Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Intel has agreed to sell its Altera chip unit to private equity group Silver Lake as the semiconductor pioneer works to raise cash and catch up with rivals such as Nvidia in the manufacture of chips for use in artificial intelligence.
Silver Lake will buy a 51 per cent stake in Altera, which makes programmable chips that tech and industrial companies can tailor to their AI needs, at a valuation of $8.75bn, Intel said on Monday.
Intel, which for months has been in talks to sell the unit as part of a broader plan to divest non-core assets, will continue to own a 49 per cent stake.
Earlier this year, Intel entered exclusive negotiations with Silver Lake after deciding the private equity group had a workable plan for a turnaround of Altera that would increase its value and set the stage for an eventual public listing of the business.
Ken Hao, Silver Lake’s chair, led the buyout group’s deal and is considered one of the private equity industry’s most knowledgeable investors in semiconductors. Two decades ago, he helped create the predecessor to what is now chip group Broadcom by carving out a semiconductor business from Hewlett-Packard.
Silver Lake has in recent years focused on large takeovers, including extricating businesses owned by technology conglomerates. In March 2023 it struck a deal to buy software group Qualtrics from German conglomerate SAP for $12.5bn. That deal, like its majority purchase of Altera, was negotiated as broader financial markets were roiled with volatility.
“This is the quintessential Silver Lake investment,” Hao told the Financial Times in an interview. “It involves a high degree of complexity with an important industrial partner and there is a lot of trust in our ability to add value.”
Intel acquired Altera for about $17bn in 2015. The chip company has previously told shareholders a stake sale would boost the chipmaker’s value and set the stage for a full exit.
Silver Lake is betting Altera’s programmable chips, which are mostly made by Intel, will benefit from rising usage from defence, healthcare and industrial companies adopting AI technologies for their products.
As part of the asset sale, Altera will replace its current chief Sandra Rivera with Raghib Hussain, a co-founder of semiconductor company Cavium.
Intel is working quickly to shed non-core assets and bulk up its finances to invest billions of dollars in modern chip fabrication plants in the US and Europe. It announced the spin-off of its venture capital arm, Intel Capital, in January.
“Today’s announcement reflects our commitment to sharpening our focus, lowering our expense structure and strengthening our balance sheet,” said Intel chief executive Lip-Bu Tan, who took over the role last month.
The asset sale is part of a broader planned restructuring that comes as President Donald Trump looks at ways to revive the fortunes of Intel, one of the architects of modern-day Silicon Valley.
Intel is in talks with the administration on a partnership with industry leader Taiwan Semiconductor Manufacturing Company, the FT previously reported.
The company began a big cost-cutting effort last summer, slashing thousands of jobs and halting manufacturing projects in Europe as its chip “foundry” business ran at a multibillion-dollar loss.
In December, Intel’s board ousted chief executive Pat Gelsinger amid concerns the chipmaker was not moving quickly enough to catch up to rivals such as Nvidia and AMD. Veteran investor and former Cadence chief executive Tan took over the role last month.
The company’s financial troubles have alarmed Washington because Intel is the only US chipmaker that can manufacture high-end chips.
Additional reporting by Michael Acton in San Francisco