Intel buys semiconductor chip maker Altera for $16.7bn

The world’s largest silicon chip making company, Intel, has announced plans to acquire Altera Corporation.

Altera, a competing chip maker to Intel, has been bought for a total price of $16.7bn, making it the largest ever acquisition in Intel’s history.

The company has agreed to buy Altera at a cost of $54 per share, significantly above the market price.

Altera is a manufacturer of small and specialised chipsets for devices like mobile phones, smart-devices and databases. Sales of these kinds of chips are predicted to have huge growth potential as they are used in the rapidly expanding sector known as the Internet of Things (IoT).

“With this acquisition, we will harness the power of Moore’s Law to make the next generation of solutions not just better, but able to do more. Whether to enable new growth in the network, large cloud data centres or IoT segments, our customers expect better performance at lower costs,” said Brian Krzanich, CEO of Intel.

Intel reportedly made the decision to acquire the company in an effort to hedge against falling revenues from its more multi-purpose computer chipsets. In the fourth quarter of 2014 alone, the company’s overall revenues dropped by 3%, reflecting the continuing decline of the PC market.

Altera is pleased with the current deal, and looks set to continue most of its operations as usual under new management.

“We believe that as part of Intel we will be able to develop innovative FPGAs and system-on-chips for our customers in all market segments. Together, we expect to drive meaningful value for our customers, partners and employees around the world,” said John Daane, CEO of Altera.

Consolidation within the semiconductor industry

While this is Intel’s largest ever acquisition, it comes in the wake of even larger deals made by competitors.

Just last week, Singapore-based Avago Technologies agreed to buy Broadcom Corp for a massive $37bn.

Before that, in March this year, Dutch company NXP Semiconductors acquired Freescale Semiconductor for $11.8bn.

This consolidation within the industry is likely driven by the changing dynamics in the semiconductor market, away from large desktop devices, towards smaller digitally enabled systems.