Intel, the leading processor manufacturer, made an official announcement on the 4th stating that the Programmable Solutions Group (PSG) will undergo a division and operate autonomously. The plan is to take the division public within the next two to three years.
Transitioning Altera into a standalone business and subsequently conducting an IPO allows Intel to unlock significant shareholder value. By divesting a portion of Altera through the IPO, Intel can potentially realize a return on its initial investment, providing shareholders with an opportunity to capitalize on Altera’s growth potential and market value.
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What is Altera?
Altera Corporation is a semiconductor company that was founded in 1985 in San Jose, California, and was acquired by Intel in 2015. Altera specializes in field-programmable gate arrays (FPGAs), which are semiconductor devices that can be configured by a customer after manufacturing. This makes FPGAs ideal for a wide range of applications, including prototyping, embedded systems, and telecommunications.
Altera’s FPGAs find applications across diverse sectors:
- Aerospace and defense: Altera’s FPGAs power radar systems, navigation systems, and communication systems in aerospace and defense.
- Automotive: In the automotive industry, Altera’s FPGAs feature in advanced driver assistance systems (ADAS), infotainment systems, and engine management systems.
- Consumer electronics: Altera’s FPGAs are essential components in high-definition televisions, set-top boxes, and video game consoles.
- Data center: Altera’s FPGAs serve crucial roles in data centers, enhancing accelerators, networking equipment, and storage systems.
- Industrial: In the industrial sector, Altera’s FPGAs support factory automation, process control, and robotics, contributing to efficient operations.
Strategic Reevaluation and Market Dynamics:
Intel’s CEO appears to be steering a comprehensive reevaluation of the company’s acquisition strategies from the past few years. The move to split non-core design businesses suggests a departure from a one-size-fits-all approach, indicating a focus on streamlined and specialized operations.
We need to determine if Intel’s manufacturing burdened these divisions or if talent loss and complex post-acquisition rewards were factors.
Read More: 5 Reasons for Intel Decision to Spin-off Its PSG Unit
The TSMC Advantage:
According to former well-known analyst Lu Xing Zhi, Altera primarily relies on TSMC for its FPGA/PLD product manufacturing. Altera’s preference for advanced processes aligns with TSMC’s expertise in providing cutting-edge semiconductor fabrication. As a result, Altera’s potential increased reliance on TSMC could significantly benefit the Taiwanese semiconductor giant.
The increased collaboration might lead to a boost in orders for TSMC, reinforcing its position as a leader in semiconductor manufacturing and advancing the capabilities of FPGA/PLD products. The intricate dynamics between Intel’s strategic moves and the resultant implications on semiconductor foundries will be essential to monitor in the coming years. Understanding the precise allocation of manufacturing tasks between Intel and TSMC is crucial for a comprehensive analysis of the potential market impact. The bigger altera becomes, TSMC gets bigger order until Intel substitutes the order using their latest tech nodes.
Read More: TSMC on Track for $100 Billion Sales Milestone in 2025: Analyst
Lessons from AMD’s Experience:
The move to spin off FPGA/PLD business is reminiscent of AMD’s acquisition of Xilinx. AMD faced challenges due to high acquisition costs and had to amortize substantial intangible assets, impacting profitability over five years. This raises questions about how AMD’s CEO, Dr. Lisa Su, plans to handle Xilinx integration and the balance between flexibility and chip design integration for long-term success.
Intel decision to spin off the PSG division is a bold strategic move reflecting changes in the semiconductor industry. The implications will be closely monitored, especially regarding Intel’s relationship with semiconductor manufacturers and the broader strategies of industry leaders.
