not only peripherals but also a different type of processor,
        namely a GPU. In fact, most CPUs in laptops, desktops and smartphones also
        contain a GPU.11
(12)    For completeness, the Commission notes that under the above definition of SoC, an
        SoC does not have a fixed content and its components vary depending on the task
        the SoC was designed for. 12 This also means that not only CPU cores but other
        processors, such as GPUs or FPGAs can also be configured as SoCs. There are, for
        example, SoCs based on FPGAs13 or complex SoCs that combine various processing
        engines. Thus, while under the definition proposed by the Notifying Party and
        adopted for this Decision all CPUs follow an SoC design (are SoCs), there are many
        SoCs that are not CPUs. The dividing line between SoCs that are CPUs and those
        that are not is the SoC’s main functionality: as long as the SoC chip’s main
        functionality are the CPU cores, the SoC will be a CPU. As mentioned in paragraph
        (10) above, this means that next to the CPU cores, the chip contains a number of
        other components (memory, memory controller, PCIe links etc.) and often an
        integrated GPU.
(13)    CPU cores are modelled around an instruction set architecture (“ISA”), which
        represents the computer language that a CPU is capable of reading to receive
        instructions from the system where it is incorporated.14 AMD’s CPUs are based on
        the x86 ISA, which was initially developed by Intel. Currently AMD and Intel are
        the only two players having access to the x86 ISA. CPUs based on the x86 ISA
        (“x86 CPUs”) represent the majority of CPUs for servers today. The main alternative
        to x86 CPUs is represented by CPUs based on the architecture developed by ARM, a
        British technology company (“ARM-based CPUs”). 15
4.1.2.2. GPUs
(14)    GPUs were first introduced to offload simple graphics operations from the CPU but
        today they are also used for workload acceleration in data centres, including in many
        of the world’s supercomputers. Even though GPUs have more limited functionalities
        than CPUs, they are much better suited to processing graphic images or
        computations that require the parallel execution of an enormous number of relatively
        simple computational tasks (for example, parallel computation of hundreds of
        thousands of matrix calculations). 16 These kind of tasks can often overburden a CPU,
        which uses sequential (instead of parallel) computation.17 As GPUs are often used to
11      Notifying Party’s Response to the Commission’s RFI 3, paragraph 4.2. See also Intel’s response to Q1 –
        Questionnaire to competitors and trade associations, question 32.
12      Notifying Party’s Response to the Commission’s RFI 2, paragraph 3.15.
13      Notifying Party’s Response to the Commission’s RFI 1, paragraph 1.5. See also Intel’s explanation on FPGA
        SoCs at https://www.intel.com/content/dam/www/programmable/us/en/pdfs/literature/ab/ab1 soc fpga.pdf.
14      See: Instruction Set Architecture by Dr. A. P. Shanthi at https://www.cs.umd.edu/~meesh/411/CA-
        online/chapter/instruction-set-architecture/index html.
15      Form CO, paragraph 258.
16      Responses to Q1 – Questionnaire to competitors and trade associations, question 4; Q2 – Questionnaire to
        customers, question 4, in particular Microsoft’s response.
17      See one customer’s response to Q2 – Questionnaire to customers, question 4.
                                                                4
 ---pagebreak---         offload computational tasks from the CPU for which the GPU is well suited and
        accelerate their execution, they are referred to as “accelerators”. Accelerators
        include, but are not limited to, GPUs.
(15)    As mentioned in Section 4.1.2.1, GPUs that are integrated into CPUs are parts of
        CPUs. For the purpose of this Decision, the rest of the GPUs, i.e. GPUs that are not
        integrated another processor technology, are referred to as “discrete GPUs”. Discrete
        GPUs are used in many areas, which broadly fall into two use cases: i) high
        performance computing and AI applications in data centres and ii) applications
        requiring high quality graphics or visualisation, such as gaming, computer-aided
        design (CAD), flight simulators etc.18 Discrete GPUs are also commonly offered as
        SoCs, 19 in which the GPU is the main functionality. Furthermore, GPUs are often
        sold as a graphics card, i.e. a ready-made hardware that can be plugged into a
        computer, instead of as a discrete chip.
4.1.2.3. FPGAs
(16)    FPGAs are a type of programmable logic device that can be configured by customers
        after fabrication to perform logic and processing tasks. 20 The ability to reprogram
        FPGAs with desired application or functionality requirements after manufacturing
        (i.e., “in the field”) distinguishes them from other chips, which cannot be changed
        after fabrication. Due to this feature, FPGAs are an attractive option for applications
        with evolving standards and algorithms. 21 Like GPUs, FPGAs can be used in data
        centre servers to offload and accelerate a variety of workloads from a CPU. As such,
        FPGAs are also included among accelerators, along with GPUs. Lower performance
        FPGAs are used to perform system control and power management tasks in data
        centres.22 Other than data centres (servers), FPGAs are also used in a variety of
        vertical industries, including in the telecommunications, automotive, aerospace and
        defence sectors, and in industrial controls. 23
(17)    Contrary to CPUs and GPUs, which are programmed to perform tasks through the
        use of software, in the case of FPGAs engineers program directly the hardware. Thus
        FPGAs are deployed for tasks that benefit from dedicated hardware. In such tasks
        FPGAs offer better latency, connectivity and thus performance than a CPU or GPU
        in combination with software.24 However, programming directly the FPGA is much
        more difficult than programming via software and thus their use involves higher
        engineering costs relative to CPUs or GPUs. 25
(18)    FPGAs, including some of the FPGAs offered by Xilinx, can be sold as SoCs, i.e.
        with other elements of a computer system on the same die,26 but this is not
18      Notifying Party’s Response to the Commission’s RFI 2, paragraph 18.2; Resposes to Q1 – Questionnaire to
        competitors and trade associations, question 33; Q2 – Questionnaire to customers, question 23.
19      Notifying Party’s Response to the Commission’s RFI 1, paragraph 1.5.
20      Form CO, paragraphs 223-224.
21      Form CO, paragraphs 223-224.
22      See for example: https://www.latticesemi.com/en/Blog/2020/02/25/19/33/Different Types of FPGAs.
23      Form CO, paragraph 312; minutes of a phone call with Intel, paragraph 5.
24      Minutes of a phone call with Intel.
25      Minutes of a phone call with Intel.
26      Notifying Party’s Response to the Commission’s RFI 1, paragraph 1.5. See also Intel’s explanation on FPGA
        SoCs at https://www.intel.com/content/dam/www/programmable/us/en/pdfs/literature/ab/ab1 soc fpga.pdf.
                                                               5
 ---pagebreak---         necessarily always the case. For example, [20-30]% of Xilinx’s FPGAs are sold as
        SoCs. 27 FPGA SoCs usually incorporate also an ARM-based CPU, which provides
        low-power compute functionality to support the FPGA. 28 The benefits of the SoC
        design are similar to those discussed in relation to CPUs: printing the CPU, other
        components and the FPGA logic blocks on the same die results in lower power
        consumption, smaller board size, and higher bandwidth communication between the
        processor and FPGA. 29 Even though a CPU is included in these SoCs, the main
        functionality of the chip remains the FPGA technology. As such, these FPGA SoCs
        are very different from the CPU-based SoCs offered by AMD.
(19)    FPGAs can also be sold as FPGA accelerator cards, i.e. as ready-to-use hardware
        that can be inserted into a server’s expansion slot. These cards have the same
        function as the FPGA, i.e. to accelerate the processing of certain workloads by
        offloading them from the server CPU to the FPGA. A type of FPGA accelerator
        card, for example, is the so-called Smart Network Interface Card or Smart NIC,
        which accelerates in particular networking functions.
4.1.2.4. ASICs and ASSPs
(20)    By way of context, accelerators include not only GPUs and FPGAs but also
        application-specific standard products (ASSPs) and application-specific integrated
        circuits (ASICs). 30 ASSPs are custom-designed for a specific function that appeals to
        a wide market. As such they are “off-the-shelf” products that can be purchased in
        identical form by a number of different customers. By contrast, ASICs are custom
        designed chips for a specific customer. 31 As they are custom designed for a specific
        task both chip types offer superior performance for that particular task. ASICs are
        generally used when superior performance (including optimal energy consumption
        properties) is desired but an ASSP for the specific application is not available and
        the large development cost of a customised chip results in economical unit cost in
        light of the large volume of products32 that will contain the chips. Neither Party
        offers ASSPs or ASICs.
4.1.2.5. Other products
(21)    Other than the core products mentioned above, AMD also offers semi-custom SoCs
        for the gaming market. These are semi-customised chips designed for Microsoft
        and Sony game consoles, built to the order of these customers for their Xbox and
        PlayStation products respectively. 33 Because of their semi-customised nature, they
        are quite different from AMD’s general CPUs and discrete GPUs.
(22)    Finally, AMD also offers chipsets, which are integrated circuits that manage the data
        flow between the CPU, the main memory, and peripherals such as graphics cards,
27      Notifying Party’s Response to the Commission’s RFI 1, paragraph 1.5.
28      Form CO, paragraphs 128 – 133.
29      See: https://www.intel.com/content/dam/www/programmable/us/en/pdfs/literature/ab/ab1 soc fpga.pdf.
30      Form CO, paragraphs 219-226.
31      Form CO, paragraphs 225-226.
32      Responses to Q1 – Questionnaire to competitors and trade associations, questions 6-7. Q2 – Questionnaire to
        customers, questions 5-6.
33      Form CO, paragraph 363.
                                                            6
 ---pagebreak---         Ethernet, USB or audio devices.34 Often the chipset is integrated with the CPU on
        the same chip in an SoC configuration, but sometimes it is sold separately from the
        CPU. 35 Even in the case of a separate sale, however, a chipset is only compatible
        with the CPU it was designed for and does not work with any other CPU. 36 For
        instance, AMD makes its chipsets for use with its own CPUs, and an AMD chipset
        cannot be used with an Intel CPU or vice versa. In this sense, chipsets can be
        regarded as CPU accessories rather than independent products.
4.1.2.6. Interconnect technologies
(23)    In computer systems, the various components need to be connected with the CPU
        using an interconnect technology. The Peripheral Component Interconnect express
        (PCIe) is an open interconnect standard available to everyone on FRAND terms and
        widely used to interconnect high-speed devices, including CPUs and accelerators,
        especially in servers. In this regard, PCIe ensures interoperability between the
        different components in servers, regardless of the manufacturer that supplied such
        components. All chips supplied by the Parties, as well as by their main competitors,
        are compatible with the PCIe interconnect technology. 37
(24)    In recent years, a new open interconnect standard has emerged, the Compute Express
        Link (CXL), that may replace the PCIe standard. CXL has been designed to target
        intensive workloads and to offer superior interconnect technology between CPUs
        and specialised chips such as GPUs, FPGAs etc. compared to the PCIe (e.g.
        improved speed and larger bandwidth). This, among other elements, makes the CXL
        standard more suitable especially for data centres. The CXL standard is backed by a
        consortium that includes the main semiconductor suppliers (such as Intel, AMD,
        ARM, IBM and Xilinx). 38
(25)    Last, certain semiconductor suppliers other than the Parties (e.g., Nvidia and Intel)
        have developed proprietary interconnect technologies in order to increase the
        performance of their processor systems.
4.2.    Product market definition
4.2.1. Distinction between CPUs, discrete GPUs and FPGAs
4.2.1.1. Commission precedents
(26)    The Commission dealt with the market definition of semiconductors, and in
        particular CPUs, GPUs and FPGAs in several previous cases. These include the Intel
        antitrust decision (“Intel”),39 and the Intel/McAfee 40, Intel/Altera41 and
34      Form CO, paragraph 293.
35      Notifying Party’s Response to the Commission’s RFI 3, paragraph 20.12.
36      Notifying Party’s Response to the Commission’s RFI 3, paragraph 20.12.
37      Form CO, paragraph 242 – 250.
38      Form CO, paragraph 242 – 250.
39      Case COMP/37.990 – Intel, Commission decision of 13 May 2009. The decision is currently under appeal in case
        T-286/09 RENV Intel v. Commission.
40      Case COMP M.5984 - Intel/McAfee, Commission decision of 26 January 2011.
41      Case COMP M.7688 – Intel/Altera, Commission decision of 14 October 2015.
                                                            7
 ---pagebreak---         Nvidia/Mellanox42 merger decisions. In these cases, the Commission never
        considered a product market wider than the markets for CPUs, discrete GPUs or
        FPGAs. In other words, it never included CPUs, discrete GPUs and FPGAs in the
        same product market. By contrast, in some of these cases it defined narrower
        markets than all CPUs or all GPUs.
(27)    More specifically, in Nvidia/Mellanox, the Commission considered that different
        types of accelerators (i.e. GPUs, FPGAs, ASSPs and ASICs) are generally suitable
        for different applications, and therefore they are likely not part of the same market.43
        In particular, especially as regards data centres, the market investigation indicated
        that different types of data processing solutions are suitable for different kinds of
        tasks.44 Respondents indicated that discrete GPUs have become the default solution
        for specific parallel workloads in datacentres45 and several customers submitted they
        would not be willing to perform certain compute-intensive workloads with other
        accelerators than discrete GPUs for datacentres. On this basis, the Commission
        considered possible product markets for discrete GPUs that did not include other
        processor technologies such as CPUs and FPGAs.
4.2.1.2. The Notifying Party’s views
(28)    The Notifying Party submits that different types of accelerators such as GPUs and
        FPGAs belong to separate product markets in line with the Commission’s approach
        in Nvidia/Mellanox.46 The Notifying Party does not expressly consider the
        distinction between CPUs and FPGAs, or that between CPUs and discrete GPUs.
        However, the Notifying Party’s view that CPUs, GPUs and FPGAs all fall into
        separate market is implicit from the fact that it only discusses distinctions within
        these chip types and the technical description of the products. Namely, the Notifying
        Party explains that CPUs are general purpose processors capable of performing all
        types of operations, while accelerators (which include FPGAs and GPUs) are
        specialised chips that improve the processing performance of CPUs by offloading
        certain computational tasks from the CPU. 47 The specialised chips are better suited
        to certain tasks than the CPU but they cannot do everything that a CPU can do and
        entail some drawbacks such as the difficulty of programming, higher power
        consumption etc.48 The Notifying Party further explains that each accelerator is
        suitable for different operations with GPUs being ideal for processing graphic
        images or computations that require massive parallel execution of relatively simple
        computational tasks and reprogrammable FPGAs being an attractive option for
        applications with evolving standards.49 The Notifying Party also notes that FPGAs
        offer high performance with low latency but programming an FPGA is difficult.
42      Case COMP M.9424 – Nvidia/Mellanox, Commission decision of 19 December 2019.
43      Case COMP M.9424 – Nvidia/Mellanox, Commission decision of 19 December 2019, paragraph 27.
44      Case COMP M.9424 – Nvidia/Mellanox, Commission decision of 19 December 2019, paragraph 27.
45      Case COMP M.9424 – Nvidia/Mellanox, Commission decision of 19 December 2019, paragraph 28.
46      Form CO, paragraphs 368. Precisely, the Parties consider distinct GPUs a separate product market from “data
        centre processing and acceleration solutions (such as FPGAs, ASICs / ASSPs or other acceleration technologies).
47      Form CO, paragraphs 215-226.
48      Form CO, paragraphs 215-226.
49      Form CO, paragraphs 219-226.
                                                               8
 ---pagebreak--- 4.2.1.3. The results of the market investigation and the Commission’s assessment
(29)    In line with the Commission’s consistent case practice, the market investigation
        confirms that CPUs, discrete GPUs and FPGAs belong to different product markets.
(30)    A large majority of both customers and competitors was of the view that FPGAs are
        almost never credible alternatives to CPUs and GPUs or that any substitution
        between these chips is limited to some very specific applications.50 For example a
        customer submitted that FPGAs can only replicate GPUs in limited circumstances
        within a networking context and that FPGAs cannot typically operate a software like
        a CPU.51 Another customer considered that GPUs excel in processing information
        streams in a highly parallel manner and FPGAs generally cannot do the same. If this
        is possible in the case of very performant FPGAs, the power consumption and cost
        of an FPGA would be higher than that of a GPU so as to exclude substitutability.
        This view was echoed by another customer who submitted that even if an FPGA can
        be programmed to execute similar tasks as a CPU, it would have a different power
        consumption and cost profile. 52 In the same vein, another respondent observed that if
        multicore GPU and CPU functions are implemented via an FPGA, the FPGA would
        have lower clock speed, higher power consumption and thus would not be
        competitive.53 A competitor submitted that CPUs are more versatile than FPGAs and
        are consequently far more suitable for performing general computing workloads,
        which have a large quotient of serial computations. GPUs are typically more
        efficient and cost-effective than FPGAs in performing parallel computations, which
        are used in many high-performance computing (HPC) and AI workloads. FPGAs, on
        the other hand, are better suited than CPUs or GPUs to workloads for which an
        application-specific chip design is desirable and the FPGA implementation is
        economical54 (versus ASSPs or ASICs).
(31)    The responses thus confirm that CPUs are optimised for general purpose computing
        and sequential processing, while GPUs are optimised for the parallel execution of a
        very large number of simple tasks. Although FPGAs can be programmed to do
        similar computational tasks, they are a poor substitute for both GPUs and CPUs in
        these functions in terms of energy consumption, cost and/or performance. By
        contrast, FPGAs are better suited to, and offer superior performance in, workloads
        requiring a specific hardware. Thus, the Commission considers that there is no
        demand-side substitution between CPUs and GPUs on the one hand and FPGAs on
        the other hand.
(32)    The results of the market investigation were equally conclusive on the demand-
        substitutability between CPUs and GPUs. A very large majority of both competitors
        and customers considered that CPUs and GPUs are almost never credible
        alternatives to each other or that any substitution is limited to certain very specific
        cases.55 Almost all qualitative replies pointed to the distinction mentioned before,
50      Responses to Q1 – Questionnaire to competitors and trade associations; Q2 – Questionnaire to customers,
        question 3.
51      One customer’s response to Q2 – Questionnaire to customers, question 3.
52      One customer’s response to Q2 – Questionnaire to customers, question 3.
53      One customer’s response to Q2 – Questionnaire to customers, question 3.
54      One competitor’s response to Q1 – Questionnaire to competitors and trade associations, question 3.
55      Responses to Q1 – Questionnaire to competitors and trade associations, question 4; Q-2 Questionnaire to
        customers, question 4.
                                                             9
 ---pagebreak---         namely that CPUs are general purpose processors that can do all tasks but operate
        with sequential processing (which most computational tasks require) and thus do not
        handle well tasks that require parallel sequencing of a large number of simple tasks
        (e.g. hundreds of thousands of matrix calculations in parallel or rendering an image
        or video, which requires the parallel processing of a multitude of pixels). By
        contrast, GPUs are specialised chips exactly for this type of computational tasks but
        as specialised chips they are less suited to general computational tasks. Contrary to
        CPUs, GPUs are also not able to do all types of computations as many algorithms
        are not suited for GPU execution.56
(33)    In line with the results of the market investigation, the Parties’ internal documents
        show that [evaluation of AMD’s and Xilinx’s products]. 57 58
(34)    As regards supply-side substitution, all responding competitors confirmed that a
        semiconductor company that is only active in the design and supply of either of the
        three chips (CPUs, discrete GPUs, or FPGAs) cannot switch to supplying one of the
        other two chips within 6 months and at modest costs.59 Respondents submitted that
        the relevant timeframe for new chip development is 3-5 years and the requisite
        investment is very substantial. In addition, de novo developments of GPUs or
        FPGAs by players active in the supply of other chips are exceptional (one case of de
        novo GPU development by Intel) or non-existent (FPGAs).60
(35)    Accordingly, for the purpose of the present Decision, the Commission concludes that
        CPUs, discrete GPUs and FPGAs belong to separate product markets.
4.2.2. CPUs
4.2.2.1. Commission precedents
(36)    In Intel,61 the Commission found that there is no substitutability between (i) x86
        CPUs and ii) non-x86 CPUs. Demand substitution was excluded because non-x86
        CPUs were incompatible with the Windows operating system and the x86
        architecture was the standard architecture in the market, and products and
        applications designed for the x86 CPUs would not run on a CPU with a non-x86
        architecture.62 The Commission also excluded supply-side substitution in light of the
        evidence, which indicated that switching production between CPUs of different
        architectures requires several years and very large sunk costs. 63 In the same decision,
        the Commission also found that there is no substitutability between (i) CPUs for
        computers; and (ii) CPUs for non-computer devices.64 From the demand side, the
56      Responses to Q1 – Questionnaire to competitors and trade associations, question 4; Q-2 Questionnaire to
        customers, question 4.
57      [Internal document].
58      Parties’ internal documents submitted under Form CO section 5.4 and in copy under US-HSR section 4-c and
        4-d; Minutes of a call with Microchip.
