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Intel: Semi Industry Will Consolidate, We Are a Willing Buyer

Intel
(Image credit: Intel)

As the semiconductor industry heads towards another inflection point, Intel, with its deep pockets, is letting other companies know that it is a willing buyer. Only time will tell what the company will buy, though.

As the semiconductor industry becomes more capital intensive it should enter another round of consolidation, according to Pat Gelsinger, chief executive of Intel. Chip design and production are becoming more expensive, which opens merger & acquisition doors for large companies like Intel. Speaking to the Wall Street Journal this week, Pat Gelsinger said that the semiconductor giant is willing to buy other players as the industry faces major transformations. The head of Intel made the comments after its alleged acquisition target GlobalFoundries reportedly started procedures to go public, scuttling any potential deal.  

Intel's CEO did not mention GlobalFoundries specifically in the interview, but he did say that the company was willing to buy smaller players in the semiconductor field when asked about the U.S.-based foundry.  

"There will be consolidation in the industry," Gelsinger said. "That trend will continue, and I expect that we are going to be a consolidator. […] M&A takes willing buyers and willing sellers. I am a willing buyer."  

The number of companies that can produce chips using leading-edge fabrication technologies is declining. Just 15 years ago there were a number of integrated design manufacturers (IDMs) and foundries that could roll out leading-edge nodes around the same time with Intel and challenge the blue giant. Now the number of IDMs and foundries have shrunk either as a result of M&A or because some companies ceased making chips. Today, only three companies in the world can produce chips using leading-edge processes and some cannot move beyond 14nm/12nm nodes, whereas others have not even entered the FinFET era. 

Like other big companies, Intel is always in an M&A mode as the company is permanently trying to acquire new IP and talent, expand its product lineup, and/or enter new markets. Intel has made dozens of acquisitions over the course of the most recent 25 years.  

Strategic acquisitions like the purchase of Altera in 2014 enabled Intel to enter the FPGA market; takeovers of Mobileye, Movidius, and Nervana made Intel a serious competitor in the fields of AI and autonomous vehicles; Chips and Technologies transaction was Intel's entrance into the graphics field; other deals strengthened Intel's existing product lines with new technologies and/or IP. What Intel has not done (at least not in recent history) was buying other makers of semiconductors as the company has always had enough production capacity.  

While Pat Gelsinger says that M&As are not at the top of his agenda as Intel's CEO, industry consolidation is something inevitable and Intel will have to participate in it. A takeover of GlobalFoundries makes great sense for Intel as a part of its IDM 2.0 strategy (even despite the fact that it will be hard to complete due to antimonopoly regulators). Furthermore, the ongoing economic processes might make some other companies a low-hanging fruit, or a strategic target that is not to be missed. 

  • Diabl0
    Many big words and promises from Intel lately. That is all.
    Reply
  • InvalidError
    The semiconductor industry is already dangerously over-consolidated IMO with only three major players having an effective oligopoly on bleeding-edge fabs. That doesn't leave many options to go to when you need something made and anything happens with any one of them. Lack of meaningful competition at the high-end is part of the reason why we have the current chip shortage that started pre-covid, covid merely provided the final shove that sent the whole industry tumbling toward chip shortage hell with an coincident supply chain disruptions and demand spike.

    Healthy competition and supply chain robustness requires independent supply diversity.
    Reply
  • bigdragon
    Intel's statements here are why I think mergers and acquisitions need to be banned in certain industries or once companies reach a certain size. Intel needs more competition, not less. I cannot think of an example where consolidation improved an industry for anyone outside the financial world.
    Reply
  • InvalidError
    bigdragon said:
    I cannot think of an example where consolidation improved an industry for anyone outside the financial world.
    Intel acquiring Altera to integrate FPGA and high-speed fabric tech into CPUs and other chips makes sense: the two product categories don't really compete with each other and are logical complements for things like high-speed networking, HPC, deep-learning, etc. and AMD ended up acquiring Xilinx for fundamentally identical reasons.

    The next logical acquisition with chiplet/tile based CPUs and GPUs would be a DRAM manufacutrer/fab to internally source custom embedded RAM.
    Reply
  • Kamen Rider Blade
    InvalidError said:
    The semiconductor industry is already dangerously over-consolidated IMO with only three major players having an effective oligopoly on bleeding-edge fabs. That doesn't leave many options to go to when you need something made and anything happens with any one of them. Lack of meaningful competition at the high-end is part of the reason why we have the current chip shortage that started pre-covid, covid merely provided the final shove that sent the whole industry tumbling toward chip shortage hell with an coincident supply chain disruptions and demand spike.

    Healthy competition and supply chain robustness requires independent supply diversity.
    We need a simple rule, if an industry only has "Single Digits" worth of major players, then Mergers & Acquisitions are BANNED.

    You want to buy off a company, defeat them in the market and bankrupt your competition. Then buy off the assets of their corpse.

    Until then, we should bar "ANY & ALL" 'Mergers & Acquisitions' while there are single digit competitors in any field.
    Reply