Analysis, Business, Companies, CPU, Hardware, Intel

Why Altera’s Acquisition is a Timely Move by Intel


Editor’s note: The following is a guest post by Rana J Pratap, PhD. Rana is Principal Consultant – Technology at LexInnova, a patent and litigation consulting firm. He can be reached at

The semiconductor industry has witnessed a wave of consolidation in recent times, through a string of mergers and acquisitions in the last few months. Avago’s $37 billion acquisition of Broadcom last week, and NXP’s acquisition of Freescale for $11.8 billion in March are some of the recent acquisitions that have garnered a lot of attention.

Intel (NASDAQ: INTC), the world’s leading semiconductor chipmakers continued this trend yesterday, by agreeing to buy Altera, a leading manufacturer of field-programmable gate array (FPGA) devices for $16.7 billion. This acquisition would combine Intel’s leading position in microprocessors with Altera’s position in programmable logic devices (that is second only to Xilinx). Intel has diverse product lines, which include processors and memory chips for PCs, servers, and mobile devices, while Altera concentrates solely on FPGAs. FPGA chips are very flexible and have the advantage of being able to handle specific workloads with very fast compute times. This means that if any critical algorithms change, or a new computing workload is implemented, the FPGA can be reprogrammed without the need to undergo a lot of hardware change.

Intel is the market leader in general purpose computing servers, but the computing needs of today’s datacenter, telecommunications, and IoT markets are evolving rapidly, and can only be pacified with the programmability of FPGAs. FPGA chips have been in use within servers to improve overall system performance, and through this acquisition, Intel could bring major technology changes to cater to its big data and cloud customers. The combined potential of Intel and Altera would also make the combined entity well poised to target a growing market of telecommunications and IoT applications. This will allow Intel to add more product lines to boost its revenue, while also allowing it to consolidate its lead in the server market. Additionally, as FPGAs command high margins, fabricating them would help Intel in improving its top line revenues.

table-1Intel already integrates Altera’s FPGA technology with its Xeon chip to customize CPUs and run special data center workloads (such as hardware acceleration). Intel’s biggest threat in the data center is from the servers based on ARM architecture. While Intel’s CPU is best for general purpose computing, ARM based CPUs would be superior in implementing specific workloads through hardware. Currently, most of these workloads run in software on an Intel CPU. With this acquisition, Intel can use Altera’s FPGAs to implement these workloads in hardware to counter any threat from ARM servers, capable of hardware-implemented workloads. This could also help Intel counter Nvidia, which has a lead over Intel in vector/parallel processing cores that are used in supercomputers and scientific computing.

Altera has already signed a deal with Intel to use its foundry last year to manufacture FPGAs. This was a win-win relationship because FPGA fabrication requires latest process nodes and a smaller die area (both of which Intel can offer) to be cost effective. Backed by Intel’s fabrication capabilities will allow Altera to compete better against competitors such as Xilinx. The relationship also benefits Intel, as it has been struggling to keep its foundries utilized with PC sales going down, which still account for 60% of its revenue. Now Intel will be able to keep its foundries fully utilized, without having to fabricate for competitors such as Mediatek (TPE: 2454) and Qualcomm (NASDAQ: QCOM).

Our research team at LexInnova performed an analysis of the patent portfolios of both Intel and Altera. According to our analysis, both companies follow similar patent filing trends in a number of technology domains (such as General purpose processing, specialized processing, I/O processing, etc.). This deal will strengthen Intel’s overall server portfolios as Altera has a strong patent portfolio in the server domain. It will also improve Intel’s capabilities in “processing.” While Intel leads in CPUs (14,925 patents/patent applications), and general-purpose processors (10,199 patents/patent applications), while Altera leads in general purpose processors (1,253 patents/patent applications) and specialized processors (1,221 patents/patent applications).

With strategic gains in technology, revenue, innovation, and intellectual property, Altera’s acquisition appears to be a well-timed move by Intel.