Two notes on Intel's possibly buying Altera

By Tom Hackenberg and Robbie Galoso, IHS



Top 10 semiconductor industry suppliers

According to a report in the Wall Street Journal on Friday, March 27, 2015, Intel is in talks to buy Altera. Intel’s largest purchase comes on the heels of a long series of semiconductor mergers and acquisitions – including NXP and Freescale, Cypress Semiconductor and Spansion, Lattice Semiconductor and Silicon Image, Qualcomm and CSR, Infineon and International Rectifier, and several more. Each of these mergers has had an influence on various markets.

How would Intel’s acquisition of Altera affect the semiconductor landscape?
Intel is the largest supplier of microprocessors (MPU) in the world, with overall semiconductor revenues near $50 billion in 2014 and MPUs comprising 80 percent of that revenue. While not as large as Intel, with $2 billion in 2014 revenues, Altera is the second-largest supplier of programmable logic devices (PLD) and system-on-chip (SoC) field programmable gate arrays (FPGAs).

The largest market for Intel’s MPU is computers, including portable PCs and tablets, desktop PCs, notebooks, servers and high-performance computing (HPC) platforms. In the last several years, demand has stagnated for PCs and other products in this category, and it’s IHS predicts that the tablet market is entering a saturation phase with slowing growth; however, Intel supplies a host of integrated chip solutions to many markets beyond computers, and it is in many of these markets that Intel has the most potential for continued growth.

Telecommunications infrastructure is perhaps one of the largest synergetic markets for Intel and Altera. Intel is already the leading supplier of high-performance wired and wireless telecommunications infrastructure processor solutions, and with an increasing market for internet-of-things (IoT) connected devices, these markets provide opportunity for the right solutions. Altera’s position as a strong supplier of broadband, networking and telecommunications solutions was likely a crucial consideration for Intel, when the company decided to enter into talks with Altera. There are a few small overlaps to consider, such as the Altera SoC FPGA with embedded ARM Cortex A processors; however, on the whole, Intel’s x86 microprocessors and applications processors would be very complementary to Altera’s broad base of programmable logic, especially for networking solutions. Intel microprocessors are optimized for high performance control, and Altera PLDs and FPGAs are flexible and can be easily configured to process huge parallel streams of packet data, as a coprocessor to the MPU, which could be a key strength of the merger.

There are other applications and markets where a high performance MPU and configurable logic are designed to work side by side: Industrial applications for military and aerospace, manufacturing and process control, automotive applications, security and surveillance, broadcast, and many more. Even in HPC, FPGAs will perform coprocessing functions. Whether it is offering complementary solutions, or combining intellectual property, in order to create new unique SoCs, the combined potential of Intel and Altera should be well poised to target a growing telecommunications market and IoT applications.

An Intel-Altera Merger Would Be the Second-Largest Industrial Semiconductor Company in the World
A potential Intel-Altera merger will generate almost $2 billion in industrial semiconductor revenues in 2014, which equates to nearly 5 percent of the overall global industrial semiconductor market. The merger of Intel-Altera would rank the company second, behind Texas Instruments, which is a leap from Intel’s previous rank of 4th and Altera’s previous rank of 29th.

The merger would achieve impressive industrial-electronics market share gains, especially in the following categories: manufacturing and process automation (ranked second globally), military and civil aerospace (also ranked second) and test and measurement (ranked fourth).

The Intel-Altera merger is complementary, given that each company essentially manufactures different types of semiconductors. The Intel-Altera merger would combine Intel’s leading position in industrial microprocessors (MPUs) with Altera’s second-ranked position in industrial programmable logic devices (PLDs).