59      Responses to Q2 – Questionnaire to customers, question 5.
60      Responses to Q2 – Questionnaire to customers, question 5.
61      Case COMP/37.990 – Intel, Commission decision of 13 May 2009.
62      Case COMP./37.990 – Intel, Commission decision of 13 May 2009, paragraphs 803-808.
63      Case COMP/37.990 – Intel, Commission decision of 13 May 2009, paragraphs 821-824.
64      Case COMP/37.990 – Intel, Commission decision of 13 May 2009, paragraphs 814, 831, 835. These non-
        computer devices include cameras, washing machines, calculators, fridges, industrial robots, medical devices,
                                                             10
 ---pagebreak---         performance of non-computer CPUs was insufficient for use in computer systems
        and they were incompatible with the operating systems that run on computers. There
        was also no supply-side substitutability based on the time and cost necessary to
        switch production between these CPU types.65 The Commission also considered, but
        eventually left open, whether the relevant product market for x86 CPUs should be
        further segmented based on the different computer devices in which x86 CPUs are
        incorporated, i.e. x86 CPUs for: (i) desktops; (ii) laptops; and (iii) servers. 66
(37)    In Intel/McAfee, the Commission concluded, in line with the Intel decision, that x86
        CPUs constituted a relevant product market separate from non-x86 CPUs. 67 In the
        same decision, the Commission again considered the possible segmentation of the
        market for x86 CPUs into x86 CPUs for (i) servers; (ii) desktops; (iii) notebooks;
        and (iv) certain new types of devices, such as netbooks, tablets, handheld devices
        and consumer electronics. However, the Commission eventually left such possible
        segmentation open.68
(38)    In Intel/Altera, the Commission considered product markets for CPUs segmented by
        device type and architecture. The market investigation suggested that it is
        appropriate to segment the CPU market by device type,69 whereas the results
        regarding a possible segmentation by architecture were mixed70 in that respondents
        indicated a lack of substitutability for computer devices and a certain degree of
        substitutability for CPUs for non-computers. The Commission, in any case, left the
        product market definition open.71
4.2.2.2. The Notifying Party’s views
(39)    The Notifying Party agrees with the Commission’s approach in Intel/Altera insofar
        as the Commission determined that a single relevant product market might exist
        encompassing all CPUs, but that further segmentation might be appropriate.72
        However, in the Notifying Party’ view, for the purpose of this Decision it can be left
        open whether the relevant product market for CPUs should be segmented based on
        (i) the type of architecture used (x86 CPUs vs. non-x86 CPUs); (ii) CPUs used in
        computer or in non-computer devices; and, within CPUs for computer devices, (iii)
        the type of device into which the CPU is incorporated (e.g. servers, desktops, laptops
        etc.). According to the Notifying Party, the Transaction does not raise any
        competition concerns regardless of the precise market definition.
(40)    With regard to these distinctions, the Notifying Party adds that CPUs for computer
        devices and CPUs for non-computer devices (i.e. CPUs used in an industrial
        machine) may constitute separate relevant product markets.73 In this regard, the
        cars, cash registers, ATMs etc. The industry sometimes refers to these as “embedded CPUs”. The Commission
        will use the term “CPUs for non-computers” to designate these CPUs.
65      Case COMP/37.990 – Intel, Commission decision of 13 May 2009, paragraphs 825-830.
66      Case COMP/37.990 – Intel, Commission decision of 13 May 2009, paragraph 835.
67      Case COMP M.5984 - Intel/McAfee, Commission decision of 26 January 2011, paragraph 28.
68      Case COMP M.5984 - Intel/McAfee, Commission decision of 26 January 2011, paragraphs 29 - 30.
69      Case COMP M.7688 – Intel/Altera, Commission decision of 14 October 2015, paragraphs 19-20.
70      Case COMP M.7688 – Intel/Altera, Commission decision of 14 October 2015, paragraph 21.
71      Case COMP M.7688 – Intel/Altera, Commission decision of 14 October 2015, paragraph 22.
72      Form CO, paragraph 344.
73      Form CO, paragraph 355.
                                                            11
 ---pagebreak---      Notifying Party submits that there is limited substitutability on the demand side, as
     non-computer applications require certain characteristics, such as longevity, low-
     power consumption and mechanical and thermal robustness that CPUs for computer
     devices do not have. Buyers of CPUs for non-computer applications require devices
     with a high degree of reliability rather than fast and powerful compute engines.
     Furthermore, industrial systems are often certified, therefore non-computer CPUs
     need to resist for a longer period in the same system than computer CPUs, in order to
     avoid expensive re-certification process.74
(41) However, on the supply side, the Notifying Party considers that there is
     substitutability between these types of CPUs, as suppliers of one type can easily
     switch to designing and supplying CPUs of the other type. The Notifying Party
     submits that AMD and Intel are a case in point, as they both offer a range of CPUs
     for non-computers alongside their high-performance CPUs for computer devices.
     More specifically, AMD’s CPUs for non-computers are based on their computer
     CPUs, which are modified to meet the requirements of customers in the non-
     computer space.75 In any event, the Notifying Party considers that the relevant
     product market definition can remain open, since the assessment of the Transaction
     remains unchanged whether or not CPUs for computer and for non-computer devices
     belong to separate product markets.76
(42) The Notifying Party submits that SoCs in which the main element is a CPU should
     be regarded as CPUs and thus part of the CPU product market.77 In the notifying
     Party’s view, even if SoCs include a number of different components of a computer
     system, an SoC’s primary functionality is what defines it as a device. Furthermore,
     the Notifying Party explained that today, CPU cores are always sold with additional
     functionalities on the same chip, i.e. packaged as an SoC, although the industry has
     continued to refer to them as CPUs. Therefore, it should not be considered that a
     chip containing CPU cores plus additional functionalities, where the CPU
     technology remains the central element of the chip, forms a separate product market
     from the “pure” CPU cores, which are almost no longer sold on a standalone basis. 78
(43) Likewise, the Notifying Party considers that CPUs (SoCs) that incorporate both CPU
     and GPU technologies are a type of CPU and should not be regarded as part of a
     separate product market. AMD uses the term Accelerated Processing Unit (APU) for
     these CPUs. This is because the CPU is the central element of the chip, the chip’s
     primary function is to act as compute engine. The Notifying Party submits that
     today, a CPU contains a built-in GPU in approximately 80% of notebooks (laptops)
     and desktops, and almost 100% of all notebooks (laptops).79
(44) In sum, the Notifying Party submits that the relevant product market for CPUs is the
     same as SoCs in which the principal element is the CPU cores. In its view, this
     includes also CPUs with a built-in GPU, which the Notifying Party refers to as
     APUs. As regards possible segmentations of the market for all CPUs, the Notifying
74   Form CO, paragraph 356.
75   Form CO, paragraphs 357 – 358.
76   Form CO, paragraph 359.
77   Form CO, paragraph 346.
78   Form CO, paragraphs 148 – 169.
79   Form CO, paragraph 351 and paragraphs 190 – 196.
                                                      12
 ---pagebreak---         Party considers that, for the purpose of this Decision, it can be left open whether the
        CPU product market should be further segmented based on: (i) the architecture used;
        (ii) CPUs for computer or non-computer devices; and, within CPUs for computer
        devices, (iii) the type of device in which they are incorporated.
4.2.2.3. The results of the market investigation and the Commission’s assessment
(45)    The Commission will first consider the Notifying Party’ explanations on CPUs,
        CPU-based SoCs, and CPUs containing an integrated GPU, followed by the
        potential distinctions considered in the precedents.
        A) CPUs, CPU-based SoCs and CPUs containing an integrated GPU
(46)    Half of competitors and a majority of customers who have replied to the market
        investigation considered that, indeed, most CPUs are supplied as SoCs. 80 A
        significant minority of all respondents did consider the statement to be incorrect but,
        as indicated in Section 4.1.2.1, this is mainly because the term “SoC” does not seem
        to have a consistent meaning in the industry. For example, one respondent only
        considers a CPU an SoC if the chip incorporates certain input/output functions and
        under this definition not all CPUs are SoCs. 81 However, the same respondent also
        noted that even the CPUs that are not SoCs under its definition contain components
        (such as graphics rendering) that once had been handled by separate chips, i.e. it
        confirmed that CPUs contain other components than cores. Some respondents used
        the term SoC as the opposite of a “discrete CPU” i.e. they considered SoCs to be
        only those chips that contain more than one type of processors, e.g. a CPU and a
        GPU. 82 One respondent noted that the issue appears to be more semantic than
        substantive.83 Indeed, as factually almost all, if not all, CPUs contain elements other
        than the cores, under the definition put forward by the Notifying Party and adopted
        for the purpose of this Decision (see Section 4.1.2.1), CPUs are sold in an SoC form
        and are thus SoCs.
(47)    It also appears to be very common that CPUs include a GPU on the same die, in
        particular in smartphones, tablets, laptops and desktops.84 Specifically, in 80% of all
        notebooks (laptops) and desktops, and in 100% of notebooks (laptops), the CPU
        includes an integrated GPU. 85 Given that in these cases the main functionality of the
        SoC is a CPU (the integrated GPU mainly handles image and video rendering but
        this is just one of the many functions of a computer) and that the competitive reality
        is that in the notebook (laptop) and desktop segments CPUs generally contain a
        GPU, it is a reasonable approach to regard these SoCs as CPUs. Thus, under the SoC
        definition proposed by the Notifying Party and adopted for this Decision, it appears
        to be correct that all CPUs are sold as SoCs and that these include CPUs with an
80      Responses to Q1 – Questionnaire to competitors and trade associations, question 31; Q2 – Questionnaire to
        customers, question 21.
81      Responses to Q2 – Questionnaire to customers, question 21.
82      See for example the responses of several customers to Q2 – Questionnaire to customers, question 21.
83      Responses to Q2 – Questionnaire to customers, question 21.
84      Notifying Party’s Response to the Commission’s RFI 3, paragraph 4.2 and Form CO paragraphs 192 – 196. See
        also one competitor’s response to Q1 – Questionnaire to competitors and trade associations, question 32.
85      Notifying Party’s Response to the Commission’s RFI 3, paragraph 4.2 and Form CO paragraphs 192 – 196. See
        also one competitor’s response to Q1 – Questionnaire to competitors and trade associations, question 32.
                                                              13
 ---pagebreak---      integrated GPU. 86 On that basis and for the purpose of the present Decision, the
     Commission will not distinguish CPUs from CPU-based SoCs or discrete CPUs
     from CPUs that contain an integrated GPU.87
(48) For completeness, as explained in Section 4.1.2.1, the Commission notes that there
     are SoCs that are not CPUs, e.g. FPGAs are also sometimes sold as SoCs. Thus
     while under the definition proposed by the Notifying Party all CPUs are SoCs, the
     reverse is not true (i.e. not all SoCs are CPUs).
     B) Distinction between CPUs for computers and CPUs for non-computers
(49) All competitors and roughly half of customers that expressed a view considered that
     CPUs for computers and CPUs for non-computers are substantially different and that
     they are not substitutable.88 The factors mentioned are consistent with those
     mentioned by the Notifying Party: CPUs for computers have to be more performant,
     whereas CPUs for non-computers need to produce less heat, consume less power and
     be more resistant to high and low outside temperatures and other weather
     conditions. 89 However, half of the customers considered that CPUs for computers
     and CPUs for non-computers are interchangeable and many responses indicated that
     in certain cases computer CPUs can be used in non-computer systems.90 Contrary to
     the Notifying Party’s view, supply-side substitution appears to be excluded as
     respondents indicated that switching production involves much longer timeframes
     than 6 months and involves significant investments.91 This is all the more so in the
     case of CPU suppliers using the x86 instruction set (such as Intel and AMD) as a
     majority of CPUs for non-computers are based on the ARM architecture.92 Overall,
     taking all the responses into account, CPUs for computers and CPUs for non-
     computers (sometimes also referred to as “embedded CPUs in the industry) are more
     likely than not to constitute separate markets. However, as the distinction does not
     change the competitive assessment, the Commission leaves the definition open.
     C) Distinction between CPUs based on architecture
(50) As regards a possible distinction between CPUs based on the architecture, a majority
     of customers and competitors that responded to the market investigation indicated
     that ARM CPUs and x86 CPUs are credible alternatives to each other.93 In the same
     vein, some respondents submitted that these two architectures compete with each
     other. However, several respondents noted that the constraints are not symmetrical in
86   As mentioned before AMD refers to CPUs with an integrated GPU as APUs. However, this is an AMD product
     name and the term is not used universally in the industry.
87   The Commission reiterates that these are largely semantic issues. If CPUs containing a GPU were not CPUs, then
     in certain segments (e.g. laptops, desktops) there would not be a CPU market to speak of, whereas the industry
     generally considers that laptops do have CPUs. The competitive reality would not change, however, as the same
     firms would compete in the segments where CPUs with integrated GPUs are common, just the product name
     would be different.
88   Respones to Q2 – Questionnaire to customers, question 17.
89   Respones to Q1 – Questionnaire to competitors and trade associations, question 24.
90   Respones to Q2 – Questionnaire to customers, question 17.
91   Respones to Q1 – Questionnaire to competitors and trade associations, question 25.
92   See one competitor’s response to Q1 – Questionnaire to competitors and trade associations, question 25.
93   Responses to Q1 – Questionnaire to competitors and trade associations, question 26; Q2 – Questionnaire to
     customers, question 18.
                                                            14
 ---pagebreak---      that ARM-based CPUs constrain x86-based CPUs, but this is not true vice-versa.94
     Consistent with this, a competitor noted that switching between architectures have so
     far been observed only in the direction towards ARM architecture from x86 and not
     vice-versa.95
(51) Furthermore, all but one respondents considered that switching between the two
     architectures involves substantial costs as it requires the re-writing of the software
     stack and rethinking the whole hardware architecture.96 This is consistent with the
     finding in the precedents that CPU architecture and the software running on the
     computer have to be compatible. This clear feedback on high switching costs
     indicates that users may not be able to switch between the different architectures as a
     result of a 5-10% relative price increase in the price of CPUs of either architecture.
     Even if a switch happens, it is likely to be a long term choice that is not likely to be
     reversed in the short term due to the same switching costs. Put differently, switching
     between CPUs of different architectures involves switching between two
     ecosystems, which would not necessarily happen in response to relative price
     changes of 5-10% in the price of the CPUs. In other words, the constraints of the
     different architectures on each other may be weaker and less immediate than that
     which would justify placing the CPUs in the same product market; rather, the
     constraints may be out-of-market constraints that trigger one-off type switching in
     the long term. The Commission also notes that CPU users that do not write their own
     software could only switch if their software supplier creates a version of the software
     suitable for another CPU architecture. However, the software vendor is unlikely to
     produce such a version unless there is significant customer demand for it, which
     creates a negative feedback loop that may hinder switching.
(52) Thus, while there appears to be some level of competitive constraint between CPUs
     of different architectures, the indications are that these are unidirectional (ARM
     CPUs constrain x86 CPUs but not vice-versa) and not immediate enough for
     including the CPUs of different architectures in one product market. However, as the
     distinction would not change the competitive assessment of this case, the
     Commission leaves the definition open.
     D) Distinction by device type within CPUs for computers
(53) Respondents provided some indication that CPUs used in different device types (e.g.
     servers, desktops, laptops, smartphones etc.) have different characteristics due to
     different requirements, for instance, in terms of performance and size. 97
(54) In any case, the Commission considers that, for the purpose of this Decision, it can
     be left open whether the product market for CPUs should be segmented according to
     any of the distinctions set out above, as the Transaction does not raise competition
     concerns under any of the possible product market definitions.
94   Responses to Q1 – Questionnaire to competitors and trade associations, question 26, and Q2 – Questionnaire to
     customers, question 18.
95   Respones to Q1 – Questionnaire to competitors and trade associations, question 26.
96   Respones to Q1 – Questionnaire to competitors and trade associations, question 27; Q2 – Questionnaire to
     customers, question 19.
97   Respones to Q1 – Questionnaire to competitors and trade associations, question 29; Q2 – Questionnaire to
     customers, question 20.
                                                          15
 ---pagebreak---         E) Conclusion
(55)    In sum, the Commission leaves the question whether the product market for CPUs
        should be further segmented based on (i) the architecture; (ii) the use in computer or
        non-computer devices; and, iii) within CPUs for computer devices, the different
        device types. Moreover, the Commission considers that, for the purpose of this
        Decision and under the definition set out in Section 4.1.2.1, all CPUs are SoCs, and
        that it is very common that CPUs include an integrated GPU. Thus, the Commission
        will not distinguish CPUs from CPU-based SoCs or discrete CPUs from CPUs that
        contain a GPU.
4.2.3. Discrete GPUs
4.2.3.1. Commission precedents
(56)    In Nvidia/Mellanox, as explained in paragraph (27), the Commission considered that
        discrete GPUs are part of a separate product market compared to other types of
        processing solutions. 98 In this context, the Commission also concluded that GPUs
        integrated into another chip are distinct products compared to discrete GPUs, i.e.
        GPUs that do not comprise another processor technology. 99
(57)    Within discrete GPUs, the Commission considered a distinction between: (i) discrete
        GPUs for datacentres; and (ii) discrete GPUs for gaming. In this respect, the market
        investigation confirmed that (i) discrete GPUs for data centres, on the one hand, and
        (ii) discrete GPUs for gaming, on the other hand, are in different relevant product
        markets. Respondents indicated that, despite these products having the same
        architecture, they have different levels of performance due to, among other reasons,
        technical limitations of discrete GPUs for gaming. 100
(58)    Against this background, the Commission found that there is a separate relevant
        product market for discrete GPUs for datacentres.101
4.2.3.2. The Notifying Party’s views
(59)    The Notifying Party agrees with the Commission’s findings in Nvidia/Mellanox with
        respect to distinct product markets for i) discrete GPUs for data centres and ii)
        discrete GPUs for gaming. In that that regard, the Notifying Party states that the
        architecture of discrete GPUs for gaming is optimised for a maximum of frames per
        minutes while the architecture of discrete GPUs for data centres is optimised for
        flops per second.102 The Notifying Party submits that these two architectures
        continue to diverge in terms of capability and performance, and that substitutability
        between discrete GPUs for data centres and discrete GPUs for gaming will likely
        decrease further in the future.103 According to the Notifying Party, there is no basis
        for any additional distinctions further to the one between discrete GPUs for data
98      Case COMP M.9424 – Nvidia/Mellanox, Commission decision of 19 December 2019, paragraphs 27-34.
99      Case COMP M.9424 – Nvidia/Mellanox, Commission decision of 19 December 2019, paragraph 30.
100     Case COMP M.9424 – Nvidia/Mellanox, Commission decision of 19 December 2019, paragraph 26.
101     Case COMP M.9424 – Nvidia/Mellanox, Commission decision of 19 December 2019, paragraph 38.
102     Form CO, paragraph 369.
103     Form CO, paragraph 369.
                                                      16
 ---pagebreak---         centres and for gaming, as GPUs are flexible enough to be used, for instance, across
        different industrial sectors (e.g. automotive, telecommunications etc.).104 The
        Notifying Party adds that the term discrete GPUs for gaming should be understood
        broadly, i.e. their use includes not only gaming but all other applications where
        professional visualisation is necessary, such as computer aided design (CAD), flight
        simulation and other application etc., even if gaming remains the primary use for
        such GPUs. 105
(60)    The Notifying Party also submits that integrated GPUs are not substitutable with
        discrete GPUs, in particular for data centre and high performance computing
        applications. The Notifying Parties considers that only discrete GPUs are capable of
        performing compute-intensive workloads or guarantee the video quality for gaming
        and other professional visualisation tasks. 106
(61)    Moreover, according to the Notifying Party, graphics cards should not be considered
        as forming a separate product market. In the Notifying Party’s view, graphics cards
        are a mere way of selling a GPU, and they bring only limited additional value in
        comparison to the GPU technology that graphics cards contain. This is true in
        particular as regards graphics cards used in data centres, where the GPU is more
        expensive and the cost of the add-on board, which remains fixed, accounts only for a
        small proportion of the final price of the graphics card.107 Further, [information on
        AMD’s products]. Therefore, the Notifying Party notes that any distinction between
        discrete GPUs would also apply to graphics cards. In any case, the Notifying Party
        notes that only [5-10]% of AMD’s GPUs are offered as graphics cards, 108 and that
        the distinction between discrete GPUs and graphics cards can be left open, since this
        does not affect the competitive assessment of the Transaction.109
(62)    In any case, the Notifying Party argues that the exact scope of the GPU product
        market can be left open due to the absence of competition concerns in relation to this
        Transaction under any plausible product market definition.110
4.2.3.3. The results of the market investigation and the Commission’s assessment
(63)    In line with the Nvidia/Mellanox precedent and with the Notifying Party’s view, an
        overwhelming majority of respondents to the market investigation confirmed the
        approach taken in Nvidia/Mellanox. Thus, respondents confirmed that integrated
        GPUs on the one hand, and discrete GPUs on the other hand belong to separate
        product markets and that discrete GPUs for gaming and discrete GPUs for data
        centres form separate product markets.111 As a customer summarised, “Integrated
        GPUs are really marketed under the CPU brand, not the GPU itself so the two
        markets are distinct. Furthermore, GPU architectures has specialized to the point
104     Form CO, paragraph 371.
105     Notifying Party’s Response to RFI 3, paragraph 18.2.
106     Form CO, paragraph 370.
107     Notifying Party’s Response to Commission’s RFI 5.
108     Ibid.
109     Form CO, paragraph 372. The Parties further note that that AMD does not distinguish revenues from add-on
        boards without GPUs separately from revenue from GPU chips.
110     Form CO, paragraph 368.
111     Responses to Q1 – Questionnaire to competitors and trade associations, question 33; Q2 – Questionnaire to
        customers, question 23.
                                                             17
 ---pagebreak---         where a data center or AI type GPU is no longer as computationally efficient at
        video processing [as] a gaming GPU even though their constituent design IP library
        is identical”112 This also confirms that, as discussed in relation to CPUs and GPUs
        (Section 4.1.2.1 and 4.2.2.2), integrated GPUs are mainly sold as parts of CPUs.
(64)    Furthermore, discrete GPUs and graphics cards appear to fall into the same market
        based on supply-side substitution. Indeed, the core component of a graphics card is
        the discrete GPU, whereas the card that houses the GPU is a simple and relatively
        inexpensive device that can be added at little cost by any discrete GPU supplier.
        Based on the information provided by the Notifying Party, the costs related to the
        manufacturing of the card by an external manufacturer, in case of data centre
        graphics cards, account for [percentage range] of the total production costs, and the
        component that determines the final price of a graphics card is the GPU
        technology. 113 Thus, AMD could easily and at modest cost redirect this volume of
        GPUs to manufacturing own-brand graphics cards using an external manufacturer
        for add-on boards. In addition, no proprietary knowledge is necessary to build such
        boards, unlike the design of a GPU that requires specific technical know-how. 114
(65)    In light of the precedents and of the results of the market investigation, the
        Commission concludes, for the purpose of the present Decision, that discrete GPUs
        constitute a separate product market from integrated GPUs, which are usually
        integrated into CPUs. Likewise, the Commission concludes that discrete GPUs for
        data centres and discrete GPUs for gaming and professional visualisation constitute
        separate markets. Graphics cards would fall into the same market as the discrete
        GPU they house.
