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Intel’s Programmable Solutions Segment Posts Double-Digit Growth

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Intel’s programmable solutions group

In the previous part of the series, we saw that Intel’s (INTC) three growth drivers—data center, IoT (Internet of Things), and memory—are facing slowing revenue growth and declining profits. However, the company is making efforts to boost growth in these areas. One major effort the company took was the acquisition of FPGA (field programmable gate array) maker Altera in 2015.

Intel aims to integrate Altera’s FPGA chips in its server processors, IoT processors, and NAND chips to boost performance. Meanwhile, it would also sell FPGA as a standalone product and continue to compete with the dominant player Xilinx (XLNX). As a result, Altera has been integrated into Intel as a separate segment PSG (Programmable Solutions Group) from January 2016.

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PSG’s fiscal 2Q16 performance

In fiscal 2Q16, PSG revenue grew 12% YoY (year-over-year) to $465 million. The YoY comparison is made with Altera’s fiscal 2Q15 revenue. On a sequential basis, revenue grew 29.5%. The revenue was driven by strong demand in communication, infrastructure, and the channel.

PSG’s operating loss narrowed from $200 million in fiscal 1Q16 to $62 million in fiscal 2Q16. The operating expenses include a non-cash charge of $160 million for inventory adjustments. If we add back this charge, PSG reported an operating profit of $100 million in fiscal 2Q16.

Xilinx is a tough competition for Altera

While Intel was busy integrating Altera, Xilinx moved fast and transitioned to TSMC’s (TSM) 16nm (nanometer) node. Altera, on the other hand, is scheduled to ship samples of 14nm Stratix 10 in 2016 with production ramp up taking place sometime in 2017. This put Xilinx one year ahead of Altera in terms of technology.

Moreover, Xilinx signed partnership agreements with IBM (IBM) and Qualcomm (QCOM) to integrate its FPGAs in the latter’s server chips, replicating what Intel plans to do with Altera.

Xilinx expects 2016 to be a good year for the industry, which means Intel’s PSG revenues would also grow. Next, we’ll look at Intel’s other two supplementary segments—security and new technology.

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