Intel agreed to buy rival chipset maker Altera for $16.7 billion in a long-rumored deal that will get Intel further involved in the market of silicon for network gear and data centers. The deal represents another indication of consolidation in the silicon industry and comes hot on the heels of Avago Technologies' $37 billion transaction to buy Broadcom, which will push Avago into the networking chipset market.
Intel will acquire Altera for
Altera, along with rival Xilinx, is one of the two biggest suppliers of so-called field-programmable gate arrays, or FPGAs, which can be used in a wide variety of devices and applications. FPGAs are widely used in base stations, computer networking gear equipment, cars and other products. After they are manufactured, the FPGA chips can be programmed to carry out specialized tasks like data encryption and work much faster than traditional microprocessors.
Intel said it will use its proprietary manufacturing processes in combination with Altera's FPGA technology. The companies plan to create new products for the data center and Internet of Things market segments, and
Altera will become an
"Intel's growth strategy is to expand our core assets into profitable, complementary market segments," said Intel CEO
As the BBC notes, the two companies already work together, with Intel manufacturing some of the chips designed by Altera, while Altera has used some of Intel's technology to create its own silicon.
The Intel/Altera deal comes after Avago announced plans last week to purchase Broadcom in the largest chip deal ever. Broadcom decided to exit the cellular baseband market in mid-2014 after concluding it was losing too much money. However, Broadcom is still a major supplier of Wi-Fi silicon and of Wi-Fi combo chipsets, which include Bluetooth, FM radio and other technologies. Additionally, Broadcom is a player in the Internet of Things market. Combined, Avago and Broadcom will be a major player in the wireless infrastructure, networking and broadband technology markets.
The deals could put pressure on Qualcomm (NASDAQ:QCOM), the leading wireless chipset supplier, and force a shift in strategy. Overall, they present not just consolidation in the industry but chipmakers' desire to acquire expertise in market share in adjacent segments in the silicon market, and in the wireless infrastructure segments in particular, as a way to achieve future growth.
- see this Intel release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this NYT article
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