4.2.4. FPGAs
4.2.4.1. Commission precedents
(66)    In Intel/Altera115, the Commission considered the potential distinction between
        FPGAs and Complex Programmable Logic Devices (“CPLDs”), i.e. are another type
        of programmable logic devices that can be configured by customers and are
        primarily used as “glue logic” to interface with other integrated circuits in a system.
        The Commission also assessed the potential distinction between FPGAs and ASICs
        and ASSPs, which are also specialised, albeit not reprogrammable, hardware.
(67)    In addition, the Commission also examined distinctions within FPGAs based on
        (i) performance characteristics (i.e., between high-end, mid-range, and low-end
        devices); and (ii) the type of device FPGAs are installed into (i.e., desktops, laptops,
        and servers). Moreover, the Commission considered whether FPGA for servers
        could be further distinguished based on (iii) the FPGA’s intended use
112     Response of one customer to Q2 – Questionnaire to customers, question 23.
113     Notifying Party’s Response to the Commission RFI 5.
114     Notifying Party’s Response to the Commission RFI No 5. The Notifying Party explained that the only factor that
        prevents AMD from manufacturing their own boards is the investment required to build a manufacturing facility,
        while manufacturers, rather than owning specific IP or know-how, benefit from economies of scale and therefore
        offer lower costs for the manufacturing process, that make it convenient for AMD to outsource the
        manufacturing.
115     Case COMP M.7688 – Intel/Altera, Commission decision of 14 October 2015.
                                                              18
 ---pagebreak---         (i.e. computing, networking, storage) and whether, iv) within FPGAs for computing
        in servers, there is a separate market for FPGAs for workload acceleration.
(68)    With respect to FPGAs and CPLDs, the market investigation indicated that these two
        products are not interchangeable as they have different functionalities and
        characteristics, target different user categories and are built upon different
        architectures. In particular, compared to FPGAs, CPLDs are generally significantly
        less performant in terms of computing capability and speed, while being more
        complex and less configurable. 116
(69)    With respect to FPGAs and ASICs or ASSPs, the market investigation indicated that
        FPGAs could be an alternative ASICs or ASSPs, but also underlined important
        differences. In particular, FPGAs can be configured to a higher degree by customers
        using specialised software.117 Furthermore, FPGAs come with lower time-to-market,
        lower fixed costs and higher variable cost than ASICs or ASSPs. Given the different
        cost structure, ASIC and ASSPs can offer significant performance advantages vis-à-
        vis FPGAs for companies with sufficient financial and technical resources who need
        larger quantities. 118
(70)    Eventually, the Commission found that: (i) FPGAs and CPLDs; and (ii) FPGAs and
        ASICs/ASSPs fall into different product markets, but left open the issue whether
        segmentations within FPGA products are warranted, as the transaction did not raise
        any concerns under any market definition based on the considered distinctions. 119
4.2.4.2. The Notifying Party’s views
(71)    The Notifying Party submits that FPGAs fall into separate product markets from
        GPUs, ASICs, ASSPs and other acceleration technologies. 120 However, the
        Notifying Party submits that the Commission should not segment the FPGA market
        further based on (i) performance characteristics, (ii) type of device, (iii) intended use
        (in particular, as between computing, networking, or storage in a data centre), nor
        based on (iv) the vertical industry in which FPGAs are used (e.g. automotive,
        communications etc.). This is because FPGAs are generic, programmable logic
        devices that can serve all purposes.121
(72)    Moreover, the Notifying Party submits that the Commission has never considered
        segmenting the market for FPGAs between FPGAs for computer devices (mostly
        servers) and embedded FPGAs (i.e. FPGAs used in non-computer devices). In the
        Notifying Party’s view, such segmentation is not warranted, because: (i) there is no
        fundamental difference between FPGAs used in servers and FPGAs used in
        embedded applications; (ii) conditions in the supply of FPGAs are broadly similar
116     Case COMP M.7688 – Intel/Altera, Commission decision of 14 October 2015, paragraph 41.
117     Case COMP M.7688 – Intel/Altera, Commission decision of 14 October 2015, paragraph 43.
118     Case COMP M.7688 – Intel/Altera, Commission decision of 14 October 2015, paragraph 43.
119     Case COMP M.7688 – Intel/Altera, Commission decision of 14 October 2015, paragraphs 40, 53.
120     Form CO, paragraph 379.
121     Form CO, paragraph 380.
                                                         19
 ---pagebreak---         across all industry sectors; and (iii) the majority of FPGAs are used in embedded
        applications in any case.122
(73)    In any case, the notifying Party submits that the exact scope of the product market
        for FPGAs can be left open due to the absence of competition concerns raised by the
        Transaction under any plausible definition. 123
4.2.4.3. The results of the market investigation and the Commission’s assessment
        A) Distinction between FPGAs and CPLDs, ASICs and ASSPs
(74)    As regards CPLDs, respondents to the market investigation nearly unanimously
        confirmed that they are not substitutable with FPGAs neither from a demand, nor
        from a supply perspective, due to the wide performance gap and the large differences
        in production know-how. 124
(75)    The market investigation also confirmed, in line with the precedents, that although in
        some cases both FPGAs and ASICs could be deployed for the same task, there is a
        large difference in their cost structure.125 Namely, respondents indicated that
        designing an ASIC involves very substantial fixed costs and thus they are worth to
        deploy only in large quantities. By contrast, FPGAs have low unit costs but
        programming the FPGA involves considerable variable costs. Thus, FPGAs are
        mostly worth deploying in small or medium quantities, while ASICs are worth
        deploying in large quantities which implies that the substitutability between FPGAs
        and ASICs is minimal. 126
(76)    By extension, the same applies to ASSPs with the difference that, contrary to ASICs,
        the cost of the ASSP development can be spread over several customers. Thus, if the
        need for a specific optimised hardware is large enough in the overall market so as to
        lower the unit cost of ASSPs, ASSPs will be preferred over FPGAs as they do not
        need to be programmed and are off-the-shelf products. However, if there are no
        ASSPs for a given application where specialised hardware is needed or the expected
        volumes are not large enough to make the ASSP development economical, FPGAs
        will be preferred. Moreover, regardless of economics, FPGAs will be preferred for
        workloads where specialised hardware is desired but the methods are evolving and
        thus the chip needs to be reprogrammed from time to time. ASSPs and ASICs not
        being reprogrammable, they cannot be deployed in such cases.
        B) Potential distinctions within FPGA products
(77)    The feedback received in relation to a possible segmentation of FPGAs based on the
        performance levels (i.e. high-end, mid-range and low-end FPGAs), was somewhat
        mixed as regards demand-side substitution. Respondents were close to equally split
122     Form CO, paragraphs 382 – 383.
123     Form CO, paragraph 378.
124     Responses to Q1 – Questionnaire to competitors and trade associations, question 9; Q2 – Questionnaire to
        customers, question 7.
125     Responses to Q1 – Questionnaire to competitors and trade associations, question 6; Q2 – Questionnaire to
        customers, question 5.
126     Responses to Q1 – Questionnaire to competitors and trade associations, question 7; Q2 – Questionnaire to
        customers, question 6.
                                                         20
 ---pagebreak---      on whether FPGAs with different performance profiles are credible alternatives.127
     However, the qualitative answers point to a lack of substitution as FPGA
     performance also correlates with cost and energy consumption, resulting in
     significant trade-offs between FPGAs with different performance profiles.128 The
     responses also indicate that the categories of high-end, mid-range and low-end
     FPGAs are not clear-cut and thus substitution between FPGAs close to the cut-off
     points of two different performance brackets is likely. 129 This, however, does not
     mean that the distinction would not have merit. While demand-side substitution is
     unlikely, the results are inconclusive as regards supply-side substitution. Switching
     production from lower performance towards higher performance versions is not
     possible in a short timeframe and without incurring significant costs but switching
     supplies in the other direction seems easier. 130 This one-directional substitution may
     result in a unified market as, with the exception of one small player (Microchip), all
     suppliers are capable of supplying high-end FPGAs. However, lower-end FPGA
     designs also have challenges especially as regards power consumption and thus it
     may not be easy to switch supplies in this direction either.131 As the distinction does
     not influence the outcome of the competitive assessment, the Commission leaves the
     market definition in this regard open.
(78) Replies were also inconclusive as regards a possible distinction between FPGAs for
     computers (almost exclusively servers) and for non-computer devices.132 Certain
     responses indicate that if the performance (and thus power consumption, cost and
     size) parameters are equivalent, the same FPGA can be used in computers and in
     non-computers.133 However, other responses indicate that there may be differences
     that would not be captured by the distinction based on performance, such as
     reliability, number of pins and security features.134 Furthermore, just like in the case
     of CPUs for non-computers, the replies indicate that in certain cases FPGAs in non-
     computers need to be resistant to extreme weather conditions. 135 While such aspects
     would most likely exclude demand substitution in certain non-computer applications,
     supply-side substitution is unclear in this regard. As the potential distinction does not
     influence the outcome of the competitive assessment, the Commission leaves the
     definition open in this regard.
(79) As regards a possible distinction between FPGAs used in different industrial sectors
     (e.g. automotive, telecommunications etc.), the responses generally indicate that,
     from a demand perspective, due to their programmability, the same FPGAs can be
     used across different vertical industries. 136 However, as indicated before, it appears
     that this is only true across certain industries as certain industrial uses require
127  Responses to Q1 – Questionnaire to competitors and trade associations, question 14; Q2 – Questionnaire to
     customers, question 10.
128  See for example one customer’s response to Q2 – Questionnaire to customers, question 10.
129  See for example one competitor’s response to Q1 – Questionnaire to competitors and trade associations.
130  Respones to Q1 – Questionnaire to competitors and trade associations, question 15.
131  Minutes of a call with Achronix.
132  Responses to Q1 – Questionnaire to competitors and trade associations, question 18; Q2 – Questionnaire to
     customers, question 13.
133  See one customer’s response to Q2 – Questionnaire to customers, question 13.
134  See one customer’s response to Q2 – Questionnaire to customers, question 13.
135  See one customer’s response to Q2 – Questionnaire to customers, question 13.
136  Responses to Q1 – Questionnaire to competitors and trade associations, question 20; Q2 – Questionnaire to
     customers, question 14.
                                                          21
 ---pagebreak---      resistance to environmental factors that FPGAs used in a more standard environment
     cannot provide.137 For example, FPGAs used in 5G base stations need to be
     temperature resistant,138 while FPGAs used in the aerospace industry need to be
     resistant to radiation. 139 However, as indicated before, the market feedback lacks
     sufficient clarity as to whether or not suppliers could add such features without
     major difficulties. As defining separate markets for FPGAs in certain industries
     would not influence the competitive assessment, the Commission leaves the market
     definition open.
(80) A large majority of customers also indicated that there are specific use cases for
     FPGAs that would require specific product characteristics and technical parameters
     such that the FPGAs are not substitutable across these use cases. 140 However, the
     qualitative responses revealed few differences beyond the distinctions considered
     previously (performance, size, power consumption, resistance to environmental
     factors etc.) and the feedback on suppliers’ ability to adjust production in relation to
     these parameters,141 if there are any, was insufficient. However, as the competitive
     assessment does not change regardless of any distinction within FPGAs, the
     Commission can also leave the definition open in this regard.
(81) Finally, the Commission also leaves open the question whether FPGAs used in data
     centres constitute separate markets, as the results were inconclusive as to whether
     data centre FPGAs have different features relative those used outside data centres
     that are not captured by the potential distinction on performance. 142
(82) The market investigation confirmed that some FPGAs are also often offered as
     SoCs. 143 On the demand side, the majority of customers indicated that FPGA SoCs
     are regarded as more complex, distinct products from standalone FPGAs, although
     the issue remains that the term “SoC” is not used consistently.144 However, there
     appears to be supply-side substitutability between standalone FPGAs and FPGA
     SoCs. The Commission recalls that FPGA SoCs are standalone FPGAs that have
     been pre-emptively combined with other semiconductors, typically an ARM-based
     CPU, for efficiency reasons. Any FPGA supplier, when it has the capability to
     design FPGA programmable logic, can easily combine the latter, in a short
     timeframe and at modest costs, with the components required to create an SoC. 145
(83) As regards FPGAs and FPGA accelerator cards, the market investigation indicates
     that they are not substitutable. From the demand side one is a chip level product,
     while the other is a board level product i.e. they are at different levels of a server’s
137  Responses to Q1 – Questionnaire to competitors and trade associations, question 20; Q2 – Questionnaire to
     customers, question 14.
138  See the response of one customer, Q2 – Questionnaire to customers, question 14.
139  Minutes of a phone call with GE.
140  Responses to Q1 – Questionnaire to competitors and trade associations questions 22/22.1; Q2 – Questionnaire to
     customers, questions 15/15.1.
141  Responses to Q1 – Questionnaire to competitors and trade associations, question 22.
142  Responses to Q1 – Questionnaire to competitors and trade associations, question 16; Q2 – Questionnaire to
     customers, question 23.
143  Responses to Q1 – Questionnaire to competitors and trade associations, question 10; Q2 – Questionnaire to
     customers, question 8.
144  Responses to Q2 – Questionnaire to customers, question 9.
145  See Notifying Party’s Response to the Commission’s RFI 5.
                                                          22
 ---pagebreak---         architecture. As such they cannot be used interchangeably.146 From the supply-side,
        some responses indicate that switching from supplying FPGAs to supplying FPGA
        accelerator cards takes two years and significant financial investment. However,
        only a few respondents provided feedback on this issue, and the Notifying Party
        argues that substitutability exists on the supply side because the FPGA architecture
        is the central element of FPGA accelerator cards and FPGA suppliers can easily, and
        at modest costs, switch to supplying FPGA accelerator cards from standalone
        FPGAs. 147 The Notifying Party also argues that contract manufacturers can easily
        create an FPGA card from an FPGA; however, this was not confirmed in the market
        investigation. The Commission considers that, for the purpose of this Decision, it
        can be left open whether FPGA accelerator cards are part of the same product market
        as FPGAs, as the outcome of the competitive assessment does not change regardless
        of such distinction.
        C) Conclusion
(84)    Based on the above the Commission considers that, for the purpose of this Decision,
        it can be left open whether the market for FPGAs should be further segmented
        according to the segmentations indicated above, i.e.: (i) based on the performance
        level; (ii) between FPGAs for computer and non-computer devices; (iii) between
        FPGAs used in different industrial sectors; (iv) based on the specific use cases; and
        (v) between FPGAs for data centres and FPGAs used outside data centres. The
        Commission considers that the outcome of the competitive assessment does not
        change regardless of any market definition based on these distinctions. The
        Commission further considers that, for the purposes of this Decision, standalone
        FPGAs and FPGA SoCs are in the same market, and that it can be left open whether
        FPGA accelerator cards are part of the same market as FPGAs.
4.2.5. The Parties’ other products
4.2.5.1. Chipsets
(85)    In Intel/McAfee, the Commission detailed that chipsets are generally designed to
        work with a specific family or generation of CPUs and that, in order to function
        together, chipsets and CPUs have to be compatible.148 The Commission also
        discussed whether chipsets could constitute a separate product market in particular
        from CPUs, as they can be bought and sold independently, 149 and considered
        possible distinction within chipsets based on the separate CPU (after)markets, i.e.
        between chipsets compatible with (i) Intel CPUs; or (ii) AMD CPUs, respectively. 150
        However, the relevant product market was left open.151
(86)    The Notifying Party submits that chipsets are part of the same product market as
        CPUs. According to the Parties, changes in the way CPUs are designed and
        manufactured make a distinction between chipsets and CPUs even less appropriate
146     Responses to Q1 – Questionnaire to competitors and trade associations, question 13.
147     See Notifying Party’s response to the Commission’s RFI 5.
148     Case COMP M.5984 – Intel/McAfee, Commission decision of 26 January 2011, paragraph 13.
149     Case COMP M.5984 – Intel/McAfee, Commission decision of 26 January 2011, paragraph 34.
150     Case COMP M.5984 – Intel/McAfee, Commission decision of 26 January 2011, paragraph 35.
151     Case COMP M.5984 – Intel/McAfee, Commission decision of 26 January 2011, paragraph 36.
                                                             23
 ---pagebreak---         today than it was at the time of the Commission’s 2011 Intel/McAfee decision. In
        particular, today chipsets and CPUs are mostly sold in an integrated way (i.e. in the
        same SoC). If they are sold separately (as it happens sometimes e.g. for the do-it-
        yourself – “DIY” desktop market), there is always a one-to-one relationship between
        every AMD CPU and AMD chipset sold. Likewise, the Notifying Party explained
        that also Intel CPUs only work with Intel chipsets. In addition, chipsets have a low
        value compared to the CPU itself. 152 Consequently, the Notifying Party submits that
        chipsets do not fall into a separate market from CPUs.
(87)    In this regard, the Commission notes that chipsets may be considered as parts of
        CPUs. To the extent they are distinct products, a chipset for a given CPU would not
        be substitutable with a chipset designed for another CPU. For the purpose of this
        Decision, the Commission considers that the question whether chipsets belong to the
        same product market as CPUs can be left open as the distinction would have no
        effect on the competitive assessment. If they do not fall into the same market as
        CPUs on the grounds that they are CPU parts, they clearly would not belong to the
        same market as FPGAs either as chipsets are non-programmable hardware
        complements to CPUs. Further, if they are excluded from the market of CPUs, to
        which they most closely relate, they also cannot be part of the market for any other
        AMD product (any discrete GPU market, or any market where semi-custom SoCs
        for the gaming market would belong).
4.2.5.2. Semi-custom SoCs for the gaming market
(88)    Semi-custom SoCs for the gaming market typically describe SoCs which incorporate
        CPU(s) and GPU(s) on a single chip and are built into video gaming consoles
        (e.g. Sony PlayStation, Microsoft Xbox, Nintendo Switch). Notably, the Notifying
        Party explains that they do not refer to discrete GPUs for gaming (Section 4.2.3.1),
        which are mainly used for desktops or laptops with dedicated performance needs for
        gaming. 153 Furthermore, such SoCs do not contain, and are not used together with,
        FPGAs.
(89)    The Commission has not considered semi-custom SoCs for the gaming market in
        previous decisions. The Notifying Party note that such product market is likely to be
        distinct from other CPUs, as semi-custom SoCs for gaming are bespoke products
        that have distinct characteristics and are designed specifically on customer order.
        Furthermore, semi-custom SoCs for gaming are designed and manufactured under
        long-term contracts with customers lasting approximately [time range]. 154
(90)    The Commission considers that semi-custom SoCs for the gaming market are not
        part of any of the potential CPU markets discussed in Section 4.2.2 or any of the
        discrete GPU markets discussed in Section 4.2.3. These are semi-bespoke products
        developed for specific customers and not substitutable with AMD’s CPUs or GPUs.
        Likewise, as they are customised SoCs based on CPU and GPU technology, they do
        not belong to the same market as FPGAs. Their exact market definition can be left
        open because it would not change the outcome of the competitive assessment.
152     Form CO, paragraph 361.
153     Form CO, paragraph 193.
154     Form CO, paragraph 363.
                                                  24
 ---pagebreak--- 4.3.   Geographic market definition
4.3.1. Commission precedents
(91)   In Intel, the Commission found that the geographic market for CPUs is worldwide in
       scope, as (i) CPU suppliers compete globally, (ii) CPU architectures are the same
       around the world, (iii) OEMs operate on a worldwide basis, and (iv) the cost of
       shipping CPUs around the world is low compared to CPU manufacturing cost.155
       Likewise, in Intel/McAfee, the Commission found that the geographic markets for
       x86 CPUs and chipsets are both worldwide in scope. 156 The same conclusion was
       also reached by the Commission in Intel/Altera in relation to all CPUs and possible
       segments thereof.157
(92)   Similarly, in Intel/Altera and Nvidia/Mellanox, the Commission concluded that the
       markets for FPGAs and GPUs (and possible segments thereof) are worldwide in
       scope.158 The market investigation indicated a lack of significant differences in
       pricing, supply or purchasing patterns across the globe, as well as low shipping and
       handling costs. 159
4.3.2. The Notifying Party’s view
(93)   The Notifying Party submits that, in line with the relevant Commission precedents,
       the geographic markets for semiconductors should be worldwide in scope.160
4.3.3. The results of the market investigation and the Commission’s assessment
(94)   A large majority of respondents to the market investigation indicated that, regardless
       of the precise distinction on product level, the geographic market for CPUs, GPUs
       and FPGAs is worldwide in scope.161
(95)   Some respondents indicated that certain issues such as trade restrictions and
       geopolitical dynamics might affect the conditions of competition in China. However,
       the majority of respondents submitted that the identification of a separate geographic
       market for China is not warranted due to the fact that customers are located in every
       region of the world, including China, and that possible barriers are not significant in
       such a way as to affect the global scope of supplying and purchasing patterns.162
(96)   In line with the precedents and with the results of the market investigation, the
       Commission therefore considers that, for the purpose of this Decision, the relevant
       geographic market for CPUs, FPGAs and GPUs, regardless of the exact definitions
       at product level, is worldwide in scope.
155    Case COMP/37.990 – Intel, Commission decision of 13 May 2009, paragraph 836.
156    Case COMP M.5984 - Intel/McAfee, Commission decision of 26 January 2011, paragraph 32 – 33, 37.
157    Case COMP M.7688 – Intel/Altera, Commission decision of 14 October 2015, paragraph 25.
158    Case COMP M.7688 – Intel/Altera, Commission decision of 14 October 2015, paragraph 25; Case COMP
       M.9424 – Nvidia/Mellanox, Commission decision of 19 December 2019, paragraph 38.
159    Case COMP M.9424 – Nvidia/Mellanox, Commission decision of 19 December 2019, paragraph 56.
160    Form CO, paragraph 387.
161    Responses to Q1 – Questionnaire to competitors and trade associations, question 34; Q2 – Questionnaire to
       customers, question 24.
162    Responses to Q1 – Questionnaire to competitors and trade associations, question 35; Q2 – Questionnaire to
       customers, question 25.
