Datacentre key as Intel’s $US16.7 billion acquisition gets green light

“The datacentre server market is Intel’s profit engine, and continued performance improvement is paramount to future business.”

Intel has reached a definitive agreement on the much-rumoured deal to acquire Altera for $US16.7 billion, continuing the spate of semiconductor consolidation.

According to Daryl Inniss, research analyst, Ovum, Intel aims to use the acquisition to integrate programmable chips and processors, creating new classes of products, and to improve its data centre and Internet of Things offerings.

Intel’s CEO Brian Krzanich highlighted chip performance improvements as an important element in the company’s decision to acquire Altera.

“Interestingly,” Inniss adds, “he invoked Moore’s Law as an Intel driving force: to continue to deliver higher performance at lower power and cost.

“Some believe Moore’s Law is nearing its end because decreasing manufacturing nodes - that is, smaller feature sizes used to fabricate chips - substantially increase cost and power consumption.

“Nonetheless, integrating Altera’s programmable logic devices with Intel’s processors can deliver a new class of products, improve system performance, and drive development of some next-generation devices.”

Inniss believes the data centre server market is Intel’s profit engine, and continued performance improvement is paramount to future business.

“Intel believes it can improve server performance by a factor of two through chip integration,” he adds.

“Applications such as facial recognition, encryption, and Big Data compression would benefit. But the integration is a two-step process: first co-packaging, to be available in late 2016, and then on-die integrated solutions.”

For Inniss, the Internet of Things is a high-growth market that is still in its nascent stage.

“Intel is selective here and is targeting devices that require a high level of logic and processing,” he adds.

“It highlighted advanced driving assist systems and plans to compete with application-specific integrated circuits, the incumbent technology for this application.”

Going forward, Intel estimates it can expand Altera’s core business by 7 percent annually.

“This will undoubtedly be a challenge, as Altera’s 2014 revenue was the same as in 2010,” Inniss adds.

“Altera does help Intel enter new markets, and Altera’s revenues did increase 12 percent in 2014 versus 2013. Nonetheless Intel must develop sustained growth to post a good return for its investment.”

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