Intel is set to buy chip maker Altera for nearly $16.7 billion to boost data center business.
The deal to buy Altera is the latest in the consolidation efforts by chip vendors in the IT and telecom space to improve scale and profitability.
Last week, Avago acquired Broadcom for $37 billion.
Media reports say Intel already partners with Altera, manufacturing some top-end chips designed by the smaller rial, while Altera has used some of Intel’s chip-making technology in its designs under a long-term agreement reached in 2013.
The acquisition is the biggest in Intel Corp.’s 47-year history. In 2011, Intel bought security software maker McAfee for $7.7 billion.
Intel CEO said the combination is expected to enable new classes of products that meet customer needs in the data center and Internet of Things (IoT) market segments.
Intel plans to offer Altera’s FPGA products with Intel Xeon processors as customized, integrated products. The companies expect to enhance Altera’s products through design and manufacturing improvements resulting from Intel’s integrated device manufacturing model.
Intel CEO Brian Krzanich said: “Whether to enable new growth in the network, large cloud data centers or IoT segments, our customers expect better performance at lower costs. This is the promise of Moore’s Law and it’s the innovation enabled by Intel and Altera joining forces.”
Santa Clara, California- based Intel is the world’s largest maker of PC chips and sells most of the chips used in servers. Intel, which has 15.4 percent market share in the global semiconductor market in 2014, has improved its annual sales by 7.7 percent due to recovery in PC production. The processor company retained the No. 1 market share position for the 23rd consecutive year by capturing 15.4 percent of the market, which was down slightly on the previous year, said Gartner.
The merger and acquisition (M&A) activity in the semiconductor industry was kicked off in 2014. Avago Technologies’ acquisition of LSI; MStar Semiconductor’s merger with MediaTek; and ON Semiconductor acquisition of Aptina Imaging, were some of the deals.
Gartner in April 2015 said worldwide semiconductor revenue will grow 4 percent to $354 billion in 2015. Smartphones, solid-state drives (SSDs) and ultramobiles will see the largest semiconductor growth, while the PC segment will post the greatest decline.
According to Gartner, the end of support for Windows XP, which lifted the replacement demand for traditional PCs, faded out in late 2014. Through 2015, the replacement demand is expected to remain muted, as consumers delay migrating to Windows 10.
Intel is looking at San Jose, California-based Altera because its business in PC segment is not encouraging in the long term. Altera makes chips used in phone networks and cars. This apart, Altera sells chips known as field-programmable gate arrays that customers can later configure for specific processing or data-storage functions, including for use in cellular base stations and switching systems.
Intel is concerned about gloomy PC business. As per its latest revenue outlook, Intel slashed nearly $1 billion from its first-quarter revenue. Intel said that small businesses are delaying upgrading their computers. Fuelling Intel’s issues in revenue generation, worldwide personal computer shipments decreased 5.2 percent in the first three months of 2015.
Revenue from Intel’s PC group increased 4 percent in 2014, generating about 62 percent of total revenue, while revenue in its data center group increased 18 percent, providing just over a quarter of overall revenue, Reuters reported.