                                                         25
 ---pagebreak--- 5.    COMPETITIVE ASSESSMENT
5.1.  Introduction
(97)  There is no horizontal overlap between the Parties’ activities. First, as discussed in
      Section 4.2.1, FPGAs on the one hand (offered by Xilinx), and CPUs or discrete
      GPUs on the other hand (offered by AMD) belong to separate markets regardless of
      any distinction within these processor types. Second, as discussed in Section 4.2.5,
      AMD’s chipsets and semi-custom SoCs for the gaming market on the one hand and
      FPGAs on the other hand also belong to separate markets regardless of the precise
      market definition for these products.
(98)  As both Parties supply final chips or hardware incorporating those chips and neither
      are active in markets for any product that is upstream or downstream relative to the
      products of the other party, there is also no vertical relationship between them.163
(99)  However, as CPUs and FPGAs are used, or can be used, together in some servers, in
      particular in data centres,164 as well as in a number of non-computer devices, 165 there
      is a conglomerate relationship between the two products and the Parties. To a lesser
      extent discrete GPUs and FPGAs could also be used together in data centres,166 and
      in some other applications,167 which results in another conglomerate relationship. 168
      To the extent FPGA accelerator cards form a separate market from FPGAs, then a
      conglomerate relationship would arise between accelerator cards and CPUs/GPUs,
      as they can be used together in data centres.
(100) In addition to these links, there are no further conglomerate relationships involving
      other products. To the extent they do not belong to the same market as CPUs
      themselves, chipsets do not give rise to conglomerate relationships. Chipsets being a
      close complement of CPUs, they are used together with CPUs and not FPGAs.
      FPGAs are not used in gaming consoles, 169 and therefore there cannot be a
      conglomerate relationship between semi-custom SoCs for gaming and FPGAs.
      Should FPGA based accelerator cards form a separate market, there would be no
      conglomerate relationship between them and chipsets and semi-custom SoCs for
      gaming for the same reasons as in the case of FPGAs.
5.2.  Analytical framework
(101) Pursuant to the Commission’s Non-Horizontal Merger Guidelines170, conglomerate
      mergers are mergers between firms that are in a relationship which is neither
163   Form CO, paragraph 463.
164   Notifying Party’s Response to the Commission’s RFI 1, paragraph 3.1., Notifying Party’s Response to the
      Commission’s RFI 2, question 7.
165   Notifying Party’s Response to the Commission’s RFI 1, paragraph 3.2.
166   Notifying Party’s Response to the Commission’s RFI 1, paragraph 13.3. Notifying Party’s Response to the
      Commission’s RFI 3, paragraph 19.2.
167   Responses to to Q2 – Questionnaire to customers, question 36.
168   Form CO, paragraph 464.
169   Responses to Q1 – Questionnaire to competitors and trade associations, question 17; Q2 – Questionnaire to
      customers, question 12.
170   Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of
      concentrations between undertakings, OJ C 265, 18.10.2008, p. 6–25.
                                                          26
 ---pagebreak---        horizontal (as competitors in the same relevant market) nor vertical (as suppliers or
       customers). In conglomerate mergers, the relevant companies are active in closely
       related markets, for instance supplying complementary products or products that
       belong to the same product range.171
(102) It is acknowledged that, in the majority of cases, conglomerate mergers will not lead
       to any competition problems. In this regard, conglomerate mergers, like vertical
       mergers, provide substantial scope for efficiencies. 172 However, in certain specific
       cases, there may be harm to competition.
(103) The main concern in the context of conglomerate mergers is that of foreclosure. The
       combination of products in related markets may confer on the merged entity the
       ability and incentive to leverage a strong market position from one market to another
       market, in order to foreclose rivals on the latter, by means of tying or bundling or
       other exclusionary practices.173
(104) Pursuant to the Non-horizontal Merger Guidelines, bundling refers to the way
       products are offered and priced by the merged entity. In particular, products can be
       sold only together in fixed proportions (pure bundling), or they can also be available
       separately, but the sum of their standalone prices is higher than the bundled price
       (mixed bundling). Tying refers to situations in which customers that purchase one
       product (the tying product) are required to also buy another good from the same
       producer (the tied product). Tying can be implemented on a technical basis (i.e. via
       exclusive technical compatibility between the products) or on a contractual basis.174
(105) Tying and bundling as such are common practices that often have no anticompetitive
       consequences. Companies may engage in tying and bundling in order to provide
       their customers with better products or offerings in cost-effective ways.
(106) Nevertheless, in certain circumstances, these practices may reduce the competitive
       pressure on the merged entity. In assessing the likelihood of such a scenario, the
       Commission examines, first, whether the merged firm would have the ability to
       foreclose its rivals, second, whether it would have the economic incentive to do so
       and, third, whether a foreclosure strategy would have a significant detrimental effect
       on competition, thus causing harm to consumers. In practice, these factors are often
       examined together as they are closely intertwined. 175
5.3.   Market shares and sales values
5.3.1. CPUs
(107) The following tables indicate the market shares of the Parties and their competitors
       under the following plausible product market definitions: (i) all CPUs, (ii) x86
       CPUs, (iii) CPUs for non-computers, (iv) x86 CPUs for non-computers, (v) CPUs
       for computer devices, (vi) x86 CPUs for computer devices, (vii) CPUs for servers
171    Non-horizontal Merger Guidelines, paragraphs 5 and 91.
172    Non-horizontal Merger Guidelines, paragraph 13.
173    Non-horizontal Merger Guidelines, paragraph 93.
174    Non-horizontal Merger Guidelines, paragraphs 96 – 97.
175    Non-horizontal Merger Guidelines, paragraph 94.
                                                           27
 ---pagebreak---       and viii) x86 CPUs for servers. The geographic scope of these markets is worldwide.
      All market shares are in value.
(108) Table 1 indicates the market shares and sales values of AMD and its competitors in
      a possible worldwide market comprising all CPUs, irrespective of the architecture,
      the general application (i.e., CPUs for computer devices, CPUs for non-computers)
      and, the different types of computer devices (e.g. servers, desktops, laptops etc.).
      Table 1: Shares and sales values in worldwide market for all CPUs (2018 – 2020)
                                        Market shares                                  Sales (million USD)
          Supplier
                             2018             2019              2020          2018            2019         2020
             Intel         [40-50]%        [40-50]%         [40-50]%           […]             […]         […]
            AMD             [0-5]%           [0-5]%           [0-5]%           […]             […]         […]
           Others          [50-60]%        [50-60]%         [50-60]%           […]             […]         […]
            Total           100.0%          100.0%           100.0%            […]             […]         […]
                                                    176
      Sources: IDC, Mercury and Parties' estimates
(109) In a possible worldwide market comprising all CPUs in 2020, AMD holds a market
      share of [0-5]% (sales: USD […] million), Intel holds a market share of [40-50]%
      (sales: USD […] million), while other competitors hold [50-60]% (sales: USD […]
      million) together.
(110) Table 2 indicates the market shares and sales values of AMD and its competitors in
      a possible worldwide market comprising all x86 CPUs, irrespective of the general
      application and the type of computer device.
      Table 2: Shares and sales values in worldwide market for all x86 CPUs (2018 – 2020)
                                        Market shares                                  Sales (million USD)
          Supplier
                             2018             2019              2020          2018            2019         2020
             Intel        [90-100]%       [90-100]%        [90-100]%           […]             […]         […]
            AMD             [0-5]%          [5-10]%          [5-10]%           […]             […]         […]
            Total           100.0%          100.0%           100.0%            […]             […]         […]
      Source: IDC, Mercury and Parties’ estimates
(111) In a possible worldwide market comprising all x86 CPUs in 2020, AMD holds a
      market share of [5-10]% (sales: USD […] million) and Intel holds a market share of
      [90-100]% (sales: USD […] million).
(112) Table 3 indicates the market shares and sales values of AMD and its competitors in
      a possible worldwide market comprising CPUs for non-computers, irrespective of
      the architecture.
176   AMD notes that the market size for the embedded segment available from IDC may include [AMD’s competitor]
      revenues in embedded applications related exclusively to self-supply, however to the best of AMD’s knowledge
      these revenues are negligible and do not materially affect the overall market size.
                                                               28
 ---pagebreak---       Table 3: Shares and sales values in worldwide market for CPUs for non-computers (2018 – 2020)
                                      Market shares                           Sales (million USD)
         Supplier
                           2018              2019          2020        2018          2019           2020
            Intel        [10-20]%         [10-20]%     [10-20]%        […]            […]           […]
           AMD            [0-5]%            [0-5]%       [0-5]%        […]            […]           […]
          Non-x86
                         [80-90]%         [80-90]%     [80-90]%        […]            […]           […]
         suppliers
           Total          100.0%           100.0%       100.0%         […]            […]           […]
      Source: IDC and Parties’ estimates
(113) In a possible worldwide market comprising CPUs for non-computers in 2020, AMD
      holds a market share of [0-5]% (sales: USD […] million), Intel holds a market share
      of [10-20]% (sales: USD […] million), while other competitors, who are all
      suppliers of non-x86 CPUs, hold [80-90]% altogether (sales: USD […] million).
(114) Table 4 indicates the market shares and sales values of AMD and its competitors in
      a possible worldwide market comprising x86 CPUs for non-computers.
      Table 4: Shares and sales values in worldwide market for x86 CPUs for non-computers (2018 – 2020)
                                      Market shares                           Sales (million USD)
         Supplier
                           2018              2019          2020        2018          2019           2020
            Intel       [90-100]%        [90-100]%    [90-100]%        […]            […]           […]
           AMD            [0-5]%            [0-5]%       [0-5]%        […]            […]           […]
           Total          100.0%           100.0%       100.0%         […]            […]           […]
      Source: IDC and Parties’ estimates
(115) In a possible worldwide market comprising x86 CPUs for non-computers in 2020,
      AMD holds a market share of [0-5]% (sales: USD […] million) and Intel holds a
      market share of [90-100]% (sales: USD […] million).
(116) Table 5 indicates the market shares and sales values of AMD and its competitors in
      a possible worldwide market comprising CPUs for computer devices, irrespective of
      the architecture and the type of computer device (e.g. servers, desktops, laptops etc.).
      Table 5: Shares and sales values in worldwide market for CPUs for computer devices (2018 – 2020)
                                       Market shares                          Sales (million USD)
          Supplier
                            2018             2019          2020        2018          2019           2020
             Intel        [70-80]%        [70-80]%     [70-80]%        […]            […]           […]
         Qualcomm         [10-20]%        [10-20]%     [10-20]%        […]            […]           […]
            AMD            [0-5]%          [5-10]%      [5-10]%        […]            […]           […]
          MediaTek         [0-5]%           [0-5]%      [5-10]%        […]            […]           […]
          HiSilicon        [0-5]%           [0-5]%       [0-5]%        […]            […]           […]
           Unisoc          [0-5]%           [0-5]%       [0-5]%        […]            […]           […]
           Marvell         [0-5]%           [0-5]%       [0-5]%        […]            […]           […]
           Ampere          [0-5]%           [0-5]%       [0-5]%        […]            […]           […]
          AllWinner        [0-5]%           [0-5]%       [0-5]%        […]            […]           […]
          Rockchip         [0-5]%           [0-5]%       [0-5]%        […]            […]           […]
           Phytium         [0-5]%           [0-5]%       [0-5]%        […]            […]           […]
                                                          29
 ---pagebreak---                                        Market shares                           Sales (million USD)
           Supplier
                             2018           2019           2020        2018           2019          2020
            Ingenic
                           [0-5]%         [0-5]%         [0-5]%        […]             […]           […]
        Semiconductor
            Nvidia         [0-5]%         [0-5]%         [0-5]%        […]             […]           […]
             Others        [0-5]%         [0-5]%         [0-5]%        […]             […]           […]
              Total        100.0%         100.0%          100%         […]             […]           […]
      Source: IDC, Mercury and Parties' estimates
(117) In a possible worldwide market comprising CPUs for computer devices in 2020,
      AMD holds a market share of [5-10]% (sales: USD […] million), Intel holds a
      market share of [70-80]% (sales: USD […] million), Qualcomm holds [10-20]%
      (sales: USD […] million), MediaTek holds [5-10]% (sales: USD […] million), while
      other competitors hold [5-10]% altogether (sales: USD […] million).
(118) Table 6 indicates the market shares and sales values of AMD and its competitors in
      a possible worldwide market comprising x86 CPUs for computer devices,
      irrespective of the type of computer device (e.g. servers, desktops, laptops etc.).
      Table 6: Shares and sales values in worldwide market for x86 CPUs for computer devices (2018 – 2020)
                                      Market shares                            Sales (million USD)
          Supplier
                            2018            2019           2020        2018           2019          2020
             Intel      [90-100]%       [90-100]%      [80-90]%        […]             […]           […]
           AMD            [0-5]%         [5-10]%       [10-20]%        […]             […]           […]
           Total         100.0%           100.0%        100.0%         […]             […]           […]
      Source: IDC, Mercury and Parties’ estimates
(119) In a possible worldwide market comprising x86 CPUs for computer devices in 2020,
      AMD holds a market share of [10-20]% (sales: USD […] million) and Intel holds a
      market share of [80-90]% (sales: USD […] million).
(120) Table 7 indicates the market shares and sales values of AMD and its competitors in
      a possible worldwide market comprising all CPUs for servers, irrespective of the
      architecture.
      Table 7: Shares and sales values in worldwide market for CPUs for servers (2018 – 2020)
                                      Market shares                            Sales (million USD)
          Supplier
                            2018            2019           2020        2018           2019          2020
             Intel      [90-100]%       [90-100]%     [90-100]%         [...]          […]           […]
           AMD            [0-5]%          [0-5]%        [5-10]%         [...]          […]           […]
          Marvell         [0-5]%          [0-5]%         [0-5]%         [...]          […]           […]
          Ampere          [0-5]%          [0-5]%         [0-5]%         [...]          […]           […]
          HiSilicon       [0-5]%          [0-5]%         [0-5]%         [...]          […]           […]
          Phytium         [0-5]%          [0-5]%         [0-5]%         [...]          […]           […]
           Others         [0-5]%          [0-5]%         [0-5]%         [...]          […]           […]
           Total         100.0%           100.0%        100.0%         […]             […]           […]
      Source: IDC, Mercury and Parties’ estimates
                                                         30
 ---pagebreak--- (121) In a possible worldwide market comprising CPUs for servers in 2020, AMD holds a
       market share of [5-10]% (sales: USD […] million), Intel holds a market share of [90-
       100]% (sales: USD […] million), while other competitors hold less than [0-5]% each
       and [0-5]% together (sales: USD […] million).
(122) Table 8 indicates the market shares and sales values of AMD and its competitors in
       a possible worldwide market comprising x86 CPUs for servers.
       Table 8: Shares and sales values in worldwide market for x86 CPUs for servers (2018 – 2020)
                                          Market shares                             Sales (million USD)
           Supplier
                              2018              2019          2020            2018         2019         2020
             Intel         [90-100]%         [90-100]%     [90-100]%          […]           […]         […]
            AMD              [0-5]%            [0-5]%       [5-10]%           […]           […]         […]
            Total            100.0%            100.0%       100.0%            […]           […]         […]
       Source: Mercury and Parties’ estimates
(123) In a possible worldwide market comprising x86 CPUs for servers in 2020, AMD
       holds a market share of [5-10]% (sales: USD […] million) and Intel holds a market
       share of [90-100]% (sales: USD […] million).
(124) The market shares indicated in the tables above exclude CPU suppliers that only
       self-supply CPUs. 177 However, the Parties’ market shares in all of the possible
       market segments for CPUs considered above would not change materially if such
       competitors are included in the market shares calculation.
5.3.2. Discrete GPUs
(125) The following tables set out the market shares of the Parties and their competitors in
       hypothetical worldwide markets for (i) all discrete GPUs, and the worldwide markets
       for (ii) discrete GPUs for datacentres and (iii) discrete GPUs for gaming. All market
       shares are in value.
(126) Table 9 indicates the market shares and sales values of AMD and its competitors in
       hypothetical worldwide market comprising all discrete GPUs.
       Table 9: Shares and sales values in worldwide market for all discrete GPUs (2018 – 2020)
                                          Market shares                             Sales (million USD)
           Supplier
                              2018              2019          2020            2018         2019         2020
            Nvidia          [80-90]%          [80-90]%     [90-100]%          […]           […]         […]
            AMD             [10-20]%         [10-20]%       [5-10]%           […]           […]         […]
            Total            100.0%            100.0%       100.0%            […]           […]         […]
       Source: Mercury and Parties’ estimates
177    These “self-suppliers” are in particular Apple, Samsung, Fujitsu, IBM, AWS and Oracle.
                                                             31
 ---pagebreak--- (127) In the hypothetical worldwide market comprising all discrete GPUs in 2020, AMD
       holds a market share of [5-10]% (sales: USD […] million), Nvidia holds a market
       share of [90-100]% (sales: USD […] million).
(128) Table 10 indicates the market shares and sales values of AMD and its competitors in
       the worldwide market for discrete GPUs for data centres.
       Table 10: Shares and sales values in worldwide market for discrete GPUs for data centres (2018 – 2020)
                                        Market shares                           Sales (million USD)
           Supplier
                              2018            2019          2020          2018         2019            2020
            Nvidia        [90-100]%       [90-100]%    [90-100]%          […]           […]            […]
             AMD            [5-10]%         [5-10]%       [0-5]%          […]           […]            […]
             Total          100.0%          100.0%       100.0%           […]           […]            […]
       Source: Mercury and Parties’ estimates
(129) In the market for discrete GPUs for data centres in 2020, AMD holds a market share
       of [0-5]% (sales: USD […] million) and Nvidia holds a market share of [90-100]%
       (sales: USD […] million).
(130) Table 11 indicates the market shares and sales values of AMD and its competitors in
       the worldwide market for discrete GPUs for gaming.
       Table 11: Shares and sales values in worldwide market for discrete GPUs for gaming (2018 – 2020)
                                        Market shares                           Sales (million USD)
           Supplier
                              2018            2019          2020          2018         2019            2020
            Nvidia         [80-90]%        [80-90]%     [80-90]%          […]           […]            […]
             AMD           [10-20]%        [10-20]%     [10-20]%          […]           […]            […]
             Total          100.0%          100.0%       100.0%           […]           […]            […]
       Source: Mercury and Parties’ estimates
(131) In the worldwide market for discrete GPUs for gaming in 2020, AMD holds a
       market share of [10-20]% (sales: USD […] million) and Nvidia holds a market share
       of [80-90]% (sales: USD […] million).
5.3.3. FPGAs
(132) The following tables set out the market shares of the Parties and their competitors in
       the plausible worldwide markets for (i) all FPGAs and (ii) FPGAs in data centres.
       All market shares are in value.
(133) Table 12 indicates the market shares and sales values of Xilinx and its competitors
       in a worldwide market comprising all FPGAs.
       Table 12: Shares and sales values in worldwide market for all FPGAs (2018 – 2020)
                                        Market shares                           Sales (million USD)
           Supplier
                              2018            2019          2020          2018         2019            2020
            Xilinx         [50-60]%        [50-60]%     [50-60]%          […]           […]            […]
             Intel         [30-40]%        [30-40]%     [30-40]%          […]           […]            […]
          MicroChip
         Technology /       [5-10]%         [5-10]%      [5-10]%          […]           […]            […]
          Microsemi
                                                           32
 ---pagebreak---                                       Market shares                           Sales (million USD)
          Supplier
                              2018          2019           2020         2018          2019            2020
        Lattice Semi-
                            [5-10]%       [5-10]%        [5-10]%         […]          […]             […]
          conductor
          Achronix           [0-5]%        [0-5]%         [0-5]%         […]          […]             […]
            Others           [0-5]%        [0-5]%         [0-5]%         […]          […]             […]
            Total           100.0%        100.0%         100.0%          […]          […]             […]
      Source: Garner, OMDIA and Parties’ estimates
(134) In a possible worldwide market comprising all FPGAs in 2020, Xilinx holds a
      market share of [50-60]% (sales: USD […] million), Intel holds a market share of
      [30-40]% (sales: USD […] million), MicroChip Technology / Microsemi holds
      [5-10]% (sales: USD […] million), Lattice Semiconductor holds [5-10]% (sales:
      USD […] million), Achronix holds [0-5]% (sales: USD […] million) and other
      competitors hold [0-5]% altogether (sales: USD […] million).
(135) Table 13 indicates the market shares and sales values of Xilinx and its competitors
      in a possible worldwide market comprising FPGAs for data centres.
       Table 13: Shares and sales values in worldwide market for FPGAs for data centres (2018 – 2020)
                                      Market shares                           Sales (million USD)
          Supplier
                              2018          2019           2020         2018          2019            2020
            Xilinx         [30-40]%      [40-50]%       [50-60]%         […]          […]             […]
             Intel         [60-70]%      [50-60]%       [40-50]%         […]          […]             […]
            Total           100.0%        100.0%         100.0%          […]          […]             […]
      Source: Parties’ estimates
(136) In a possible worldwide market comprising FPGAs for datacentres in 2020, Xilinx
      holds a market share of [50-60]% (sales: USD […] million) and Intel holds a market
      share of [40-50]% (sales: USD […] million).
(137) Furthermore, Table 14 addresses Xilinx’s activities in FPGAs for non-computers
      (embedded applications), providing a breakdown of Xilinx’s market shares in
      possible separate worldwide markets for FPGAs sold in each of the relevant industry
      sectors where both FPGAs and CPUs are used, i.e. aerospace & defense, automotive,
      industrial controls, medical imaging, security, wired & wireless. All market shares
      are in value.
