The European Commission has cleared under the EU Merger Regulation the proposed acquisition of Altera by Intel, both US suppliers of electronic components.
The companies supply different types of semiconductors. Semiconductors are electronic components that can be found in virtually every electronic device today. The end-products that contain semiconductors range from base stations, mobile phones, computers, domestic appliances and cars, to medical equipment, identification systems, large-scale industry electronics and aerospace equipment.
Commissioner Margrethe Vestager, in charge of competition policy, said: "I am glad that we can approve this transaction, which shows that multibillion euro deals in complex industries can be cleared unconditionally after an initial investigation. Our decision demonstrates that relevant deals can be swiftly approved if they raise no competition concern".
Altera designs and supplies semiconductors known as programmable logic devices (“PLDs”). This product category includes both field programmable gate arrays (“FPGAs”) and complex programmable logic devices (“CPLDs”).
Intel designs, manufactures and supplies semiconductors known as microprocessors or central processing units ("CPUs").
The FPGAs produced by Altera can be used to accelerate certain repetitive computing functions of the CPUs produced by Intel such as the running of search algorithms (so-called "workload acceleration").
In addition, Intel offers so-called contract manufacturing services to other suppliers of semiconductors. These contracts are entered into between Intel and semiconductor suppliers that do not own manufacturing facilities.
The Commission's investigation
The Commission's investigation focussed on several semiconductor markets, where the activities of the companies are linked. In particular, the Commission investigated the vertical relationship between Intel's contract manufacturing services and Altera's activities in the supply of FPGAs and CPLDs. The Commission also investigated the potential anti-competitive effects arising from the strong position of Intel in the market for CPUs, in closely related markets.
Contract manufacturing services
The Commission's investigation found that Intel has a very limited position in the market for contract manufacturing services and that Altera's demand for such services is of limited importance as compared to the overall market demand. Moreover, several competitors are active at both upstream and downstream level.
The effects of Intel's strong position in the CPUs market in closely related markets
The Commission investigated whether the new entity could leverage Intel's strong position in the CPUs market in related markets. Both CPUs and FPGAs can be used for workload acceleration and integrated in data centre servers. The Commission investigated in particular whether the market for server workload acceleration in data centres would be affected by preventing other CPU and FPGA suppliers from competing in this market.
The Commission found that Intel would not be able to do so because Altera's competitors have a number of ways to connect their FPGAs to Intel CPUs and will not have to rely on Intel's technology to do so. Also, CPU suppliers competing with Intel would have a number of alternative FPGA suppliers after the takeover, such as Xilinx, Lattice Semiconductors and Achronix.
The Commission therefore concluded that the transaction would raise no competition concerns. The Commission cooperated closely with the US Federal Trade Commission during its investigation.
Companies and products
Intel Corporation designs and manufactures computing and communications components, such as microprocessors (also known as central processing units - CPUs), chipsets, motherboards and wireless and wired connectivity products, as well as platforms that incorporate these components. Intel also develops and sells software and services primarily focused on security and technology integration, and it recently began offering to third parties semiconductor contract manufacturing services, often referred to as foundry services.
Altera Corporation designs and sells a variety of semiconductor products, including programmable logic devices (PLDs), a product category that includes both field programmable gate arrays (FPGAs) and complex programmable logic devices (CPLDs). Those products are generally used to perform certain logic functions in electronic devices. Altera also produces highly integrated power devices, known as power system-on-chip devices; pre-defined design building blocks, known as intellectual property cores; and proprietary development software.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days (35 working days if commitments are offered) to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).