The Altera business, which is Intel’s buy into field-programmable gate arrays (FPGAs), now is searching for billions for what reports claim to be a minority stake in the business—Intel’s most drastic change in its strategic approach. Intel bought Altera back in 2015 for $16.7 billion. While Altera had always been a compliant winner since its inception and continued to grow from where it stood, Intel was looking to divest some portion of the business to strengthen its financial position.
It is part of wider restructuring efforts by Intel, led by CEO Pat Gelsinger, aimed at streamlining activities and focusing on pressing areas such as AI and advanced chip manufacturing. Seeking external investment in Altera is thus the firm’s strategy to build cash cushions in the midst of financial deteriorations, among them delays in key projects including the $32 billion semiconductor plant in Germany.
Although Altera has been profitable, raking in about $2 billion in annual revenues, the moves by Intel to find a strategic investor signal broader industry trends that are involved with consolidation of resources and positioning for that next wave of technologies. In core markets such as telecommunications, automotive, and artificial intelligence, FPGAs will remain at the heart of the long-term strategy for Intel, but the company needs an investor who will keep it afloat while still having some level of control over the operations.
This is done against the background of rising competition from competition from AMD and Nvidia, who have aggressively made strides in semiconductor markets. The company now has enormous challenges reclaiming its former dominance; in fact, delayed production technology and losses in share in significant segments have been perturbing it for some time.
“Intel has been quietly seeking an investor in Altera, and it has hired financial advisers to help the way, according to those sources.”. It’s not clear what exactly Intel is looking for, but estimates suggest it could ask for billions in exchange for this minority stake, which would allow it to retain strategic influence over Altera’s operations while unlocking capital immediately—it also might foreshadow an eventual IPO, a move it has made for other units in recent years.
As Intel ventures in a very competitive landscape, letting go of parts of its non-core business like Altera may help the company reallocate resources into growth areas such as AI, 5G infrastructure, and its foundry business, which is where it seeks to become competitive with TSMC and Samsung. The semiconductor giant bases its hope on the hope that portfolio thinning and strategic partnership signings will ultimately make it emerge stronger and sharper.
The restructuring efforts of Intel are also well-timed in that the semiconductor industry is going through a sea change. Today, these companies are moving up-market towards high-margin, high-growth areas as the market becomes more integrated and globalized; for Intel, success will depend on putting its vision into action and to attract the right partnerships to ensure Altera’s future growth opportunities with access to much-needed capital.