      Table 14: Xilinx’s shares and sales values in worldwide markets for FPGAs in industry sectors where both
      FPGAs and CPUs are used (2018 – 2020)
          Industry                    Market shares                           Sales (million USD)
            Sector            2018          2019           2020         2018          2019            2020
        Aerospace &
                           [50-60]%      [50-60]%       [60-70]%         […]          […]             […]
           Defence
         Automotive        [60-70]%      [60-70]%       [60-70]%         […]          […]             […]
          Industrial
                           [30-40]%      [30-40]%       [30-40]%         […]          […]             […]
           Controls
           Medical
                           [60-70]%      [50-60]%       [50-60]%         […]          […]             […]
           Imaging
                                                          33
 ---pagebreak---           Industry                      Market shares                                 Sales (million USD)
           Sector            2018            2019             2020           2018            2019          2020
         Security 178         n/a             n/a              n/a            n/a              n/a          n/a
          Wired &
                           [40-50]%       [50-60]%         [40-50]%          […]              […]          […]
          Wireless
           Overall
        market share
                           [40-50]%       [50-60]%         [40-50]%          […]              […]          […]
        in the above
           sectors
      Source: Parties’ estimates
(138) For 2020, in a potential worldwide market for FPGAs for the Aerospace & Defence
      sector, Xilinx would hold a market share of [60-70]% (sales: USD […] million). In
      the potential worldwide markets for FPGAs for the Automotive and the Medical
      Imaging sectors, Xilinx would hold a market share of [60-70]% and [50-60]%
      respectively (sales: USD […] million and USD […] million). In the potential
      worldwide markets for FPGAs for the Wired & Wireless and the Industrial Controls
      sectors, Xilinx would hold a market share of [40-50]% and [30-40]% respectively
      (sales: USD […] million and USD […] million). Finally, Xilinx’s aggregate market
      share across the abovementioned sectors is [40-50]% (sales: USD […] million).
(139) In the industry segments referred to in Table 14, AMD has very limited presence.
      More specifically, in potential worldwide markets for CPUs in each of the industry
      segments at hand, AMD’s market shares range from [0-5]% in the Automotive
      sector to a maximum of [0-5]% in the Industrial Controls and the Wired & Wireless
      sectors (2020).
(140) Table 15 indicates an estimate of Xilinx’s market shares in the market for FPGAs of
      different performance levels. All market shares are in value.
      Table 15: Xilinx’s shares in worldwide markets for FPGAs of different performance levels (2020).
                         Performance level                                      Xilinx’s market share
                          High-end FPGAs                                          [50-60]% - [60-70]%
                          Mid-range FPGAs                                         [40-50]% - [50-60]%
                           Low-end FPGAs                                          [40-50]% - [50-60]%
      Source: Parties’ estimates
(141) The Notifying Party submits that there are no third-party reports that provide
      breakdowns of supplier sales and segment sizes by FPGA performance level.
      However, the Parties estimate that Xilinx’s market shares in the potential markets for
      low-end and mid-range FPGAs are not materially different from its shares in the
      market for all FPGAs ([40-50]% – [50-60]%). Xilinx believes that its share of a
      theoretical high-end FPGA segment may be slightly higher, i.e., in the [50-60] – [60-
      70]% range.179
(142) Finally, the Notifying Party could not produce market shares for FPGA accelerator
      cards. Although given the relatively large number of suppliers in this segment180 it is
178   Xilinx does not have reliable data for the security segment as it tracks it within the wider Wired & Wireless /
      Communications segment and does not believe that the market shares of both segments differ materially.
179   Form CO, paragraphs 436 – 437.
180   Notifying Party’s response to the Commission’s RFI 6.
                                                             34
 ---pagebreak---       unlikely that Xilinx’s share would be above 30%, absent reliable information, for the
      purposes of the competitive assessment, the Commission is going to assume that
      Xilinx’s share is above 30%.
5.4.  Identification of affected markets
(143) As explained in Section 5.1, FPGAs or FPGA accelerator cards on the one hand, and
      CPUs on the other hand are sometimes used together or bought by the same
      customers. Namely, FPGAs can be interconnected with CPUs in data centre servers.
      For example, FPGAs are deployed to accelerate certain computing workloads that
      otherwise would be performed by the CPU. 181 Likewise, FPGAs are also used for
      board management in data centre servers.182 In addition, FPGA-based Smart NICs
      are used to offload networking tasks from CPUs. 183 In non-computers, FPGAs and
      CPUs can be used together by customers in the following industrial sectors in which
      Xilinx is active: Aerospace & Defense, Automotive, Industrial Controls, Medical
      Imaging, Security and Wireless & Wired Communications. 184 Consequently, there is
      a conglomerate relationship between FPGAs and FPGA accelerator cards on the one
      hand and CPUs on the other hand.
(144) As AMD’s market share stays well below 30% no matter how the CPU market is
      defined, using CPUs as a leveraging product is unlikely and thus its CPU market
      position does not give rise to an affected market.
(145) By contrast, Xilinx’s market share is above 30% under all plausible market
      definitions for FPGAs. Having a significant market share in FPGAs (or any plausible
      narrower market discussed in Section 4.2.4), the merged entity could potentially
      leverage its market position in FPGAs to CPUs. Thus the affected market in this
      regard is the market for all CPUs or any of the plausible market definitions pursuant
      to the distinctions discussed in Section 4.2.2, with the exception of the potential
      markets for CPUs in the following devices: smartphones, tablets, laptops and
      desktops regardless of architecture. As FPGAs are virtually never used in these
      devices,185 these potential markets would not be affected by any exclusionary
      practice. 186
(146) If FPGA accelerator cards constituted a separate market, then the merged entity
      could use both i) FPGAs exluding accelerator cards and ii) FPGA accelerator cards
      as leverage. The first case would be almost identical to the one in which FPGAs
      including FPGA accelerator cards (discussed in paragraph (145) above) are used as
      leverage and would give rise to the same affected markets. This is because FPGA
181   Form CO, paragraph 11.
182   Responses to Q1 – Questionnaire to competitors and trade associations, question 38.
183   Form CO, paragraph 234, Responses to Q1 – Questionnaire to competitors and trade associations, question 46.
      This is an example of joint use of FPGAs and CPUs under the assumption that FPGA accelerator cards belong to
      the same market as FPGAs.
184   Notifying Party’s Response to the Commission’s RFI 2, question 7.
185   Notifying Party’s Response to the Commission’s RFI 3, question 15.
186   In concrete, the affected markets are i) the market for CPUs for computer devices; ii) the market for CPUs for
      non-computers; iii) the market for x86 CPUs; iv) the market for non-x86 CPUs; within CPUs for computers the
      v) the market for CPUs for servers. Further any plausible combinations of markets i)-v) could also be affected.
                                                            35
 ---pagebreak---       accelerator cards are a small market,187 and thus the list of plausible FPGA markets
      and the links between any potential FPGA market to any potential CPU market
      would remain the same even after their exclusion. In the second case, as discussed in
      Section 5.3, the merged entity may have market shares in excess of 30% in the
      market for FPGA accelerator cards. Thus the merged entity could potentially use
      FPGA accelerator cards to leverage its market position to certain plausible CPU
      markets. These include the market for all CPUs or any of the considered market
      definitions that include server CPUs because FPGA accelerator cards are only used
      in servers. That is to say, the affected CPU markets exclude the market for CPUs for
      non-computers regardless of architecture and the potential markets for CPUs in the
      following devices: smartphones, tablets, laptops and desktops also regardless of
      architecture.
(147) Moreover, in some cases, FPGAs and discrete GPUs are also used by the same
      customers in the same environment. For example, in data centres an FPGA
      accelerator card (concretely an FPGA-based Smart NIC) can interconnect several
      GPUs used for workload acceleration. More broadly, FPGAs can provide
      networking and board management functions in servers containing GPUs, 188 but they
      may be used together also outside servers, e.g. in some automotive platforms. 189 In
      rare occasions, both chips can be used for workload acceleration.190 Functionally
      they may be used together for applications involving image processing and video
      recognition. 191 In addition, GPUs and FPGAs are used together in certain systems in
      the defence sector.192
(148) Just like in the case of CPUs, AMD’s market share stays well below 30% in both the
      market for discrete GPUs for data centres and the market for discrete GPUs for
      gaming and other professional visualisation. Thus, using GPUs as a leveraging
      product is very unlikely and AMD’s market position in GPUs does not give rise to
      an affected market.
(149) However, as Xilinx has a market share above 30% under all plausible FPGA market
      definitions, the merged entity could plausibly leverage that position to discrete
      GPUs. Thus, the affected market is the market for discrete GPUs for data centres.
      The Commission notes that FPGAs are not used in gaming193 and thus the use of
      FPGAs together with discrete GPUs for gaming and professional visualisation is
      restricted to uses outside gaming, which is, at best, marginal. Therefore, the market
      for discrete GPUs for gaming and other professional visualisation would be
      potentially affected by any exclusionary practices only to the marginal extent that
      common usage concerns applications other than gaming. If FPGA accelerator cards
      constituted a separate market, then it cannot be excluded that the merged entity may
      have market shares in excess of 30% in this market too. The merged entity could
187   Notifying Party’s response to the Commission’s RFI 6. Xilinx’s total sales amount to USD […] million. Thus,
      assmuning Xilinx’s share is around [30-40]%, the market size is maximum USD [200-300] million compared to
      a market size of USD [5 500-6 000] million in the case of all FPGAs.
188   Responses to Q1 – Questionnaire to competitors and trade associations, question 46.
189   Responses to Q1 – Questionnaire to competitors and trade associations, question 46.
190   Responses to Q1 – Questionnaire to competitors and trade associations, question 46.
191   Responses to Q2 – Questionnaire to customers, question 36.
192   Responses to Q2 – Questionnaire to customers, question 36.
193   Responses to Q1 – Questionnaire to competitors and trade associations, question 17; Q2 – Questionnaire to
      customers, question 12.
                                                            36
 ---pagebreak---         potentially use these products to leverage its market position to the market for GPUs
        used in data centres. As FPGA accelerator cards are only used in servers, the market
        for GPUs for gaming and visualisation would not be affected in this scenario.
(150) In summary, the Transaction gives rise to the following affected markets
              Under the assumption that FPGA accelerator cards are not a separate market,
                 the leveraging product is FPGAs and the affected markets are:
                      i)  the market for all CPUs or any of the market definitions considered in
                          Section 4.2.2, with the exception of the potential markets for CPUs in
                          the following devices: smartphones, tablets, laptops and desktops
                          regardless of architecture;
                      ii) The market for GPUs for data centres and the market for GPUs for
                          gaming and professional visualisation.
              Under the assumption that FPGA accelerator cards form a separate market,
                 one of the leveraging product is FPGAs excluding FPGA accelerator cards,
                 which would give rise to the same affected markets as those indicated in the
                 first indent.
              Also under the assumption that FPGA accelerator cards form a separate
                 market, FPGA accelerator cards would also be a leveraging product, giving
                 rise to the following affected markets:
                     i)   The market for all CPUs or any of the considered market definitions
                          that include server CPUs regardless of architecture;
                     ii) The market for GPUs for data centres.
(151) Therefore, in the following sections, the Commission will assess the impact of the
        Transaction as regards the conglomerate relationships identified in
        paragraphs (143)-(150) above. In sections 5.5 and 5.6, the Commission will consider
        the potential foreclosure of rival CPU and GPU suppliers under the assumption that
        the FPGA accelerator cards are not a separate market, and are thus included in the
        relevant plausible FPGA markets. As indicated in the Horizontal Merger Guidelines,
        the Commission will analyse the merged entity’s ability and incentive to forcelose
        rival CPU and GPU suppliers as well as the overall effects of such possible
        foreclosure strategy. In Section 5.7 the Commission will explain how the assessment
        in Section 5.5 and 5.6 applies under the assumption that FPGA accelerator cards
        form a separate market.
5.5.    Foreclosure of CPU suppliers
5.5.1. Ability to foreclose CPU suppliers
5.5.1.1. The Notifying Party’s view
(152) The Notifying Party submits that the merged entity will have no ability to leverage
        its position in the market for FPGAs and to foreclose CPU suppliers, both in the data
        centre space and in the industrial space, under any scenario of contractual
        tying/bundling, technical tying and mixed bundling. This is because: (i) Xilinx lacks
                                                      37
 ---pagebreak---       a significant degree of market power in FPGAs; and (ii) there are not enough
      opportunities to bundle or tie CPUs ad FPGAs.
(153) First, the Notifying Party considers that Xilinx’s worldwide market shares in the
      market for FPGAs, which do not change materially under the different possible
      definitions for the affected markets ([50-60]% in all FPGAs, [50-60]%, in FPGAs
      for data centres and an aggregate [40-50]% in the industrial sectors referred to in
      Table 14 do not confer market power to Xilinx. 194 The Notifying Party considers that
      Xilinx faces strong competition from Intel, which offers comparable FPGA
      products.195
(154) The Notifying Party also consider that such conclusion is not preempted by the fact
      that Xilinx has high market shares in FPGAs sold in certain industry sectors
      (e.g. Aerospace & Defence: [60-70]%, Automotive: [60-70]%). According to the
      Notifying Party, the industry sectors referred to in Table 14 do not constitute
      separate relevant markets. FPGAs are indeed widely interchangeable across such
      sectors, [information on FPGA prices]. In any case, the Notifying Party also points
      out that there is strong competition in each of the industrial sectors at hand. The
      Notifying Party points to the high fluctuation of Xilinx’s market shares in the past
      years, showing that the market is contestable and that orders are lumpy, with large,
      infrequent orders that tend to understate or overstate Xilinx’s share at a particular
      point in time. Therefore, there is no ground for concluding that Xilinx’s higher or
      lower share across the relevant industry sectors indicates a higher or lower degree of
      market power compared to Xilinx’s position in the overall FPGA market.196
(155) Furthermore, as regards the CPU side, Intel’s market shares are overwhelmingly
      larger than AMD’s, up to [90-100]% in the market for server CPU (Table 7: Shares
      and sales values in worldwide market for CPUs for servers (2018 – 2020) and Table
      8: Shares and sales values in worldwide market for x86 CPUs for servers (2018 –
      2020), [90-100]% for x86 CPUs, while AMD’s market shares are very limited
      (below or even well below 10% in all possible market segments for CPUs). In the
      industrial space, moreover, AMD has a market share of less than [0-5]%. Therefore,
      the merged entity faces the presence of a comparable competitor in the market for
      FPGAs in data centres, as well as a much larger competitor, thus very difficult to
      foreclose, in the respective CPU market.
(156) In addition, the Notifying Party explained that the merged entity will face significant
      buyer power of end customers, especially the so-called “hyperscalers”.197
      Hyperscalers, like customers in general, have a strong preference for a “mix and
      match” approach, sourcing separate components for their data centres and choosing
      what is best for their needs regardless of the supplier. Therefore, they would resist
      any attempt to bundle or tie different chips. According to the Notifying Party, if the
      merged entity tried to implement such strategies, they would lose market share in
194   Form CO, paragraphs 23, 123, 511 – 512.
195   Form CO, paragraphs 23, 511.
196   Form CO. Paragraphs 612 – 615.
197   Hyperscalers are data centre facilities built, owned and operated by the companies they support. The term applies
      to the largest data centres only, operated by companies such as Amazon Web Services, Apple, Facebook,
      Google etc.
                                                              38
 ---pagebreak---       favour of Intel or other competitors.198 Therefore, for the reasons set out above, the
      Notifying Party considers that Xilinx does not have a significant degree of market
      power.
(157) Second, the Notifying Party considers that the size of the FPGA market is
      considerably smaller compared to the size of the CPU market, with common FPGA
      and CPU customers being just a fraction of the overall CPU customers. More
      specifically, as regards data centres, the Notifying Party considers that the FPGA
      market is worth USD […] million annually, whereas the CPU market is worth
      USD […] billion (2020). 199 In general, the Notifying Party estimates that in 2019
      less than 15% of worldwide server expenditure was on servers that use acceleration
      technology, whether GPUs, FPGAs or other accelerator types. Moreover, even
      within single data centres that use accelerators, the percentage of accelerated servers
      is extremely small, at most 5-10% of the total number of servers in the data centre.200
      Likewise, in the industrial space, the Notifying Party submits that CPUs used
      together with an FPGA represent less than 10% of the overall potential market for
      CPUs for non-computer devices (i.e. used in industrial applications). 201 In addition,
      the Notifying Party indicates that also a minority of FPGAs, i.e. approximately
      [20-30]% is used together with a CPU by industrial customers. 202
(158) Against this background, the Notifying Party considers that the merged entity would
      not have the ability to successfully foreclose CPU suppliers by means of contractual
      tying/bundling, technical tying or mixed bundling.
(159) More specifically, as regards contractual tying or bundling, the Notifying Party
      considers, first, that customers would be able to obtain FPGAs from Intel to be
      paired with other suppliers’ CPUs. In any case, Intel would also be able to replicate
      any bundling strategy that the merged entity might attempt. Moreover, the Notifying
      Party notes that Intel has never imposed contractual tying with its CPUs and FPGAs,
      which shows that such strategy is not feasible. 203 Second, the Notifying Party
      considers that Xilinx’s FPGAs are not must-have products for data centre and
      industrial customers. The choice of an FPGA usually follows the one of a CPU,
      especially in data centres, and it is very unlikely that the choice of an FPGA would
      determine purchase decisions for CPUs, especially if such FPGAs are not clearly
      superior to the ones offered by competitors. 204 Third, the merged entity would not be
      able to decrease rival CPU’s market share, since the majority of CPUs are not used
      together with an FPGA. Therefore, CPU suppliers would retain significant
      opportunities to sell CPUs to customers that do not use them with FPGAs.
(160) As regards technical tying, the Notifying Party submits that the merged entity would
      have to degrade the interoperability of Xilinx’s FPGAs with third-party CPUs, such
198   Form CO, paragraphs 88, 513, 519 – 520.
199   Form CO, paragraph 509.
200   Form CO, paragraph 233.
201   Form CO, paragraph 625 and 182. The Parties consider that this figure is a conservative estimate. In AMD’s
      view, the true attach rate could be as low as 1% or 0.1%, as it is based on AMD’s general industry knowledge,
      and reflects the likely proportion of customers in the industrial space that currently require both an x86 CPU and
      an FPGA. In AMD’s view, the true attach rate could be as low as 1% or 0.1%.
202   Form CO, paragraphs 180 – 181.
203   Form CO, paragraph 524.
204   Form CO, paragraph 525.
                                                              39
 ---pagebreak---         that AMD’s CPUs would secure better performance when paired with Xilinx’s
        FPGAs. In the Notifying Party’s view, such technical tying is implausible. 205 First,
        Xilinx’s FPGAs currently interconnect with CPUs from all suppliers using the PCIe
        open standard protocol, and, in the future, its successor CXL. The Notifying Party
        notes that today, the PCIe is built into every server and, in general, is the de facto
        standard to interconnect CPUs and accelerators. Open standards have become a
        requirement for customers across the relevant industries, especially in data centres.
        Therefore, if the merged entity degraded Xilinx’s FPGAs interoperability with third-
        party CPU, it would cut itself out of the market. Second, the merged entity, like
        every other company, would not be able to alter the PCIe protocol, as it is developed
        by an independent industry organization. Third, AMD, unlike Intel, 206 does not have
        any proprietary interconnect technology, […]. On the contrary, AMD, like Xilinx,
        relies on the PCIe standard.207
(161) As regards mixed bundling, the Notifying Party submits that the merged entity
        would not be able to leverage its position in FPGAs to incentivize customers to buy
        FPGAs and CPUs in a bundle, thereby foreclosing rival CPU suppliers. First,
        according to the Notifying Party, the merged entity lacks the market power to do so
        for the reasons explained in paragraphs (152)to (154). Second, Intel could match and
        undercut any FPGA/CPU bundle offered by the merged entity being able to afford a
        more aggressive pricing strategy for a longer period. Third, as mentioned above, the
        opportunities to bundle FPGAs and CPUs are limited, as the majority of CPUs are
        sold to use without an FPGA.208
(162) In sum, for the reasons set out above, according to the Notifying Party the merged
        entity would lack the ability to foreclose rival CPU suppliers by means of
        commercial tying or bundling, technical tying and mixed bundling. The Notifying
        Party submits that the merged entity would lack a significant degree of market power
        in the FPGA market and that there would not be enough opportunities to bundle
        FPGAs and CPUs due to the very small size of the FPGA market relative to the CPU
        market.
5.5.1.2. The results of the market investigation and the Commission’s assessment
(163) As mentioned in Section 5.4, the Commission will assess the ability of the merged
        entity to leverage Xilinx’s position in the market for FPGAs in order to foreclose
        rival CPU suppliers. The Commission will carry out such assessment under all
        possible market definitions for CPUs and FPGAs set out in sections 4.2.2 and 4.2.4
        respectively, considering all possible exclusionary practices i.e. contractual tying,
        pure bundling, mixed bundling and technical tying. As a preliminary remark the
        Commission considers that the ability to foreclose means the ability to decrease
        substantially the sales of rivals in the leveraged market through bundling and tying.
        In the concrete case, this means that the merged entity, using Xilinx’s FPGAs as the
205     Form CO, paragraph 527.
206     Intel has developed proprietary interconnect technologies, i.e. the QuickPath Interconnect, the Keizer
        Technology Interconnect and the UltraPath Interconnect. In Intel/Altera, the Commission concluded that Intel
        would not have the ability to pursue a foreclosure strategy despite its use of proprietary technologies. This is
        because, inter alia, rival FPGA suppliers could continue to interconnect to Intel’s CPUs using the PCIe, that Intel
        did not have the ability to degrade.
207     Form CO, paragraphs 527 – 535.
208     Form CO, paragraphs 526 – 540 and 624 – 627.
                                                               40
 ---pagebreak---       leveraging (tying) product, would have the ability to decrease substantially the sales
      of its CPU rivals.
      (A) Contractual tying and pure bundling
(164) The Commission considers that the merged entity will not have the ability to
      foreclose rival CPU suppliers by means of contractual tying or pure bundling
      between Xilinx’s FPGAs and AMD’s CPUs.
(165) First, under any of the possible market definitions for FPGAs and CPUs, the
      common pool of customers (i.e. sourcing both FPGAs and CPUs) is relatively small
      compared to the overall number of CPU customers. Therefore, in line with the
      Parties’ arguments, the merged entity would not be able to influence a significant
      part of the demand for CPUs by leveraging on Xilinx’s position in the market for
      FPGAs. In line with paragraph 100 of the Non-Horizontal Merger Guidelines,
      foreclosure constitutes a potential concern only if there is a large common pool of
      customers for the products concerned, so that demand for the individual products
      may be affected through bundling or tying.
