In the wake of Broadcom failing to complete its takeover of Qualcomm, Intel is buying another chip company as it works on adjusting its own its business to fit the next generation of computing. Today, the company is announcing that it is acquiring eASIC, a fabless semiconductor company that makes customisable eASIC chips for use in wireless and cloud environments.
Financial terms of the deal are not being disclosed, as the price paid will not be material to Intel. eASIC has 120 employees, was founded in 1999 and has counted Khosla, Kleiner Perkins and Seagate among its investors, raising $149 million in total. It had been recapitalised in 2012 and so, in its last round, in November 2017, it was valued at around $110 million post-money, according to PitchBook, to give you a basic idea of a possible pricing ballpark.
eASIC’s technology and team will become a part of Intel’s Programmable Solutions Group (PSG), which Intel created after it acquired Altera in 2015 for $16.7 billion. Altera is a producer of FPGA chips, and the idea will be to complement those with eASIC’s technology, said Dan McNamara, corporate vice president and GM of the PSG division:
“We’re seeing the largest adoption of FPGA ever because of explosion of data and cloud services, and we think this will give us a lot of differentiation versus the likes of Xilinx,” which is one of Intel’s biggest competitors in FPGA. “We’ll be able to offer an end-to-end lifecycle that fits today’s changing workloads and infrastructure. No one on the marketplace will have this.” FPGA designs allow companies to quickly modify chip architectures, but they also require a lot of power. eASIC chips are more efficient, and they can be configured quickly from the outset (but cannot be modified).
The idea will be to offer eASIC as a transition to customers of Intel’s (and its competitors) who are already using FPGA and looking for a migration to the next thing. Applications that might need eASIC power could range from baseband and radio heads in 4G and 5G networks as well as applications based in the cloud that require heavy data computations, for example AI and video services, or financial risk analysis.
Intel and eASIC have actually been working together since 2015, when the latter company started to provide its flavor of ASIC designs to Intel for its Xeon chips. McNamara confirmed that Intel never invested in eASIC but it had considered the idea “multiple” times, including recently, instead of acquiring.
However, ultimately, owning the company outright made more sense for both sides, he said.
“Strategic partnerships are good but a combination much better,” he said, “because it brings the investment capability to the next node. When you are privately held and venture-backed you can be challenged by the investment needed for the next phase of innovation.” He also noted the “key talent” and IP — including multiple patents — that Intel will be getting in the deal.
eASIC itself has felt the pinch of being a smaller chip company: it tried to file to go public in 2015 to raise $75 million but cancelled its IPO at a time when the public markets were freezing up for listings of startups. Its move to Intel is part of what’s been a long-term consolidation in the chip industry, which gets more value out of economies of scale and selling end-to-end services to larger customers.
“The eASIC team has developed and deployed a truly innovative structured ASIC product. The marriage of the eASIC technology with IP and capabilities of Intel will allow the ubiquitous deployment of this proven structured ASIC product into a wide breadth of exciting end applications and markets. This is the perfect time to usher in this new chapter for eASIC,” said Ronnie Vasishta, president and CEO of eASIC, in a statement.
While many in the technology and communications industries believe that areas like the Internet of Things and 5G — and the infrastructure, hardware and related services powering them — will be huge businesses, today they remain relatively small. In Intel’s most recent quarterly earnings reported in April, PSG had revenues of $498 million — up 17 percent on a year ago but still the smallest division within the company’s data-centric business units. As a point of comparison, Intel’s PC-centric Client Computing Division made $8.2 billion. But CCG only grew three percent over a year ago, and that stagnation and slowdown in Intel’s business is one reason why it needs to buy companies like eASIC and focus on future technologies.
eASIC’s customers include a number of vendors that work in the communications industry, including Huawei, NEC, Violin Memory, Seagate, Microsoft, Flir Systems and Arm. After it added a longtime Apple vet to its board several years ago, it was speculated that Apple might also have a tie to the company, although that has never been confirmed.
The deal comes at a key time for Intel, which in addition to its over-reliance on revenues from its legacy business, has been facing delays on the production of 10nm chips, and then unexpectedly lost its CEO Brian Krzanich in June when he resigned over inappropriate behavior. But Robert Swan is in the role now on an interim basis, and McNamara says the company is going full-steam ahead on its previous strategy.
“The executive team is fully focused on the execution of our strategy and this is a good example of it,” he said.
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