Intel to IPO the FPGA Group

Mobileye model part deux

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On 3rd October 2023, Intel Corporation announced that it is reorganizing the FPGA group (known as Programmable Solutions Group) into the financials as a separate business unit from Q1, for a view to a future partial IPO. This follows the same model as Mobileye, which Intel turned to IPO but retains a controlling stake. This is turning Intel more into a company that owns companies, but if that's what works for Intel long term, it'll make sense, especially now to unlock some of that value and cash it needs for scale-out.

For some history - the Programmable Solutions Group is formed from the old Altera acquisition in 2015, which was valued at $16.7b at the time. Intel used to have PSG as a separate unit in the financials from that point, then stopped in Q1 2022. They averaged $500m revenue per quarter, and was incredibly consistent. The last couple of Qs have been even better for PSG, making record revenues in the $500m-$700m+.

According to my numbers, that means PSG has generated just shy of $15b revenue for Intel since the acquisition. Not profit, revenue. If that's going to continue increasing as it has in the last few Q, there's value there.

One of the issues regarding Intel’s acquisition was to do with roadmaps. It has been believed that upon acquisition, Intel converted/forced all of Altera’s roadmap from being manufactured at TSMC to being manufactured on Intel’s 10nm process. As a result, due to the substantial delay in the 10nm process, all of the Altera future product ended up several years late, and ultimately there may have been some customers who pivoted to the competition. At this point, that product line we know is Intel’s Agilex, which over the last 12-18 months, has become a fully fleshed out product line, gaining some traction.

The Agilex family seems to have been picked up by those waiting for the Stratix updates - Intel is going after both customers it lost due to Agilex delays, but also new markets it seems. Since adopting PSG as part of the datacenter/AI group (DCAI), Intel admits it kinda took its eye off the ball in key traditional FPGA verticals to focus on the DCAI part of that business. That will change back with this news as well.

Intel also announced that as part of the reorganization, it will reintroduce PSG into the financials from Q1, so we'll get a more accurate view into those revenue and margins (I’m not sure at this point if they’ll go back and break out the business for the two years it didn’t give numbers). I have to imagine with a business like FPGA, Intel has insight into customer growth for the next couple of years to make IPO valuable to them. Also, if that IPO money is coming in 2-3 years, you have to wonder what Intel is planning to fund at that time. It probably also depends on the success of IDM 2.0 as to how much is put to separate public ownership. If IDM is going well, it might only be 2%, or at the other end, 49%. Intel has been clear that it wants to retain majority ownership. Intel has stated that while it will be majority owner and have a strong partnership, PSG in a post-IPO will not be limited to Intel-only process nodes. This means that if TSMC or Samsung or someone else offers a more cost-effective go-to-market strategy for the PSG business separately, they’re allowed to go down that route. This also follows the narrative from Intel CEO Pat Gelsinger that each business unit has to be able to stand on its own two feet, especially Foundry.

The new PSG company, with the newly appointed CEO Sandra Rivera at the helm (she has ran DCAI the last few years and helped bring Intel into the ML era), will have to have an official corporate name. Everyone's guessing it'll be named Altera. Does any other name make sense?

Link to Intel’s news: Intel Website

Alert: We’re also coming up soon to financial season. Intel has announced they’ll be presenting after close of market on October 26th.

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