(166) In this regard, the majority of respondents submitted that FPGAs and CPUs are not
      commonly used in the same application or device. Concretely respondents indicated
      that FPGAs are “sometimes” used with CPUs in the same application or device.209
      Respondents also pointed out that while most FPGAs are used with a CPU, the
      reverse is not true, i.e. most CPUs are used without an FPGA. For instance, a
      customer submitted that “in data centre applications, CPUs are present in nearly
      every data centre solution while FPGAs are present in only a small subset of
      those.”210 Likewise, a competitor stated that “FPGAs are occasionally used
      alongside CPUs as workload accelerators or in smart network interface cards.”211
(167) In the same vein, the number of CPUs used together with FPGAs accounts for a
      small proportion of all CPUs. In this regard, a large majority of customers and
      competitors indicated that most CPUs are used without an FPGA. 212 For example, a
      customer specified that “[the] FPGA market is much smaller than [the] CPU
      market”.213 Several respondents added that this is particularly true in data centres.214
      For instance, a customer indicated that CPUs are present in nearly all data centre
      solutions, while FPGAs are present only in a small subset of those, whereas another
      customer pointed out that “the proportion of servers that deploy an FPGA is very
      small”.215
209   Responses to Q1 – Questionnaire to competitors and trade associations, question 38; Q2 – Questionnaire to
      customers, question 28.
210   One customer’s response to Q2 – Questionnaire to customers, question 28.1.
211   One competitor’s response to Q1 – Questionnaire to competitors and trade associations, question 38.1.
212   Responses to Q1 – Questionnaire to competitors and trade associations, question 39; Q2 – Questionnaire to
      customers, question 29.
213   One customer’s response to Q2 – Questionnaire to customers, question 29.1.
214   Responses to Q1 – Questionnaire to competitors and trade associations, questions 39/40; Q2 – Questionnaire to
      customers, questions 29/30.
215   Two customer’s responses to Q2 – Questionnaire for customers, question 29.1 and 30 respectively.
                                                           41
 ---pagebreak--- (168) In line with the above, a large majority of respondents also indicated that only some
      CPU customers buy FPGAs. 216 As noted by a competitor “Most CPU customers do
      not buy FPGAs. Consequently, most opportunities to sell CPUs are to customers that
      do not buy FPGAs.”217 Moreover, almost the entirety of customers and competitors
      that provided a qualitative answer on this point indicated that there are significant
      business opportunities for CPU suppliers to sell CPUs to customers who do not buy
      FPGAs. 218
(169) This is consistent with the fact that, as showed by the market share tables in Section
      5.3, the size of the CPU market is considerably bigger than the size of the FPGA
      market, regardless of the possible segmentations considered. Concretely, if all CPUs
      and all FPGAs belong to one market without any distinctions the CPU market is
      25 times larger than the FPGA market (USD […] million vs USD […] million).
      Even the smallest potential CPU market (x86 CPUs for non-computers) is roughly
      double the size of the largest possible FPGA market, i.e. the market for FPGAs
      without further subdivisions (USD […] million vs USD […] million).
(170) Given the low rate of common usage and the small pool of common customers, any
      bundling or tying strategy by the merged entity would leave a large portion of the
      CPU market unaffected (under any of the considered market definitions) in
      accordance with the reasoning set out in paragraph 100 of the Non-Horizontal
      Merger Guidelines. If significant opportunities remain to sell CPUs on a standalone
      basis, CPU suppliers’ sales will not be decreased in a meaningful way even if the
      merged entity could force a bundle on those customers that do buy both chips. In
      other words, the merged entity will not have the ability to foreclose CPU suppliers.
      This applies both under a pure bundling scenario, i.e. in case the merged entity
      stopped selling both CPUs and FPGAs on an individual basis, and under a
      commercial tying scenario, i.e. if the merged entity sold FPGAs exclusively tied to
      CPUs, but not vice-versa.
(171) Second, in addition to the general consideration that plenty of opportunities will
      remain for CPU suppliers to sell CPUs on a standalone basis, it appears appropriate
      to distinguish between two broad hypotheses for the size of the FPGA and CPU
      markets as this analysis further highlights the lack of foreclosure risks.
(172) Under a broad FPGA market definition (a relevant market comprising all FPGAs
      or separate relevant markets based only on performance), the Commission considers
      that the merged entity would not have a significant degree of market power to
      foreclose CPU suppliers. If all FPGAs constituted one market, Intel, with a market
      share of [30-40]%, as well as smaller FPGA suppliers (Lattice, MicroChip and
      Achronix) with a combined market share of [10-20]% would represent a competitive
      constraint on the merged entity in relation to FPGAs. If separate markets were
      distinguished based on performance, Intel and Achronix would be constraints in the
      high-end FPGA market, all the suppliers mentioned would be constraints in the mid-
      range FPGA market and Intel, MicroChip and Lattice would be constraints in the
216   Responses to Q1 – Questionnaire to competitors and trade associations, question 42; Q2 – Questionnaire to
      customers, question 32.
217   Intel’s response to Q1 – Questionnaire to competitors and trade associations, question 45.
218   Responses to Q1 – Questionnaire to competitors and trade associations, question 45; Q2 – Questionnaire to
      customers, question 35.
                                                            42
 ---pagebreak---       low range FPGA market.219 In the presence of competitors constraining the merged
      entity, bundling and tying FPGAs and CPUs could lead to foreclosure only if
      Xilinx’s FPGAs were regarded as vastly superior compared to competitors’ FPGAs,
      especially those of Intel. However, the results of the market investigation indicated
      that customers do not consider Xilinx’s FPGAs as clearly superior. 220 At most, they
      are considered superior in some narrow segments but this is irrelevant in the scenario
      considered (large or very broad FPGA market). Further, respondents to the market
      investigation indicated that Intel constitutes an alternative across the entire FPGA
      product range. For instance, a customer submitted that “Xilinx and Altera [i.e. Intel]
      have similar products with similar tool support, and often compete for a given
      application”.221 Therefore, it is not the case that Xilinx’s FPGAs has a significant
      competitive edge under a hypothesis of broad FPGA markets.
(173) Another factor that would potentially make the merged entity an unavoidable trading
      partner and weaken the constraints exercised by competitors is if rivals faced
      capacity constraints and the merged entity would not. In this context, the
      Commission notes that all FPGA suppliers except Intel follow the fabless model, i.e.
      they do not have manufacturing assets and outsource manufacturing. Further,
      currently there is a semiconductor shortage due to capacity constraints at the
      manufacturing level. 222 These constraints effect all fabless suppliers, so it is not the
      case that the merged entity’s competitors are more capacity constrained than the
      merged entity. Further, to the extent that there is a difference in capacity constraints
      between FPGA competitors, respondents considered that Intel, the only supplier with
      its own manufacturing capacity, is likely to manage these constraints better than its
      rivals as having own manufacturing assets gives it more flexibility. 223 Thus, if
      anything, the merged entity will be more capacity constrained than its main FPGA
      rival.
(174) In line with paragraph 99 of the Non-Horizontal Merger Guidelines, if the merged
      entity’s leveraging product is not particularly important (not a must-have) and if
      rivals are not more capacity constrained than the merged entity, then the merged
      entity lacks the market power to engage in successful tying and bundling. In these
      circumstances, if customers do not want a CPU along with the FPGA, they can
      simply source FPGAs from the merged entity’s FPGA competitors.
(175) Furthermore, Intel, the merged entity’s main CPU competitor, cannot be foreclosed
      by means of bundling and tying, as it has its own FPGAs comparable to Xilinx’s and
      thus could easily replicate a CPU-FPGA bundle. Intel also enjoys a much stronger
      market position than AMD under all possible market definitions for CPUs, which
      makes its foreclosure even more implausible. Therefore, a bundling or tying strategy
      could only foreclose smaller CPU-only competitors. However, even this prospect is
      implausible for several reasons.
219   See one competitor’s response to Q1 – Questionnaire to competitors and trade associations, question 36.
220   Responses to Q2 – Questionnaire to customers, question 26.1.
221   One customer’s response to Q2 – Questionnaire to customers, question 26.1.1.
222   Responses to Q1 – Questionnaire to competitors and trade associations, question 61; Q2 – Questionnaire to
      customers, question 50.
223   Responses to Q1 – Questionnaire to competitors and trade associations, question 62; Q2 – Questionnaire to
      customers, question 51.
                                                           43
 ---pagebreak--- (176) On the one hand, under certain narrow CPU market definitions considered in
      section 4.2.2 (e.g. x68 CPU or x86 CPUs for servers), the market consists only of
      AMD and Intel and thus there would be no CPU-only suppliers to foreclose.
(177) On the other hand, under a broader CPU market definition (e.g. all CPUs, all CPUs
      for computer devices or CPUs for non-computer devices), many CPU suppliers
      supply their products to customers that do not buy FPGAs. In this regard, the market
      investigation confirmed that most CPUs are used in devices that are not designed to
      accommodate an FPGA, such as PCs (laptops, desktops), tablets and smartphones.224
      In line with this, a number of computer CPU suppliers (Qualcomm, MediaTek,
      Samsung, Unisoc, AllWinner, Rockhip) sell CPUs exclusively to customers that do
      not generally buy FPGAs. 225 Thus, foreclosure of these suppliers cannot even arise.
(178) Thus any such practice could conceivably affect only some small suppliers in CPUs
      for computers and some suppliers of CPUs for non-computers. These firms could
      have some customers that also buy FPGAs. However, as regards these suppliers the
      considerations that lots of opportunities remain to sell CPUs on a standalone basis
      (paragraphs (165) to (170) and that the merged entity lacks market power to engage
      in exclusionary practices in the presence of competitors (paragraphs (172)-(174))
      continue to apply, excluding any ability to foreclose.
(179) Under a narrow product markets for FPGAs (e.g. FPGAs used in a specific
      industrial sector or for a specific application), the Commission considers that, even if
      Xilinx had a significant degree of market power with high market shares in one of
      these narrow markets, the merged entity would not have the ability to foreclose rival
      CPU suppliers. This is because under this hypothesis the considerations set out
      above in paragraphs (165)-(170) would apply a fortiori as any plausible CPU market
      would be vastly larger than the narrow FPGA markets. For example, under the
      narrowest possible product market for CPUs, e.g. x86 server CPUs or x86 non-
      computer CPUs, the size of the CPU market would be USD […] million and USD
      […] million respectively. By contrast, if the FPGA market was segmented only by
      vertical industry, typical market sizes range from USD […] million to USD […]
      million. If the FPGA markets are further segmented within vertical industries by
      performance, by specific application or both, the market sizes would even be
      smaller. The only slight exception is the wired and wireless telecommunication
      market if FPGAs are only segmented by vertical industries as in that case the market
      for the wired and wireless telecommunication FPGAs would be USD […] million.
      However, even in this case the x86 CPU non-computer market would be almost six
      times the size of this FPGA market. These large differences in market sizes, along
      with the evidence presented in paragraphs (165)-(170), show that there would still be
      plenty of opportunities for CPU-only suppliers to sell CPUs to customers who do not
      buy FPGAs, or for applications that do not require an FPGA. Thus any tying and
      bundling by the merged entity would not be able to influence meaningfully the sales
      of rival CPU suppliers.
224   Responses to Q1 – Questionnaire to competitors and trade associations, question 16; Q2 – Questionnaire to
      customers, question 11. See also Intel and Nvidia’s response to Q1 – Questionnaire to competitors and trade
      associations, question 42.1. and 39.1 respectively.
225   Notifying Party’s Response to the Commission’s RFI 3.
                                                          44
 ---pagebreak--- (180) Third, the market investigation revealed a number of other factors, which make tying
      and bundling even less likely. Namely, a large majority of respondents confirmed
      that bundling CPUs and FPGAs is not a market practice, although in theory this
      would be possible since Intel has both products.226 Even the minority who indicated
      that such practice happens occasionally gave qualitative responses that point to the
      total absence of this practice.227 Furthermore, the overwhelming majority of
      customers indicated that they have a strong preference for a “mix and match”
      approach i.e. to buy the best product from each type of chip regardless of supplier as
      opposed to buying them in a bundle.228 Thus even customers that do buy both
      FPGAs and CPUs prefer to mix and match and thus would be reluctant to buy a
      bundle.
(181) Fourth, the Intel/Altera merger, 229 which took place in 2015, was similar to the
      Transaction in that a CPU producer, Intel, acquired an FPGA producer, Altera. As
      mentioned in paragraph (180) above, despite the fact that theoretically Intel could
      bundle and tie CPUs and FPGAs, the market investigation clearly indicated that this
      practice is almost non-existent today. Further, no CPU producer has been foreclosed
      since that merger. On the contrary, as can be seen from Table 2 in Section 5.3,
      AMD, Intel’s main rival in x86 CPUs, has successfully increased its market shares at
      Intel’s expense in the last two years and also grew its revenues and market shares
      more generally since 2016.230 [forcasts on AMD’s market position]. 231 This example
      shows the lack of foreclosure risks and further corroborates the assessment that the
      merged entity will not have the ability to foreclose CPU rivals.
(182) In conclusion, in light of all the reasons set out in this section (Section 5.5.1.2(A)),
      the Commission considers that the merged entity will not have the ability to
      foreclose rival CPU suppliers by means of contractual tying or pure bundling
      practices between Xilinx’s FPGAs and AMD’s CPUs.
      (B)         Mixed bundling
(183) In a mixed bundling scenario, the merged entity would offer discounts for a joint
      purchase of CPUs and FPGAs. The Commission considers that the merged entity
      would not have the ability to foreclose rival CPU suppliers as a result of a
      hypothetical mixed bundling strategy between Xilinx’s FPGAs and AMD’s CPUs,
      for the same reasons as set out above in relation to pure bundling and contractual
      tying.
(184) First, the Commission notes that the arguments related to the lack of a sufficiently
      large common pool of customers set out in paragraphs (165) to (170) apply, a
226   Responses to Q2 – Questionnaire to customers, question 42; Q1 – Questionnaire to competitors and trade
      associations, question 52.
227   Responses to Q2 – Questionnaire to customers, question 42. For example one respondent stated that it is not
      aware of such practice in its business and has no insight into other businesses. Another respondent referred to the
      integration of FPGAs and CPUs in the same chip, i.e. FPGA SoCs, which are part of the FPGA market. Thus the
      response is unrelated to the bundling or tying of FPGAs (including FPGA SoCs) and CPUs. The third respondent
      did not give a qualitative response.
228   Responses to Q2 – Questionnaire to customers, question 42.
229   Case COMP M.7688 – Intel/Altera, Commission decision of 14 October 2015.
230   [Internal document].
231   [Internal document].
                                                             45
 ---pagebreak---       fortiori, to a mixed bundling scenario in which the common customers would also be
      able to source FPGAs and CPUs individually from the supplier that they prefer.
(185) Second, the analysis in relation to pure bundling and contractual tying under the
      hypotheses of large and narrower FPGA markets (paragraphs (171) to (179)) also
      applies mutatis mutandis.
(186) Specifically, under the hypothesis of a broad FPGA market, the merged entity will
      lack market power and thus the ability to foreclose because its FPGAs are not clearly
      superior compared to those of competitors and competitors are not more, and
      probably less, capacity constrained than the merged entity. Further, Intel, AMD’s
      main CPU rival, cannot be foreclosed because it has its own FPGAs and could
      replicate the discounts offered for the joint purchase of FPGAs and CPUs. The
      difference in this regard relative to the pure bundling and contractual tying scenario
      is that Intel is even less likely to be foreclosed as it could maintain any discount
      much longer or give greater discounts given its much larger volume of CPUs. Thus,
      as explained in relation to pure bundling and contractual tying, the practice can, at
      best, affect smaller, CPU-only suppliers but this appears implausible too. Namely if
      the CPU market is narrow and restricted to x86 CPUs or subsegments within x86
      CPUs, there are no firms to foreclose as in those markets Intel is AMD’s only
      competitor. If the CPU market is wide, foreclosure of certain firms cannot even arise
      in the absence of customers that buy FPGAs, while the remaining firms also cannot
      be foreclosed due to an insufficient pool of common customers.
(187) Under the hypothesis of narrow FPGA markets, Xilinx may have market power in a
      narrow FPGA market, but in this case the considerations set out above in
      paragraphs (165)-(170) on the insufficient pool of common customers would apply
      with even greater force as any plausible CPU market would be vastly larger than the
      narrow FPGA markets. Thus under this hypothesis any bundling strategy would have
      a negligible effect on CPU rivals’ sales.
(188) Third, respondents to the market investigation indicated that, although it can happen
      that discounts are offered in case FPGAs and CPUs are purchased jointly by
      customers, such practice is not common, 232 and most customers would not choose
      the bundled products due to their strong preference for a mix and match approach.233
      The difference relative to pure bunding and contractual tying in this regard is that
      customer preference for mix and match has a much stronger effect in the case of
      mixed bundling because the customer is free to choose any individual product from
      the merged entity.
(189) Fourth, the lack of any effect or observable systematic bundling practice after the
      Intel/Altera merger (paragraph (181) shows that such practices are unlikely to occur
      following the implementation of the Transaction.
(190) Therefore, for the reasons set out above and in line with the Commission’s
      assessment under a pure bundling scenario, the Commission concludes that the
232   Responses to Q1 – Questionnaire to competitors and trade associations, question 53; Q2 – Questionnaire to
      customers, question 43.
233   Responses to Q1 – Questionnaire to competitors and trade associations, questions 43.3/46; Q2 – Questionnaire to
      customers, questions 33.1/36.
                                                           46
 ---pagebreak---       merged entity will not have the ability to foreclose rival CPU suppliers by means of
      a mixed bundling strategy between Xilinx’s FPGAs and AMD’s CPUs.
      (C)       Technical tying
(191) The Commission has assessed whether the merged entity would have the ability to
      tie AMD’s CPUs to Xilinx’s FPGAs by degrading their technical compatibility with
      open interconnect standards, such as the PCIe, and by developing a proprietary
      interconnect standard between Xilinx’s FPGAs and AMD’s CPUs. As a result of this
      strategy, the merged entity’s FPGAs would be incompatible with CPUs of other
      suppliers and would be compatible only with the merged entity’s CPUs.
      Alternatively, the merged entity’s FPGAs could still link up with other suppliers’
      CPUs but the PCIe connection, and thus the chips’ performance, would be
      compromised.
(192) A softer form of technical tying is when the merged entity develops a proprietary
      interconnect between its own FPGAs and CPUs but fully retains the PCIe standard.
      That way there would be improved performance when the merged entity’s CPUs and
      FPGAs are paired but the FPGAs would still be fully compatible with third party
      CPUs. The Commission notes that this form of tying amounts to a quality
      improvement when the merged entity’s chips are bought together. That is to say, this
      scenario is economically equivalent to mixed bundling in that a quality improvement
      replaces a price discount in the case of a joint purchase of the merged entity’s CPUs
      and FPGAs. Thus the same assessment applies as in the case of mixed bundling and,
      as explained in Section 5.5.1.2(B), the merged entity will not have the ability to
      foreclose competitors by pursuing this strategy.
(193) Therefore the Commission only considers the first scenario of technical tying,
      i.e. when the merged entity’s FPGAs become incompatible with, or offer worse
      performance, when paired third party CPUs. The Commission considers that the
      merged entity will not have the ability to foreclose CPU rivals this way. The
      assessment is again comparable to that outlined in Section 5.5.1.2(A) in relation to
      contractual tying and pure bundling with some differences.
(194) First, the Commission considers that, as set out in paragraphs (165) to (170) above,
      in the absence of a sufficiently large common pool of customers and in the presence
      of a lot of opportunities to sell CPUs on a standalone basis, the merged entity will
      not be able to impact meaningfully CPU rivals’ sales in the case of technical tying.
(195) Second, the analysis in relation to pure bundling and contractual tying under the
      hypotheses of large and narrower FPGA markets (paragraphs (171)-(179)) also
      applies.
(196) Specifically, under the hypothesis of a broad FPGA market, the merged entity will
      lack market power and thus the ability to foreclose because its FPGAs are not clearly
      superior compared to those of competitors and competitors are not more, and
      probably less, capacity constrained than the merged entity. Further, Intel, AMD’s
      main CPU rival, cannot be foreclosed because it has its own FPGAs and could
      replicate the merged entity’s bundle. The difference in this regard relative to the pure
      bundling and contractual tying scenario is that Intel is even less likely to be
                                                47
 ---pagebreak---       foreclosed as it already has a proprietary interconnect technology to pair CPUs and
      FPGAs, whereas the merged entity would still have to develop such a link. 234 As the
      development of a proprietary interconnect technology is a multi-year effort involving
      large costs, 235 Intel is even better positioned than the merged entity in this scenario
      than in the case of pure bundling or contractual tying. Thus, as explained in relation
      to pure bundling and contractual tying, the practice can, at best, affect smaller, CPU-
      only suppliers but this appears implausible too. Namely if the CPU market is narrow
      and restricted to x86 CPUs or subsegments within x86 CPUs, there are no firms to
      foreclose as in those markets Intel is AMD’s only competitor. If the CPU market is
      wide, foreclosure of certain firms cannot even arise in the absence of customers that
      buy FPGAs, while the remaining firms also cannot be foreclosed due to an
      insufficiently large pool of common customers.
(197) Under the hypothesis of narrow FPGA markets, Xilinx may have market power in a
      narrow FPGA market, but in this case the considerations set out above in paragraphs
      (165)-(170) on the insufficient pool of common customers would apply with even
      greater force as any plausible CPU market would be vastly larger than the narrow
      FPGA markets. Thus under this hypothesis any bundling strategy would have a
      negligible effect on CPU rivals’ sales.
(198) Third, as discussed in relation to pure bundling, contractual tying and mixed
      bundling, the market investigation confirmed that customers have a strong
      preference for a “mix and match” approach, as almost the entirety of customers
      indicated that they prefer to buy CPUs, discrete GPUs and FPGAs separately,
      picking the best option regardless of the supplier. 236 For instance, a customer
      explained that they “typically select the supplier that provides the best technical
      solution”, while two other customer also submitted that they look for best of breed
      products. Another respondent replied that they prefer to “have the ability to select
      the best option of CPU and FPGAs separately or bundled depending on the best
      overall solution”. Therefore, it appears evident that customers want to retain the
      possibility to choose how to combine the products of different suppliers, and would
      not favour an offering that technically limits their ability to do so by locking them
      into a single supplier.
