including Avago's announcement of its $37 billion acquisition of Broadcom Corporation.
Previous mergers of competitors also include NXP and Freescale, Cypress Semiconductor and Spansion, Lattice Semiconductor and Silicon Image, Qualcomm and RSE, Infineon and International Rectifier, and several others. While none of these companies directly compete with Intel in its largest market—CPUs—each of these mergers has had an impact on various integrated Intel markets where it has a presence.
The new semiconductor landscape:
Intel is the world's largest supplier of microprocessors (MPUs), with global semiconductor revenues approaching $50 billion in 2014, and MPUs comprising 80 percent of those revenues. While not as large as Intel, with $2 billion in revenue in 2014, Altera is the second-largest supplier of programmable logic devices (PLDs), systems-on-chips (SoCs), and FPGAs.
The largest markets for Intel's MPU solutions are CPUs for laptops and tablets, desktops, notebooks, servers, and high-performance computing (HPC) platforms. In recent years, demand for desktop PCs has stagnated, and the forecast for laptops has begun to decline. Much of this market sluggishness has been related to the introduction of more portable computing platforms, such as smartphones and tablets. IHS predicts that the tablet market is entering a saturation phase, with larger tablets experiencing a slowdown in growth. More relevant to the Altera acquisition, Intel provides a range of integrated-chip solutions for many markets beyond PCs, and it is in many of these markets that Intel has the greatest potential for continued growth.
Communications infrastructure and data center equipment comprise some of the largest synergistic markets for Intel and Altera. Intel is already the leading provider of high-performance wired and wireless telecommunications infrastructure, and—with a growing market for connected devices in the Internet of Things (IoT)—these markets offer further opportunity for the right solutions. Altera's position as a strong provider of broadband, networking, and telecommunications solutions was likely a crucial consideration for Intel when the company decided to acquire Altera.
Overall, Intel's x86 microprocessors and application processors would be highly complementary to Altera's broad base of programmable logic, especially for networking solutions. Intel microprocessors are optimized for high-performance control, and Altera's PLDs and FPGAs are flexible and can be easily configured to process huge parallel streams of data in packets as a coprocessor to the MPU, which could be a key strength of the acquisition. There are some minor overlaps to consider, such as Altera's FPGA system-on-chip (SoC) with embedded ARM Cortex A processors. Whether Intel continues to develop ARM-based solutions—a strategy they attempted and abandoned with XScale technologies—will be the kind of strategic decisions IHS will follow after the acquisition.
There are many applications and markets where a high-performance MPU and configurable logic are designed to work side-by-side: industrial, military, and aerospace applications; manufacturing and process control; automotive applications; security and surveillance; broadcasting; and many more. Even in HPC, FPGAs will perform co-processing functions. Whether offering complementary solutions or combining intellectual property to create unique new SoCs, the combined potential of Intel and Altera should be well-positioned to target a growing market for telecoms and IoT applications.
