Intel has bought Altera for $16.7bn in cash after months of negotiation, as the electronics giant looks to expand further into the internet of things sector.
The deal is a high price for a company with annual revenues of $1.9bn in 2014, but the combination will enable “new classes of products”, according to Intel.
Altera was founded in 1983 and focuses on programmable logic devices, and its products are generally used in the automotive, communications aerospace and medical device industries.
The deal comes less than a week after Avago Technologies agreed to buy Broadcom Corp for $37bn, marking the most expensive deal ever for the chipmaking sector.
And earlier in the year, NXP Semiconductors’ said it would spend $12bn to buy Freescale Semiconductor.
The two firms already work together, with Intel manufacturing some of the chips designed by Altera, while Altera has used some of Intel’s technology in the design of its chips.
While most of Intel’s chips are used in servers, Altera’s chips are used in phone networks and cars – an area Intel has been looking to expand into.
“Given our close partnership, we’ve seen first hand the many benefits of our relationship with Intel,” said Altera chief executive and chairman John Danne.
Intel chief executive Brian Krzanich said said the acquisition would enable it to “do more”.
“Intel’s growth strategy is to expand our core assets into profitable, complementary market segments,” he added.
The boards of both firms have already agreed the deal, and Intel said it expected the acquisition to be completed within six to nine months.
Intel’s deal for Altera has been approved by the boards of both companies and comes one week after rivals Broadcom and Avago agreed a $37bn merger deal. Altera’s main rival in FPGAs is Xilinx, as well as Lattice Semiconductor, and Microsemi. It also produces IP cores based on ARM.