(199) The prerequisite of “mix and match” from a technical point of view is open
      interconnect standards such as PCIe. Consistent with their preference for a “mix and
      match” approach, customers expressed a strong preference for open interconnect
      standards.237 All respondents to the market investigation, both customers and
      competitors, indicated that customers have a strong preference for compatibility with
      open interconnect standards, especially the PCIe, when purchasing CPUs, FPGAs or
      discrete GPUs. 238 One respondent, for example, explained that “open standards
      promote greater choice and freedom […]”. Likewise, another respondent indicated
      that “open standards and interoperability provide flexibility for vendors, value chain
234   Form CO, paragraphs 532 – 532.
235   Responses to Q1 – Questionnaire to competitors and trade associations, question 60.
236   Responses to Q2 – Questionnaire to customers, question 44.
237   Responses to Q1 – Questionnaire to competitors and trade associations, question 58; Q2 – Questionnaire to
      customers, question 48.
238   Responses to Q1 – Questionnaire to competitors and trade associations, question 58; Q2 – Questionnaire to
      customers, question 48.
                                                           48
 ---pagebreak---         providers and end users, and […] encourages technology and pricing competition”.
        The difference in customer attitudes relative to pure bundling and contractual tying
        is that customers’ preference for open interconnect standards is even stronger to the
        extent that compliance with such standard (PCIe now, CXL in the future) is a de
        facto essential requirement when purchasing chips. As a customer noted “The
        pressure and demand for PCIe standard is strong.”239 A competitor specified that
        degrading compatibility with PCIe would lead to customers choosing devices offered
        by other suppliers. 240
(200) Fourth, the Intel-Altera merger is also instructive in this regard in that Intel’s CPUs
        and FPGAs continue to be compatible with open interconnect standards despite the
        fact that Intel’s position in CPUs is much stronger than AMD’s. Under certain
        plausible CPU market definitions Intel’s market share exceeds 90% and despite that
        strong position its CPUs comply with open interconnect standards.
(201) Therefore, for the reasons set out in this section (5.5.1.2(C)), the Commission
        concludes that the merged entity will not have the ability to foreclose rival CPU
        suppliers by means of a technical tying strategy between Xilinx’s FPGAs and
        AMD’s CPUs.
5.5.2. Incentive to foreclose CPU suppliers
5.5.2.1. The Notifying Party’s views
(202) The Notifying Party considers that the incentive to foreclose CPU suppliers by
        bundling or tying FPGAs and CPUs depends on the trade-off between sales of
        FPGAs foregone (to customers that want to buy FPGAs on a standalone basis) and
        sales of CPUs gained. Based on this trade-off, the Notifying Party submits that if,
        hypothetically, the merged entity had the ability to foreclose rival CPU suppliers, it
        would not have the incentive to do so.
(203) More specifically, the merged entity would not have the incentive to engage in
        contractual tying or bundling. First, as regards data centres, the Notifying Party
        explains that FPGAs for data centres are not a separate product category, and can be
        used in a variety of other applications, including without CPUs. Notably, the
        majority of Xilinx’s revenues are generated from market segments other than data
        centres. Therefore, selling all of Xilinx’s FPGAs exclusively paired with AMD’s
        CPUs would harm the merged entity’s business, as it would not allow the merged
        entity to sell enough CPUs to data centre customers to recoup the losses on the
        FPGA side. 241
(204) Second, the Notifying Party indicates that roughly 90% of Xilinx’s FPGA sales is
        directed to industrial customers, i.e. outside of the data centre space. Also in this
        case, the Notifying Party submits that the merged entity would not have the incentive
        to engage in contractual tying or bundling strategies. As regards the industrial
        sectors where customers could use both FPGAs and CPUs (see Table 14), the
239     One customer’s response to Q2 – Questionnaire to customers, question 48.
240     Responses to Q1 – Questionnaire to competitors and trade associations, question 59; Q2 – Questionnaire to
        customers, question 49.
241     Form CO, paragraphs 547 – 551.
                                                            49
 ---pagebreak---       Notifying Party indicates that the “attach rate” for FPGAs, i.e. the estimated sales of
      FPGAs used together with CPUs relative to the overall FPGA sales in such sectors,
      range from [10-20]% (Automotive) to [30-40]% (Wired & Wireless). The average
      attach rate for FPGAs used with CPUs across such sectors is [20-30]%. 242 This
      means, according to the Notifying Party, that roughly [70-80]% of FPGAs are used
      without a CPU. 243
(205) The Notifying Party calculates that Xilinx’s total sales in the relevant industry
      sectors amount to USD […] million (2020), of which USD […] was generated from
      sales of FPGAs used without a CPU. Therefore, implementing a contractual
      tying/bundling strategy would entail the merged entity foregoing USD […] in sales.
      According to the Notifying Party, it is extremely implausible that such a loss could
      be compensated by additional CPU sales. 244
(206) The Notifying Party estimates that AMD would have to increase its sales of CPUs by
      [150-200] times for this trade-off to be profitable, as in 2020 AMD sold
      approximately USD […] million worth of CPUs in the relevant industrial sectors at
      hand. The overall CPU sales in these sectors amount to USD […] billion (2020), of
      which a conservative 10% (USD […] million) represent CPUs used with FPGAs. 245
      Given Xilinx’s approximate market share of [50-60]% in the relevant industrial
      sectors ([40-50]%), the Notifying Party considers it reasonable to assume that the
      maximum revenues that the merged entity can obtain from additional CPU sales
      represents approximately half of such amount, i.e. USD […] million. 246 This would
      result in a net loss of over USD […] million. Therefore, for the reasons set out
      above, the Notifying Party considers that the merged entities would not have the
      incentive to engage in commercial tying or bundling practices.
(207) The Notifying Party also submits that the merged entity would not have the incentive
      to implement technical tying strategies. First, impairing the use of the PCIe
      interconnect standard would affect the performance of a number of AMD’s products
      that rely on it (e.g. network controllers, switches, solid state drivers etc.). This would
      also reduce the value of AMD-based servers to customers, which would be
      counterproductive for AMD as a business strategy.247 Second, in the Notifying
      Party’s view, the merged entity would have no incentive to develop a proprietary
      interconnect technology, since this would harm interoperability between Xilinx’
      FPGAs and non-AMD CPUs. In this regard, the Notifying Party explains that a
      significant portion of Xilinx’s FPGAs are actually paired with Intel CPUs, especially
      in data centres. Third, the Notifying Party recalls the strong demand for
      interoperability, especially by large customers that enjoy significant buyer power,
      which generates an incentive to increase the products’ interoperability rather than
      decreasing it. 248 These factors, in the Notifying Party’s view, would not allow the
      merged entity to gain enough CPU sales to offset the loss of business opportunities
      due to reduced interoperability.
242   Form CO, Figure 10.
243   Form CO, paragraph 632.
244   Ibid.
245   Form CO, paragraph 633.
246   Ibid.
247   Form CO, paragraph 542.
248   Form CO, paragraph 544 – 545.
                                                  50
 ---pagebreak--- (208) Finally, the Notifying Party submits that the merged entity would not have the
        incentive to pursue a mixed bundling strategy as a means of foreclosing rival CPU
        suppliers by selling CPUs at a cost. First, gaining market share in the CPU market at
        a cost of lower margins is not sustainable given AMD’s small market shares
        compared to Intel’s overwhelmingly larger position. Such a strategy would require
        considerable investments over a long period of time that the merged entity cannot
        sustain. Second, as explained above, any discounting strategy can be replicated by
        Intel. Third, the Notifying Party points to the fact that if there were any significant
        gains stemming from a mixed bundling strategy, Intel would have already
        implemented it. Given the lack of ability and incentive, the Parties point out that the
        merged entity may actually wish to offer discounts on FPGA/CPU bundles to attract
        customers, which would have pro-competitive effects.249
(209) In conclusion, for the reasons set out above, the Notifying Party submits that the
        merged entity would not have the incentive to foreclose rival CPU suppliers by
        leveraging on Xilinx’s market position in FPGAs via tying or bundling strategies.
5.5.2.2. The results of the market investigation and the Commission’s assessment
(210) The Commission considers that the merged entity will not have any incentive to
        engage in foreclosure of competing providers of CPUs, for the following reasons.
        Such incentive would only exist if the merged entity’s gains in the leveraged CPU
        market would exceed the potential losses stemming from any tying or bundling
        strategy.
(211) First, the Commission notes that the Parties’ internal documents do not contain any
        indications that suggest the existence of an incentive to engage in bundling or tying
        practices for the purpose of foreclosing rival CPU suppliers post-Transaction. While
        the Transaction is expected to allow AMD to expand to new customers and
        industries outside data centres and to bring synergies, in line with the rationale of the
        Transaction,250 there is no indication that the merged entity intends to undertake
        anticompetitive leverage on Xilinx’s position in the market for FPGAs.
(212) Second, the results of the market investigation support the conclusion that the
        merged entity would not have the incentive to foreclose rival providers of CPUs.
        Almost the entirety of the respondents who provided a qualitative answer indicated
        that it is not common across the industry to bundle or tie CPUs and FPGAs. 251
        Specifically majority of customers indicated that this never happens, or that it
        happens rarely.252 As one customer explained, they “[have] not experienced that
        CPU and FPGA components can’t be procured separately”. Therefore, based on the
        explanations provided, it appears that there is a lack of general incentive for
        suppliers to bundle and tie different components, in particular CPUs and FPGAs.
(213) Third, the Commission notes that, based on the information provided by the
        Notifying Party on the attach rate for FPGAs and CPUs and on the limited size of the
249     Form CO, paragraphs 636 – 641.
250     Form CO, paragraphs 5 – 6.
251     Responses to Q1 – Questionnaire to competitors and trade associations, question 52; Q2 – Questionnaire to
        customers, question 42.
252     Responses to Q2 – Questionnaire to customers, question 42.
                                                             51
 ---pagebreak---       CPU market attributable to customers who also use FPGAs (paragraphs (204)
      to (206) above), which was confirmed by the market investigation
      (paragraphs (165)-(170)) it appears unlikely that a tying or bundling strategy would
      be profitable for the merged entity.
(214) Namely, in the case of pure bundling, contractual tying and technical tying, given the
      low overlap of customers and the limited opportunities to sell FPGAs and CPUs
      jointly, the gains in CPUs sales are likely to be limited. On the other hand, given
      customers’ preference for mix and match and open interconnect standards, many
      customers would reject the bundle in the presence of an alternative, leading to
      considerable losses on standalone sales. Customers would only accept the bundles in
      areas where there would be no alternative to Xilinx’s FPGAs, but, as explained in
      Section 5.5.1.2. this, at best, is limited to some very narrow plausible FPGA markets.
      In that case, however, losing CPU sales in a much larger CPU market (as the merged
      entity would have to maintain the bundle across in the entire CPU market, otherwise
      customers can continue to mix and match) would most probably outweigh the gains.
      As regards mixed bundling, the merged entity’s gains in CPU sales are also likely to
      be limited due to low overlap of customers and the limited opportunities to sell
      FPGAs and CPUs jointly. These limited gains in CPU volumes are unlikely to
      compensate for the losses from the discounts the merged entity would give in the
      case of joint sales.
(215) Fourth, the lack of a general incentive to impose bundling or tying strategies is
      further confirmed by the fact that Intel, following the acquisition of Altera, has never
      engaged in such practices. More specifically, other than some ad-hoc (but not
      systematic) discounts in the case of joint sales, Intel has continued to offer its
      FPGAs and CPUs on an individual basis, and there is no indication that this policy
      will be discontinued. Contractual tying, technical tying and bundling have never
      been imposed for the purpose of foreclosing rival suppliers of CPUs or FPGAs. 253 In
      addition, the Commission notes that Intel, unlike AMD, has developed some
      proprietary interconnect technologies. 254 However, in Intel/Altera, the Commission
      concluded that, despite this fact, it would have been commercially unattractive for
      Intel to degrade the compatibility of their FPGAs and CPUs with the PCIe standard,
      given the risk of losing sales. 255 The Commission considers that the same conclusion
      applies a fortiori to the present case, since AMD has not developed any proprietary
      interconnect technology.
(216) Therefore, for the reasons set out above, the Commission concludes that the merged
      entity would not have the incentive to foreclose rival CPU suppliers by means of any
      hypothetical bundling or tying practices between Xilinx’s FPGAs and AMD’s CPUs.
253   Form CO, paragraph 524.
254   Form CO, paragraphs 532 – 532.
255   Case COMP M.7688 – Intel/Altera, Commission decision of 14 October 2015, paragraphs 156 – 157.
                                                       52
 ---pagebreak--- 5.5.3. Impact on effective competition
5.5.3.1. The Notifying Party’s view
(217) The Notifying Party submits that, even if the merged entity had the ability and
        incentive to engage in foreclosure strategies, rival CPU suppliers would not be
        foreclosed.
(218) First, bundling or tying practices concerning Xilinx’s FPGAs and AMD’s CPUs
        would not cover a large enough proportion of the related market for CPUs to cause
        anticompetitive effects. Even if the merged entity successfully offered its FPGAs
        exclusively bundled or tied to its CPUs, and even if Intel was not able to replicate
        such bundles, any reduction in sales of rival CPU suppliers would be so limited that
        it would not reduce their ability to compete.256
(219) In this regard, the Notifying Party notes that in Nvidia/Mellanox the Commission
        accepted that if the tying or bundling practice affected 30% or less of the relevant
        market, the conduct would not hinder competitors’ ability and incentive to compete.
        The size of the FPGA market is significantly smaller than the size of the respective
        CPU market in sectors where customers use both chips together (paragraph (157)
        above). In data centres, expenditure on accelerated servers amounts to 15% of the
        overall server expenditures, with the FPGA market representing one fiftieth of the
        value of the respective CPU market. Likewise, in the industrial space, the Notifying
        Party estimates that only 10% of CPUs, at most, are used with FPGAs. Therefore,
        based on these data, the Notifying Party submits that the proportion of the CPU
        market foreclosed would be far less than 30%. Rival CPU suppliers would then still
        have access to sufficient CPU sales to remain competitive. 257
(220) Second, the Notifying Party stresses that, even if the merged entity had the ability
        and incentive to pursue bundling or tying strategies, Intel would remain as a strong
        competitive constraint and would be able to counteract any foreclosure attempt
        replicating the merged entity’s bundles by pairing Intel’s CPUs and FPGAs. 258
(221) For the reasons set out above, the Notifying Party considers that, in any case, if the
        merged entity bundled or tied their FPGAs and CPUs, such practices would not have
        anticompetitive effects. Indeed, rival CPU suppliers would not be foreclosed from
        the market and would maintain their ability and incentive to compete.
5.5.3.2. The results of the market investigation and the Commission’s assessment
(222) The Commission considers that due to the lack of ability and incentive, it is not
        needed to assess whether any foreclosure strategy would have a negative impact on
        effective competition.
(223) In any event, even if the merged entity were successful in foreclosing certain rival
        CPU suppliers by means of leveraging Xilinx’ position in FPGAs, this would impact
        only a limited portion of the market for CPUs. As explained in Section 5.5.1.2.,
        significant business opportunities would remain for rival CPU suppliers to continue
256     Form CO, paragraphs 553 – 555.
257     Form CO, paragraph 555.
258     Form CO, paragraph 554.
                                                  53
 ---pagebreak---        selling CPUs either to customers that do not buy FPGAs, or for use cases in which
       an FPGA is not deployed. Therefore, if the merged entity engaged in foreclosure
       strategies, it is implausible that Intel and smaller CPU suppliers could be foreclosed.
       If rival CPU suppliers’ sales cannot be impacted to a meaningful degree, they would
       retain their ability to compete and thus overall CPU prices and quality would not
       change.
(224) This conclusion is supported by the results of the market investigation. Almost the
       entirety of customers and competitors submitted that the Transaction would not have
       a negative impact on their company.259 Rather, a number of customers indicated that
       the impact of the Transaction will be positive, as it will allow the merged entity to
       improve the product roadmap and to bring increased product offering and value to
       customers.260 The Commission also did not receive any complaints in relation to the
       Transaction.
(225) Furthermore, and in line with the above, none of the respondents to the market
       investigation signaled that the Transaction would have a negative impact on any of
       the different markets or segments for CPUs or FPGAs considered in sections 4.2.2
       and 4.2.4 above. On the contrary, respondents indicated that the impact of the
       Transaction on such markets would be either neutral or positive.261 For instance, one
       customer and competitor of the Parties submitted that “based on experience with the
       Intel/Altera merger, the impact to the market by the AMD/Xilinx merger is expected
       to be neutral.”262
(226) In sum, for the reasons set out above, the Commission concludes that if the merged
       entity were successful in foreclosing certain rival CPU suppliers by means of
       leveraging Xilinx’ position in FPGAs, this would not have a negative impact on the
       market for CPUs under all considered product market definitions.
5.5.4. Conclusion
(227)  In light of the above considerations, the Commission considers that the Transaction
       does not give rise to serious doubts as to its compatibility with the internal market or
       the functioning of the EEA Agreement with regard to any hypothetical foreclosure
       strategy resulting from the conglomerate relationships between the Parties’ activities
       as suppliers of FPGAs and CPUs, given the lack of ability, incentive or possible
       effects of such strategy to foreclose competing CPU suppliers.
259    Responses to Q1 – Questionnaire to competitors and trade associations, question 68; Q2 – Questionnaire to
       customers, question 58.
260    Responses to Q2 – Questionnaire to customers, question 58.1.
261    Responses to Q1 – Questionnaire to competitors and trade associations, question 69; Q2 – Questionnaire to
       customers, question 59.
262    Responses to Q1 – Questionnaire to competitors and trade associations, 69.1.
                                                            54
 ---pagebreak--- 5.6.    Foreclosure of GPU suppliers
5.6.1. Ability to foreclose discrete GPU suppliers
5.6.1.1. The Notifying Party’s view
(228) First, the Notifying Party considers that no conglomerate relationship exists between
        FPGAs and GPUs. In the Notifying Party’s view, FPGAs and discrete GPUs are
        both used as accelerators in data centres. However, data centre applications that
        deploy acceleration technology generally use either FPGAs or discrete GPUs, but
        not both.263 More specifically, FPGAs and discrete GPUs could be used in the same
        data centre, but they would perform different functions and would be generally
        deployed in different applications (e.g. networking, computing or storage). In the
        few cases in which a data centre application deploys both products at once,264 the
        FPGA and the GPU perform distinct functions in different locations, and are
        generally not interconnected. For this reason, according to the Parties, the condition
        set out in the Non-horizontal Merger Guidelines that both products need to be
        “generally purchased by the same set of customers for the same end use” 265 is not
        met. The Notifying Party also notes that, to the best of their knowledge, there are no
        examples of FPGAs and discrete GPUs being purchased by the same customers in
        any industry sectors or end application other than accelerated data centres.266
(229) In any case, the Notifying Party submits that the merged entity would not have the
        ability to foreclose discrete GPU suppliers by means of tying or bundling. First, the
        Notifying Party considers that the merged entity would not have a significant degree
        of market power, for the same reasons set out above as regards tying and bundling of
        FPGAs and CPUs. In data centres, Xilinx faces significant competition from Intel,
        that has a comparable market share in the market for FPGAs. In addition, the merged
        entity would face a significantly dominant rival in the GPU market (Nvidia) that
        would be extremely implausible to foreclose due to its [90-100]% market share in
        the market for discrete GPUs for data centres.267
(230) Second, the Notifying Party considers that the arguments related to the limited
        opportunities to tie and bundle FPGAs with CPUs apply, a fortiori, to FPGAs and
        discrete GPUs. Indeed, the Notifying Party submits that only in very limited cases, if
        any, the same data centre application deploys both an FPGA and a discrete GPU.
        Therefore, due to the general lack of complementarity, commercial opportunities to
        tie or bundle discrete GPUs with FPGAs account for a very small fraction of the
        addressable market for discrete GPUs for data centres.268 For this reason, there is no
        possibility that rival GPU suppliers would be foreclosed from the broader market for
        discrete GPUs for data centres as a result of contractual tying/bundling, technical
        tying and mixed bundling strategies.
263     Form CO, paragraph 233.
264     Form CO, paragraph 234. To the best of the Parties’ knowledge, the only circumstances in which FPGAs and
        GPUs are currently deployed in the same data centre application is where an FPGA-based Smart NIC is used to
        interconnect multiple GPUs that are being used to accelerate compute workloads. However, in such case, the
        FPGA and the GPU carry out different functions that are not comparable and interchangeable.
265     Non-Horizontal Merger Guidelines, paragraph 91.
266     Form CO, paragraph 577.
267     Form CO, paragraph 585.
268     Form CO, paragraph 587. The Parties estimate that, conservatively, less than 10% of all data centre GPU
        purchases are made by customers that also purchase FPGAs (see paragraph 605).
                                                             55
 ---pagebreak--- (231) Third, according to the Notifying Party, even when FPGAs and discrete GPUs are
        purchased by the same customer, they are not purchased together. Discrete GPUs
        and FPGAs have different buying patterns and volume needs, and any joint buying
        behavior would be mostly incidental. On this point, the Notifying Party reiterates
        that discrete GPUs and FPGAs are never bought together to solve a technical
        problem for which both products are required in combination. 269 Fourth, according
        to the Notifying Party, also in this case there is significant countervailing buyer
        power among data centre customers, in particular hyperscalers.270
(232) In sum, the Notifying Party submits that, due to the lack of a significant degree of
        market power and due to very little complementarity and different purchasing
        patterns between FPGAs and GPUs, the merged entity would not have the ability to
        foreclose discrete GPU suppliers.
5.6.1.2. The results of the market investigation and the Commission’s assessment
        (A) Market for discrete GPUs for data centres
(233) The Commission considers that the merged entity will not have the ability to engage
        in foreclosure of competing providers of discrete GPUs for data centres and discrete
        GPUs for gaming, for the following reasons.
