So it seems Intel is seeking several billion dollars for a minority stake in Altera, its FPGA chip business. While this is outside of the usual AI articles, it certainly is interesting so let’s talk about it.
Altera is is a manufacturer of programmable logic devices (PLDs) acquired by Intel in 2015. Right now, 2024, Altera is focused on Field-Programmable Gate Array technology and SOC FPGAs. In February 2024 Altera was reestablished as an independent company with the name Altera… which makes sense.
A representative for Intel declined to comment. The sale process represents an abrupt change from Intel’s prior commentary on Altera. As recently last month, CEO Pat Gelsinger said that Intel’s leadership considered the business to be a core part of Intel’s future.
Intel has previously said it could look to monetize Altera business through an IPO, possibly as soon as 2026. But the idea of taking strategic or private equity investment would be a marked acceleration of those plans.
Okay so it makes FPGAs, it’s independent now, and Intel wants to sell part of its stake that it still holds in the company for several billion dollars. That’s what’s happening.
Altera was once seen as a path forward for Intel and Intel paid $16.7 billion for that path forward. And now they want to sell part of it off to raise cash for their turnaround plan. I’m not sure of just how integrated Altera really was and obviously I’m not privy to the specific ideas management had for Altera but lets just go ahead and ask AI about Altera…
Intel acquired Altera in 2015 for approximately $16.7 billion, a strategic move aimed at strengthening its position in the data center and Internet of Things (IoT) markets. Altera was a leader in field-programmable gate arrays (FPGAs), which are specialized chips that can be reconfigured after manufacturing, making them versatile for various applications, including data processing, network acceleration, and machine learning. Here are some of the core reasons Intel pursued this acquisition:
- Data Center Expansion: Intel was looking to broaden its offerings for data centers, a rapidly growing sector driven by cloud computing, big data, and AI. FPGAs can accelerate data center performance by handling specialized tasks, reducing workload on CPUs. Integrating Altera’s FPGA technology allowed Intel to offer more customizable solutions that enhanced computing power, particularly for server and high-performance computing needs.
- IoT and Emerging Markets: The flexibility of FPGAs makes them valuable for IoT, automotive, telecommunications, and industrial applications, which often require adaptable hardware. This acquisition allowed Intel to address the demands of emerging markets with hardware that could be reprogrammed to meet specific needs.
- Competitive Advantage: As the market shifted towards heterogeneous computing, Intel wanted to differentiate itself from rivals like AMD and NVIDIA. By integrating FPGAs with its own CPUs, Intel aimed to deliver specialized processors with a unique blend of processing capabilities, allowing for high-performance customization in fields like artificial intelligence and 5G infrastructure.
- Diversification: With Altera’s FPGA technology, Intel diversified its business beyond traditional CPUs, expanding into more versatile processing solutions. This acquisition broadened Intel’s portfolio, helping it adapt to the evolving technology landscape, where a mix of processors is often required to meet complex demands.
The acquisition positioned Intel as a leading player in providing customizable hardware, enabling it to address emerging trends in AI, machine learning, and data-intensive computing environments.
So that’s that. Altera added new products and helped Intel engage in the fad of the Internet of Things. But hey, that’s the good, now what about the bad? Back to AI!
Altera, while successful in the FPGA market, faced several challenges that made it a strategic acquisition target for Intel. Here are some of the core business limitations and failings that affected Altera:
- Dependence on a Niche Market: Altera was heavily reliant on the FPGA market, which, while growing, was still relatively niche compared to mainstream processor markets. This dependence limited Altera’s growth potential and made it vulnerable to competition and market shifts.
- Lagging Technology Development: Altera struggled to keep up with Xilinx, its main competitor, in technology innovation and speed to market. Xilinx was quicker to adopt advanced manufacturing processes and introduce high-performance, cost-efficient products. Altera’s lag led to market share losses and made it harder to compete, especially in high-demand segments like data centers and 5G.
- Limited Scale and Resources: As a mid-sized company, Altera lacked the scale and resources to match the investments in R&D made by larger tech giants. This limitation restricted its ability to expand its product offerings, address new verticals effectively, and keep up with the costly R&D required for competitive FPGA development.
- High Development Costs: FPGA development is expensive, and Altera faced pressure on profit margins due to high manufacturing and development costs. Maintaining advanced semiconductor manufacturing processes is capital-intensive, and without the economies of scale that larger companies like Intel enjoyed, Altera had limited financial flexibility.
- Slower Diversification into New Markets: Although Altera did enter markets beyond telecom and industrial applications, such as data centers and networking, it was slower than competitors in diversifying. This slower entry left Altera dependent on a few core industries and unable to fully capitalize on new markets like artificial intelligence and cloud computing, which were growing rapidly.
- Difficulty in Building an Ecosystem: FPGA technology requires a robust ecosystem of software, tools, and support to maximize its adaptability. Altera struggled to build as comprehensive an ecosystem as some other semiconductor firms, which impacted its ability to attract new customers, particularly in markets where ease of use and integration were critical.
Intel’s acquisition offered Altera access to greater resources, advanced manufacturing capabilities, and entry into broader markets, addressing these limitations and enhancing its competitive positioning.
That does not sound good for Altera or anyone who invests in them. It sounds like Altera really shouldn’t be independent at all and should be fully integrated with Intel because ultimately Intel is the only one who can supply the resources necessary to keep Altera in business. Altera either needs to be sold off completely or integrated, a minority stake is simply going to suck.
You know, Intel could raise $50 billion in new cash and it still would not be enough to bring its designs up to snuff or make their manufacturing truly competitive with TSMC. The cash would be like a Band-Aid as fabs continue to get delayed, chips continue to disappoint, and revenue continues to fall, all making Intel’s turnaround plans unsupportable. And Intel is definitely going to run out of things to sell and nothing is apparently as sacred as they claim.
Intel has simply lost so much knowledge after over a decade of layoffs and voluntary retirements, there’s just no way it can maintain… Anything. It’s going to have to pare down SKUs like nobody’s business. That will lose some revenue and other chip companies will be able to easily take the business Intel can no longer support. Not to mention the blow to consumer / business confidence. Sorry Google, Amazon, and Microsoft… No more special SKUs for you. And even if you still get your SKU, you’re going to have less and worse support… Because everyone who knows anything has been fired!
Everyone who could have righted the ship, helped keep Intel going, are gone. They’re at AMD, Broadcom, Qualcomm, TSMC, etc. Intel’s brain drain is now permanent. Their benefits are being reduced, their pay is not competitive, and employees are working under constant threat of losing their jobs. Money won’t fix any of this. Intel would have to cut the internal politicking and actually address systemic problems. It has shown zero willingness to gain control over its own management.
Just watch, Habana Labs and Mobileye will be shopped around. Gaudi is just a value option anyway, do they really care if someone else takes a minority stake? Again nothing is sacred and I’m sure a number of Israeli tech companies wouldn’t mind a strategic relationship. AI is the hot industry right now after all, every country wants its own AI tech sector. And is Mobileye really that important at this stage of Intel’s life?
The point is that while Intel needs a lot of money, it needs to end its politicking, and get its engineers back. Only when technical managers get the support and control they need instead of being met with indifference by upper management and fellows will Intel be on the right track again.
Ultimately Intel needs a swift kick in the butt and despite claiming it has had one… it’s pretty clear they have not.