Intel to make Altera unit into standalone business, seek IPO
INTEL plans to turn its programmable chip division into a standalone business and either sell shares to the public or seek an investor for it, part of chief executive officer Pat Gelsinger’s efforts to wring more value from the semiconductor company.
The division – called the Programmable Solutions Group, or PSG – will become an independent entity starting Jan 1, Intel said on Tuesday (Oct 3). The business, whose chips can be customised for different uses, was created out of the company’s acquisition of Altera in 2015.
Gelsinger, who took the helm in 2021, has been shaking up Intel and raising funds for a costly turnaround effort. The company paid more than US$14 billion for Altera in 2015, and spinning the business off again should help unlock some of that value. Investors applauded the move, sending the shares up almost 3 per cent in late trading on Tuesday.
“Over the next two to three years, Intel intends to conduct an IPO (initial public offering) for PSG and may explore opportunities with private investors to accelerate the business’s growth, with Intel retaining a majority stake,” the chipmaker said.
Programmable chips – also known as field programmable gate arrays, or FPGAs – can have their function changed or updated even after they’ve been installed in electronic devices. They’re used in communications hardware, data centre gear, and in the design and development of other chips. While their characteristics make them extremely flexible and powerful, they have traditionally been difficult to programme, making mass adoption difficult.
The move mirrors what Intel did with Mobileye Global, a maker of chips for self-driving cars. The company carved out the business and returned a portion of it to public markets last year.
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Gelsinger is seeking to restore Intel to the forefront of the chip industry after mistakes under his predecessors led to a loss of market share. Intel, based in Santa Clara, California, slid down the ranks of the biggest producers of semiconductors, ending decades of leadership.
After several years of shunning Intel stock, investors has become more optimistic about the turnaround. The shares have gained 35 per cent this year, outrunning a 33 per cent rally by the Philadelphia Stock Exchange Semiconductor Index.
Gelsinger’s comeback plan involves a spending spree on new factories. He’s committing billions of US dollars to facilities that will take years to come online – an audacious move at a time when Intel’s current product lineup is struggling. The company has lost ground to competitors and the main market for Intel’s processors, personal computers, has slumped back to pre-pandemic levels. Many owners of large data centres, meanwhile, have switched to AI-related gear built on Nvidia chips.
In its most recent quarter, Intel said the PSG unit posted record sales – without giving precise details. When it last reported sales for the business in 2019, Altera had an annual revenue of about US$1.99 billion. The total market for such chips will grow to US$11.5 billion in 2027 from US$8 billion in 2023, Intel said, citing third-party estimates.
The other major provider of such capabilities is Intel’s rival Advanced Micro Devices, which acquired Altera competitor Xilinx. The Intel spinoff will be managed by Sandra Rivera, who currently heads the chipmaker’s data centre unit. BLOOMBERG
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