(234) First, information gathered from the market investigation indicates that, contrary to
        the Notifying Party’s views, FPGAs and discrete GPUs for data centres could be
        used together in the same application or device by customers. However, this does not
        appear to be common. The majority of customers and competitors that provided their
        views indicated that FPGAs and GPUs are indeed “rarely” used together, although
        some respondents also submitted that this happens “sometimes”.271 In this regard,
        one competitor indicated that “both types of devices can used for the acceleration of
        certain workloads. In some cases, it may be efficient to use both, but such cases are
        less common. […] FPGAs are sometimes used to perform board management
        functions alongside a GPU. It is also possible to use FPGA-based smart network
        interface cards alongside GPUs in the same platform.”272
(235) Although the market investigation indicated that discrete GPUs for data centres
        could be used together with FPGAs by the same customers, it also appears that these
        two chips are used complementarily in a limited number of cases, and in particular
        less frequently than FPGAs and CPUs. In this regard, all respondent but one
        customer agreed with the statement that most discrete GPUs are used without an
        FPGA.273 The market investigation also confirmed that a majority of GPU customers
        do not buy FPGAs. 274 Therefore, the Commission considers that the arguments set
        out in section 5.5.1.2 related to the lack of a sufficiently large common pool of
269     Form CO, paragraphs 238 – 239.
270     Form CO, paragraph 605.
271     Responses to Q1 – Questionnaire to competitors and trade associations, question 46; Q2 – Questionnaire to
        customers, question 36.
272     Responses to Q1 – Questionnaire to competitors and trade associations, question 46.1.
273     Responses to Q1 – Questionnaire to competitors and trade associations, question 47; Q2 – Questionnaire to
        customers, question 37.
274     Responses to Q1 – Questionnaire to competitors and trade associations, question 49; Q2 – Questionnaire to
        customers, question 39.
                                                             56
 ---pagebreak---       customers, within the meaning of paragraph 100 of the Non-horizontal Merger
      Guidelines, between FPGAs and CPUs apply to FPGAs and discrete GPUs for data
      centres as well. Absent a large pool of common customers and considering the very
      limited cases of common usage of FPGAs and GPUs, the sales of Nvidia, AMD’s
      only GPU competitor, are unlikely to be affected to a meaningful degree. This
      applies to all forms of tying and bundling.
(236) Second, even if some customers purchase both chips, joint purchase will likely be
      incidental, as buying patterns for FPGAs and discrete GPUs for data centres are
      mostly independent. This is confirmed by the market investigation, as a majority of
      customers and competitors who expressed their views indicated that customers who
      purchase both FPGAs and GPUs do not purchase them at the same time.275 As
      indicated at paragraph 98 of the Non-Horizontal Merger Guidelines, pure bundling is
      very unlikely if the products are not bought simultaneously. The same applies to
      technical tying too, while non-simultaneous purchases would very much complicate
      and render more difficult contractual tying and mixed bundling.
(237) Third, the Commission considers that the arguments set out in section 5.5.1.2(A) in
      relation to CPUs and FPGAs in relation to the different hypotheses on the size of the
      FPGA markets apply in this case too mutatis mutandis.
(238) Specifically, under the hypothesis of a broad FPGA market, the merged entity will
      lack market power and thus the ability to foreclose Nvidia because its FPGAs are not
      clearly superior compared to those of its competitors and its FPGA competitors are
      not more, and probably less, capacity constrained than the merged entity. This means
      that customers can easily source FPGAs from the merged entity’s FPGA
      competitors, in particular from Intel, and discrete GPUs from Nvidia, which would
      have the means to replicate any discounts if needed. Under the hypothesis of narrow
      FPGA markets, Xilinx may have market power in a narrow FPGA market, but in this
      case the considerations set out above in paragraphs (234)-(235) on the insufficiently
      large pool of common customers would apply with even greater force as the market
      for GPUs for data centres (USD […] million) would be vastly larger than the narrow
      FPGA markets (e.g. USD […] million for FPGAs for data centers without any
      further segmentation). Thus under this hypothesis any bundling strategy would have
      a negligible effect on Nvidia’s sales. These considerations apply to all forms of tying
      and bundling, including contractual tying, pure bundling, technical tying and mixed
      bundling.
(239) Fourth, just like in the case of CPUs and FPGAs, there are additional factors that
      make any form of tying and bundling less likely. Namely, customers have a strong
      preference for a mix-and-match approach276 and open interconnect standards.277
      Furthermore pure bundling, tying and technical tying involving GPUs is virtually
      non-existent in the marketplace while discounts in the case of joint purchase are
      rare.278 Thus, even if so far there has been no supplier with substantial sales of both
275   Responses to Q1 – Questionnaire to competitors and trade associations, question 51; Q2– Questionnaire to
      customers, question 41.
276   Responses to Q2 – Questionnaire to customers, question 42.
277   Responses to Q1 – Questionnaire to competitors and trade associations, question 58; Q2 – Questionnaire to
      customers, question 48.
278   Responses to Q2 – Questionnaire to customers, question 42.2 and 43; Q1 – Questionnaire to competitors and
      trade associations, question 52.2 and 53.
                                                           57
 ---pagebreak---         GPUs and FPGAs specifically, the Commission considers it a relevant factor that
        tying and bundling practices involving GPUs are absent in the market. These factors
        make any form of tying and bundling even less likely. 279
        (B) Market for discrete GPUs for gaming and professional visualisation
(240) As explained in paragraph (148) above, FPGAs are not used in gaming devices or
        consoles, therefore the market for discrete GPUs for gaming can be considered an
        affected market only to the extent to which, potentially, such GPUs are used together
        with FPGAs for end uses other than gaming. These cases are likely to be very
        limited.
(241) Therefore, all arguments set out above in relation to the conglomerate relationship
        between FPGAs and discrete GPUs for data centres apply, a fortiori, to the potential
        conglomerate relationship between FPGAs and discrete GPUs for gaming.
        (C) Conclusion
(242) For all reasons indicated above, the Commission concludes that the merged entity
        would not have the ability to foreclose rival suppliers of discrete GPUs by means of
        hypothetical bundling or tying strategies between Xilinx’s FPGAs and AMD’s
        discrete GPUs.
5.6.2. Incentive to foreclose discrete GPU suppliers
5.6.2.1. The Notifying Party’s view
(243) In the Notifying Party’s view, even if the merged entity had the ability to foreclose
        rival suppliers of discrete GPU, it would not have the incentive to do so. In this
        regard, and in line with the arguments on foreclosure of CPU suppliers, the merged
        entity would face a trade-off between sales of FPGAs foregone (because customers
        can no longer buy FPGAs without a discrete GPU) and sales of discrete GPUs
        gained (because customers who buy Xilinx’s FPGAs would buy AMD’s GPUs
        instead of Nvidia’s GPUs).
(244) According to the Notifying Party, this trade-off would not be profitable under any
        tying or bundling scenarios. First, the Notifying Party submits that, since FPGAs and
        discrete GPUs are almost never used together in the same data centre application, the
        demand for FPGA/GPU bundles is very little compared to the demand for FPGAs
        and discrete GPUs on a separate basis.280 As the vast majority of FPGA sales in data
        centres are to customers that do not also buy discrete GPUs for use in the same data
        centre application, a contractual tying or bundling strategy would require the merged
        entity to forego almost all of its FPGA sales.
(245) Second, the Notifying Party submits that the attractiveness of tying and bundling
        discrete GPUs and FPGAs is further weakened by the fact that there is no such thing
        as data centre only FPGAs. The high-end FPGAs used in data centres are essentially
        the same as FPGAs used in a range of other applications. Therefore, the merged
279     Intel,   which  is   an   FPGA supplier,           recently    started   to    offer   data   centre  GPUs.
        https://www.pcmag.com/news/intels-first-discrete-gpu-for-data-centers-arrives-to-power-android-cloud.
280     Form CO, paragraph 595.
                                                             58
 ---pagebreak---         entity would need to stop selling all FPGAs individually to ensure effectiveness of a
        contractual tying or bundling strategy.281 The Notifying Party submits that the effects
        would be ruinous for the merged entity’s FPGA business, and such losses could not
        be recouped thanks to the limited gains in additional discrete GPU sales to the few
        customers who buy discrete GPUs and FPGAs together.
(246) Third, the Notifying Party considers that it makes no commercial sense for the
        merged entity to foreclose GPU suppliers by means of mixed bundling. The demand
        for discrete GPUs is independent from the demand for FPGAs, and purchasing
        decisions are ultimately driven by technical considerations on the two different types
        of accelerators, not by discounts on prices.282
(247) In conclusion, for the reasons set out above, the Notifying Party submits that the
        merged entity would not have the incentive to foreclose rival suppliers of discrete
        GPUs by means of any tying or bundling strategies.
5.6.2.2. The results of the market investigation and the Commission’s assessment
(248) The Commission considers that the merged entity will not have any incentive to
        engage in foreclosure of competing providers of discrete GPUs, for the following
        reasons.
        (A) Market for discrete GPUs for data centres
(249) First, in line with the considerations set out in paragraph (211) above, the Parties’
        internal documents do not contain any indications that suggest an incentive to
        engage in bundling or tying practices for the purpose of foreclosing rival suppliers of
        discrete GPU for data centres post-Transaction. On the contrary, indications about
        possible synergies are mainly relative to Xilinx’s FPGAs and AMD’s CPUs rather
        than AMD’s discrete GPUs. Therefore, there is no suggestion that the merged entity
        intends to undertake anticompetitive leverage on Xilinx’s position in the market for
        FPGAs.
(250) Second, the market investigation indicated that, as discussed in paragraph (239)
        above and in Section 5.5.1.2(A), there are no tying and bundling practices involving
        GPUs or FPGAs. This suggests that the merged entity is unlikely to have the
        incentive to bundle and tie FPGAs and discrete GPUs.
(251) Third, the arguments regarding the unprofitability of hypothetical tying and bundling
        strategies between FPGAs and CPUs (Section 5.5.2) apply, also to FPGAs and
        discrete GPUs for data centres. Namely, in the case of pure bundling, contractual
        tying and technical tying, given the low overlap of customers and the limited
        opportunities to sell FPGAs and GPUs jointly (see Section 5.6.1.2), the gains in
        CPUs sales are likely to be limited. On the other hand, given customers’ preference
        for mix-and-match chips of different suppliers and open interconnect standards,
        many customers would reject the bundle in the presence of an alternative, leading to
        considerable losses on standalone sales. Customers would only accept the bundles in
        areas where there is no alternative to Xilinx’s FPGAs, but, as explained in
281     Form CO, paragraph 598.
282     Form CO, paragraph 600 – 601.
                                                  59
 ---pagebreak---         Section 5.5.1.2. this, at best, is limited to some very narrow plausible FPGA markets.
        In that case, however, losing GPU sales in a large GPU market283 (as the merged
        entity would have to maintain the bundle across in the entire market for GPUs for
        data centres, otherwise customers can continue to mix-and-match) would most
        probably outweigh the gains related to increased GPU sales on a narrow FPGA
        market.284 In the case of mixed bundling, the merged entity’s gains in GPU sales are
        also likely to be limited due to low overlap of customers and the limited
        opportunities to sell FPGAs and GPUs jointly. These limited gains in GPU volumes
        are unlikely to compensate for the losses from the discounts given in the case of joint
        sales. In addition, the incentives to bundle and tie are likely to be even weaker than
        in the case of FPGAs and CPUs given that the pool of common customers is even
        narrower than that between FPGAs and CPUs.
        (B) Market for discrete GPUs for gaming and professional visualisation
(252) As explained in paragraph (148) above, FPGAs are not used in gaming devices or
        consoles, therefore the market for discrete GPUs for gaming can be considered an
        affected market only to the extent to which, potentially, such GPUs are used together
        with FPGAs for end uses other than gaming. As mentioned in paragraph (148) such
        cases are likely to be very limited.
(253) Therefore, the Commission considers that all the arguments set out above in relation
        to the lack of incentive to bundle or tie FPGAs and discrete GPUs for data centres
        apply, a fortiori, to a hypothetical conglomerate relationship between FPGAs and
        discrete GPUs for gaming.
(254) In conclusion, for the reasons set out above, the Commission considers that the
        merged entity would not have the incentive to foreclose rival suppliers of discrete
        GPUs for data centres and discrete GPUs for gaming by means of hypothetical
        bundling or tying strategies leveraging on Xilinx’s market position on FPGAs.
5.6.3. Impact on effective competition
5.6.3.1. The Notifying Party’s view
(255) In the Notifying Party’s view, even if the merged entity had the ability and incentive
        to implement anti-competitive tying or bundling strategies between Xilinx’s FPGAs
        and AMD’s discrete GPUs, these strategies would have no effects on competition in
        the market for discrete GPUs for data centres and would not lead to the foreclosure
        of rival GPU suppliers (i.e. Nvidia).285
(256) First, the arguments put forward with regard to the foreclosure of CPU suppliers
        apply a fortiori to this case. The impact of tying and bundling would be limited to an
        insignificant portion of the overall market for discrete GPUs in data centres since, as
        explained above, FPGAs and discrete GPUs are usually not used together. Therefore,
        in line with the Non-horizontal Merger Guidelines, the Notifying Party notes that a
        merger cannot be regarded as impeding effective competition if the fraction of the
283     The size of the market for discrete GPUs for data center is USD […] million, see Section 5.3.2.
284     For example the size of the market for FPGAs for data centers without any further segmentation is USD […]
        million.
285     Form CO, paragraph 603.
                                                              60
 ---pagebreak---         market affected by foreclosure is not large enough to remove effective single-
        product players.286 In this case, the Notifying Party submits that Nvidia and Intel will
        remain as strong single product players in the markets for discrete GPUs and FPGAs
        respectively.
(257) Second, the Notifying Party considers that possible mixed bundling strategies
        concerning discrete GPUs and FPGAs would have a pro-competitive effect on
        customers, as they would contribute to the attractiveness of the merged entity’s offer
        compared to the products offered by Nvidia.
(258) In conclusion, the Notifying Party considers that, due to the very limited portion of
        the market for discrete GPUs for data centres attributable to customers that use them
        together with FPGAs, any bundling or tying practices would not cause any
        anticompetitive effects on rival suppliers of discrete GPUs, in particular Nvidia.
5.6.3.2. The results of the market investigation and the Commission’s assessment
(259) The Commission considers that due to the lack of ability and incentive, it is not
        needed to assess whether any foreclosure strategy would have a negative impact on
        effective competition.
(260) In any event, even if the merged entity were to engage in a foreclosure strategy by
        means of leveraging Xilinx’ position in FPGAs, this would not have appreciable
        anticompetitive effects on the market for GPUs for data centres or on the market for
        GPUs for gaming and professional visualization, for the same reasons as those set
        out in section 5.5.3.2 above regarding the conglomerate relationship between FPGAs
        and CPUs.
(261) First, the Commission notes that hypothetical foreclosure strategies between Xilinx’s
        FPGAs and AMD’s discrete GPUs would impact only a small portion of the market
        for discrete GPUs for data centres, and an even smaller portion, if any, of the market
        for discrete GPUs for gaming and professional visualisation. Given that in both
        markets Nvidia is the only strong competitor with a market share above 90%, a
        reduction of Nvidia’s share by a few percentage points, even if successful, is
        unlikely to impact meaningfully Nvidia’s ability to compete, as well as GPU prices,
        quality and other competitive parameters.
(262) Second, the Commission recalls the results of the market investigation set out in
        paragraphs (224) and (225) above, according to which almost the entirety of
        customers and competitors submitted that the Transaction would not have a negative
        impact on their company.287 Furthermore, none of the respondents to the market
        investigation signaled that the Transaction would have a negative impact on the
        markets for discrete GPUs for data centres or discrete GPUs for gaming. 288
286     Form CO, paragraph 604.
287     Responses to Q1 – Questionnaire to competitors and trade associations, question 68; Q2 – Questionnaire to
        customers, question 58.
288     Responses to Q1 – Questionnaire to competitors and trade associations, question 69; Q2 – Questionnaire to
        customers, question 59.
                                                         61
 ---pagebreak--- (263) In sum, for the reasons set out in section 5.5.3.2 and recalled above, the Commission
       concludes that if the merged entity succeeded in reducing the sales of rival suppliers
       of discrete GPUs by means of leveraging Xilinx’ position in FPGAs, this would not
       have a negative impact on competition in the markets for discrete GPUs for data
       centres and discrete GPUs for gaming and professional visualisation.
5.6.4. Conclusion
(264)  In light of the above considerations, the Commission considers that the Transaction
       does not give rise to serious doubts as to its compatibility with the internal market or
       the functioning of the EEA Agreement relative to any hypothetical foreclosure
       strategy resulting from the conglomerate relationships between the Parties’ activities
       as suppliers of FPGAs and discrete GPUs, given the lack of ability, incentive or
       possible effects of such strategy to foreclose competing GPU suppliers.
5.7.   Assessment under an alternative market definition for FPGA accelerator cards
(265) As discussed in Section 5.4, if FPGA accelerator cards constituted a separate market,
       then the merged entity could use both i) FPGAs exluding accelerator cards and
       ii) FPGA accelerator cards as leverage.
(266) When the plausible FPGA markets exclude accelerator cards (first case indicated in
       paragraph (265) above), the Commission notes that the size of the potential market
       for FPGA accelerator cards is maximum USD [200-300] million 289 against a market
       size of USD [5 500-6 000] million for all FPGAs. Given that FPGA accelerator
       cards are a small market, the exclusion of FPGA accelerator cards from any broadly
       defined FPGA market would not change materially the assessment in Sections 5.5.
       and 5.6, which would remain fully applicable also to any broadly defined market for
       FPGAs excluding FPGA accelerator cards.
(267) If the FPGA markets were narrow, the exclusion of FPGA accelerator cards would
       not affect the assessment under most narrow markets considered, as FPGA
       accelerator cards are only used in servers and mostly in data centres. The plausible
       market for FPGAs for data centres would be roughly halved (original market size of
       USD […] million, while excluding FPGA accelerator cards the market size would be
       USD […] million). As this plausible market would still be a narrow plausible FPGA
       market, the assessment in Sections 5.5 and 5.6 involving narrow FPGA markets
       would fully apply. In particular, the market for FPGAs for data centres without the
       FPGA accelerator card would be very small, and thus the consideration that CPU
       suppliers will have plenty of opportunities to sell CPUs or GPUs on a standalone
       basis would rule out foreclosure. Namely, even the narrowest linked CPU market
       and the relevant linked GPU market (x86 CPUs for servers with a market size of
       USD […] million and the market for discrete GPUs for data centres with a market
       size of USD […] million) would be vastly bigger than the market for FPGAs in data
       centres that excludes FPGA accelerator cards. Thus the sales of server CPU suppliers
       and data centre GPU suppliers cannot be impacted to a meaningful degree by any
       tying or bundling strategy by the merged entity.
289    Notifying Party’s response to the Commission’s RFI 6. Xilinx’s total sales amount to USD […] million. Thus,
       assmuning Xilinx’s share is around [30-40] %, the market size is maximum USD [200-300] million compared to
       a market size of USD [5 500-6 000] million in the case of all FPGAs.
                                                             62
 ---pagebreak--- (268) Moreover, although in Sections 5.5 and 5.6 the Commission did not exclude the
      possibility that Xilinx’s FPGAs could be superior compared to competitors’ FPGAs
      in some cases, the market investigation indicated that this could be true only in
      certain narrow segments other than data centres or servers.290 This means that FPGA
      competitors, and Intel in particular, will remain strong alternatives to the merged
      entity’s FPGAs even in a narrow market for data centres FPGAs excluding
      accelerator cards. Thus, as regards CPUs, Intel cannot be foreclosed also for the
      reason because it has its own FPGAs and could replicate the bundle. Likewise, the
      merged entity’s only competitor in the market for discrete GPUs for data centres,
      Nvidia, cannot be foreclosed also because customers who prefer its GPUs can source
      FPGAs from the merged entity’s FPGA rivals, and because Nvidia would have the
      means to replicate any discounts that the merged entity would offer.
(269) In the potential separate market for FPGA accelerator cards (second case in
      paragraph (265) above), as discussed in Section 5.4, the merged entity could
      potentially use FPGA accelerator cards to leverage its market position to certain
      considered CPU and GPU markets. These include the market for all CPUs or any of
      the market definitions considered that include server CPUs, as well as the market for
      discrete GPUs for data centres, because FPGA accelerator cards are only used in
      servers and mostly in data centres. In this regard, the same assessment applies as in
      the case of the market for FPGAs for data centers without the FPGA accelerator
      cards (see paragraphs (267)-(268) above). Namely, the assessment in Sections 5.5
      and 5.6 applies in this case too and in particular the small size of the market for
      accelerator cards (USD [200-300] million) relative to the narrowest linked CPU
      market and the relevant linked GPU market indicates that there will be plenty of
      opportunities for CPU and GPU rivals to sell their products on a standalone basis.
      This, in turn, rules out foreclosure. Further, FPGA accelerator card competitors, in
      particular Intel, will remain strong alternatives to the merged entity’s FPGAs even in
      this narrow market. Thus, in addition to having plenty of opportunities to sell CPUs
      and GPUs on a standalone basis, the merged entity’s competitors in CPUs and GPUs
      (Intel and Nvidia respectively) cannot be foreclosed because Intel can replicate any
      bundle, while Nvidia’s customers can source FPGA accelerator cards from Intel or
      other FPGA rivals.
(270) In light of the above considerations, the Commission considers that the Transaction
      does not give rise to serious doubts as to its compatibility with the internal market or
      the functioning of the EEA Agreement relative to any hypothetical foreclosure
      strategy resulting from the conglomerate relationship between the Parties’ activities
      as suppliers of FPGAs, FPGA accelerator cards, discrete GPUs and CPUs, under the
      assumption that FPGA accelerator cards form a distinct market separate from other
      FPGAs.
290   Responses to Q1 – Questionnaire to competitors and trade associations, question 36; Q2 – Questionnaire to
      customers, question 26.
                                                       63
 ---pagebreak--- 6.    CONCLUSION
(271) For the above reasons, the European Commission has decided not to oppose the
      Transaction and to declare it compatible with the internal market and with the EEA
      Agreement. This Decision is adopted in application of Article 6(1)(b) of the Merger
      Regulation and Article 57 of the EEA Agreement.
                                                   For the Commission
                                                   (Signed)
                                                   Margrethe VESTAGER
                                                   Executive Vice-President
                                              64