Assignment 3

Srikar Datta Canchi

Key acquisitions in the semiconductor industry recently was of Altera which was acquired by
Intel in June, 2015. This changed Intels position in industry and made it undisputed leader in
the industry. This is because, industry was divided in different verticals, like, chip design,
designing software and FPGA implementation. Intel had chip design and designing software
teams. It covered many verticals across industries too. But as FPGA industry was in rise due
to its easy implementation devices, Intel wanted to enter FPGA race too, but It thought
acquiring a company is better than developing teams in its own. So, it bought Altera, which
was leader in FPGA industry. This acquisition costed Intel $16.7B, but seeing future, Intel
completed the deal.
Finding itself with excess fab capacity after the failure of the Ultrabook to gain market traction
and with PC sales declining, in 2013 Intel reached a foundry agreement to produce chips for
Altera using 14-nm process. General Manager of Intel's custom foundry division Sunit Rikhi
indicated that Intel would pursue further such deals in the future [1]. This made Intel seem
interested in Altera. In the end, intel followed one mantra that even if one of its verticals failed
to pump profits, other vertical succeeded it.
Intel expects 33% of all cloud service workloads to use FPGAs by 2020, creating a total
addressable market of about $37 billion. A similar strategy is being used by rivals IBM and
Advanced Micro Devices (AMD). The two have partnered with leading FPGA supplier Xilinx
for their server processors. Currently, Intels priority is to offer faster performing processors
that can handle the workload of Web services such as Google and Microsoft (MSFT).
Enhancing performance by shrinking the die size didnt serve the purpose. As an experiment,
these Web search companies started using accelerators such as FPGAs to boost processor speed
[2].
As we know all glitters are not gold, this deal seeming not sweet as it seems. Oppenheimer &
Co. analyst Rick Schafer weighed in on Intel on June 2 after the Altera acquisition
announcement, citing the deal as quite expensive. Reiterating a Perform rating on Intel, the
analyst noted, With PC and communication segment under pressure for the foreseeable future,
we believe INTCs synergy targets likely prove aggressive. He added, The deal is just
another of the recent semi mega-deals, indicative of a lack of organic growth in the segment
and the need for further consolidation [3].
Let us see how this deal works out. But I personally feel this deal will be successful as Im a
consumer of FPGA and with Intels presence in it, this segment of industry will have a hot race.
My Mid-term company, Synopsis, has research teams for FPGA and it is direct competitor to
Intel. So, this deal is a game changer for the industry.
References:
[1] https://en.wikipedia.org/wiki/Synopsys
[2] http://marketrealist.com/2015/12/intels-strategy-integrate-alteras-fpga-technology/
[3]http://www.investopedia.com/stock-analysis/060315/intel-corporation-and-alteracorporation-merger-analysis-intc-altr.aspx