Over the last two decades, Intel has established itself as the leading processor maker, acquiring smaller manufacturers while allowing a few suppliers of alternative architectures to remain afloat. Only five years ago, the goal of Intel seemed clear: remain as dominant as ever by increasing their presence in the networking space with their Atom and Xeon CPUs. But the PC and server chip made a disruptive news in 2015 when they announced their $16.7-billion acquisition of Altera, a manufacturer of field programmable gate arrays.
The rumors started back in 2013 after Altera teamed up with Intel. Many industry analysts said it was only a matter of time before Intel decides to acquire Altera, further solidifying their position in the chip space. Perhaps surprisingly, Intel didn’t pull the trigger earlier, back when Altera would have been much cheaper. The market capitalization of Altera before the blockbuster deal was wandering in $9 billion to $11.5 billion range. After the deal, the value of Altera rose to $13.4 billion.
If you think about it, it’s surprising that such a company holds so much value, especially when you consider that it has only generated $472.7 million in net income before the deal. But the acquisition only highlights the fact that Intel has seen something in Altera chips, an X-factor that is set to disrupt the entire industry.
Intel gears up for all the changes that are set to happen in the world of datacenters, wired and wireless networks, and client devices. Their current line of chips including the Atom and Xeon processors aren’t equipped to address these changes, which prompts them to turn to Altera for solutions.
According to Ron Pasek, chief financial officer or Altera, FPGAs have the advantage in the datacenter, particularly for hardware acceleration. They edge out both GPUs and CPUs thanks to their very low power. Pasek also shared how important it is for manufacturers, developers, and consumers to understand what their chips are all about because the vast opportunities they bring to the table can have a major impact across all kinds of devices.
Vice President and General Manager of the cloud platforms group at Intel, Jason Waxman, explains that Intel believes one-third of the data center market will use Altera chips by 2020. That is only five years before the acquisition, which gives the company a serious edge over other manufacturers to be at the forefront of the trend.
Altera’s field programmable gate arrays are a type of chip that can be reprogrammed even after production. It’s worth noting that FPGAs aren’t entirely new. The industry has been using FPGAs for quite a while, though they’ve been limited to specialty scenarios for logistics and financial reasons. The size and price of FPGAs are the two biggest reasons why they haven’t been used in common servers and workstations.
All these problems are being addressed by Altera, and their progress has paid dividends, as evidenced by the Intel acquisition. Some of their biggest clients include Microsoft which use FPGAs to run their search algorithms and Apple’s Siri which benefits immensely from the lower power chips that make voice-recognition-driven services more efficient. FPGAs are also believed to have the capacity to run neural networks, with many machine-learning customers already developing software optimized for the new chips.
Intel isn’t alone in their support for FPGAs. The whole industry is preparing for this huge shift, especially in a world where customization seems to be the number one thing consumers look for. Chip companies both big and small need something more agile, a product that can be altered to fit the unique needs of the market. It’s high time to deviate from the production of chips that take several months to produce just to turn an idea into something physical.
Small startups are jumping in on the trend as well. Some companies seek to create faster FPGAs. Others focus on the software side, developing code which companies can run on the most optimal hardware without constantly tweaking that code.
As for Intel, the first signs of the marriage with Altera is starting to take shape. Today, there are chips that combine the powers of Intel and Altera. These chips can be seen in servers, robots, cars, and automation equipment. Intel limits the sale of these chips to the leading-edge cloud customers.
Although the chips have yet to be used widely, the future looks bright for FPGAs. They are designed to have multi-chip modules consisting of Intel’s server chips alongside Altera FPGAs which run separately. Mass production of these new chips have already started, and it’s only a matter of time before more manufacturers and developers start enjoying their many benefits.
Intel now enjoys an easier time manufacturing custom chips thanks to Altera’s reprogrammable FPGAs. The company also tries to improve power efficiency and performance at the same time by integrating the intellectual property of Altera inside their own silicon. Although there’s no release date for these chips, their server chips with Altera FPGAs are already set to be released to more consumers.
The acquisition of Altera is also set to increase the revenue of Intel. It has also helped them generate more revenue in other areas, a much-needed boost as the PC market continues to decline. In 2015, 40 percent of Intel’s revenue came from the datacenter, memory, and Internet of Things departments. With their Altera FPGA chips, this share is likely to grow in the years to come.
Ron Pasek emphasizes that as the cost of manufacturing fixed function devices continues to rise, the benefits of using programmable logic becomes even more attractive. The tipping point only occurred ten years ago when programmable logic devices were at 40 nanometers and move to three and four nodes. With future developments underway, it shouldn’t come as a surprise when Altera chips become the go-to option for all data centers and other client devices that you can buy electronic components. Intel has done a remarkable job embracing new technologies to stay ahead of the competition while offering more efficient products to their target market.