Altera Corporation History

Address:

2610 Orchard Parkway
San Jose, California 95134
U.S.A.

Telephone: (408) 894-7000
Fax: (408) 828-0463

Public Company
Incorporated: 1984
Employees: 923
Sales: $401.6 million (1995)
Stock Exchanges: NASDAQ
SICs:: 3674 Semiconductors & Related Devices

Company Perspectives:

Altera Corporation, founded in 1983, is a worldwide leader in high-performance, high-density programmable logic devices and associated computer aided engineering (CAE) logic development tools. Programmable logic devices are semiconductor chips that offer on-site programmability to customers. The chips are programmed with tools that run on personal computers or engineering workstations. User benefits include ease of use, lower risk, and fast time-to-market. The Company offers the broadest line of CMOS programmable logic devices that address high-speed, high density, and lower power applications. Altera products service a broad range of market areas, including telecommunications, data communications, computers, and industrial applications.

Company History:

Founded in 1983, Altera Corporation is a leading maker of high-density programmable logic devices (PLDs), based on metal-oxide semiconductor technology (CMOS). These logic chips are circuits used in a variety of devices to produce electrical signals. The specific technology associated with programmable logic chips requires less power than other chips, and is more efficient than custom logic chips, reducing development time and time-to-market. Altera's products are used by makers of communications, computer, and industrial equipment. In addition to PLDs, Altera also creates software to help customers program standard integrated circuits.

Rodney Smith--a British applications engineer and then Fairchild Semiconductor manager--founded Altera in 1983 with $500,000 in seed money. Joining Smith as founding members were three others with considerable semiconductor industry experience: Robert Hartmann of Signetics Corp., James Sansbury of Hewlett-Packard Co., and Paul Newhagen of Fairchild Semiconductor Corp. The name "Altera" was introduced in 1984, standing for the word "alterable." That year, the company introduced its first generation of chips.

Altera's sales strategy, from the beginning, has been to offer a range of standard programmable parts for the IBM PC AT with inexpensive development tools, allowing customers to self-design and program custom logic circuits that meet their specific needs. This strategy was formulated to meet the industry need created by the delay associated with custom chips, due to the high percentage of silicon designs that require revision toward the end of the design cycle. With erasable, reprogrammable chips, revision can proceed immediately and repeatedly until all design bugs have been eliminated. A relationship with Intel Corp. began in August 1984, when the companies agreed to swap certain designs. In 1985, Intel began to market a group of Altera's logic microchips.

1988: Altera Goes Public

In 1988, Altera went public, and calendar sales for the year reached $38 million. The company also purchased a minority interest in Cypress Semiconductor's wafer fabrication facility (fab), and introduced a new generation of chips. The company launched the industry's first erasable programmable logic device (EPLD), which provided a complete interface to the PS⁄2's Micro Channel Bus. This new device allowed vendors to save time and board space. New EPLD programming software--usable on IBM PC AT and compatible computers&mdashcompanied the device. Later that year, Altera came forth with another innovation, MAX (multiple-array matrix), a new architecture for ultra-violet-erasable programmable logic devices that doubled the timing and quadrupled the density of previous AND⁄OR EPLD arrays. The new devices presented up to 5,000 gates, system speeds of up to 40 MHz, and over 200,000 unique programmable elements. Because the structure of the new PLDs differed so much from previous PLD devices, which used the AND⁄OR architecture, Altera offered a tool-kit addition to quicken the learning curve for designers. The package, which was workable on IBM Personal Computer ATs and compatibles, contained a graphics-design editor, a design-processing engine, a timing simulator, and programming software modules, all controlled by a supervisor task-control module.

Altera's key competitor, Xilinx, introduced similar technology in 1988. No longer was Altera alone in its market niche of programmable logic. Altera's relationship with Xilinx would be a heated rivalry over the coming years.

The Semiconductor Industry During the 1980s

The U.S. semiconductor market at this time was dominated by five large companies: Advanced Micro Devices, Inc., Intel Corp., Motorola, Inc., National Semiconductor Corp., and Texas Instruments, Inc. However, companies such as Altera and Xilinx were seen as formidable "upstarts." Altera consistently ranked among the top five public semiconductor companies in the categories of net profits and gross margins (with margins reaching an impressive 60 percent). The company had been able to carve a niche due to specialization, focusing on top-notch design of PLDs and spending its research and design budget on new product development. In 1989, sales rose 55 percent to $59 million, with $11 million net.

Looking primarily to Japan, Altera stepped up its overseas sales techniques in 1989. Lacking a Japanese office or distributor, the company hired two distributors with unique entrepreneurial approaches to aggressively promote Altera's product line to the Japanese market. The majority of Japanese sales were handled by JMC, a 9-year-old company led by Haruki Kamiyama. Kamiyama, the youngest member of a Japanese trade delegation that visited the U.S. around this time, was an entrepreneur committed to selling U.S. technology in Japan. Altera's other Japanese distributor, Paltek, focused primarily on market development, largely through the efforts of one representative--a Japanese-speaking American whose previous career stints included teaching English, working as a circus clown, and acting in Japanese soap operas. Trained in physics, this representative was able to use language skills and technical know-how to design products and customer services, and to effectively communicate with Japanese markets. Because almost all semiconductor business in Japan goes through distributors (as opposed to the United States, where 75 percent of business is done directly with customers), these two distributors were key to Altera's 1989 growth in Japanese business. By 1990, 15 percent of the company's business was due to sales in Japan.

Sales in 1990 were $78.3 million, a 33 percent increase, with net income of $13.4 million. In June of that year, Altera made its first cash investment in a fab. The company invested $7.4 million in Cypress Semiconductor's Round Rock, Texas facility, receiving in exchange guaranteed IC production capability, a portion of the fab's CMOS capacity, access to next-generation products whenever they come on-line, and the right to purchase up to 20 percent of the fab over time. Cypress received the rights to Altera's next generation of MAX products (Altera was already producing Cypress's line of programmable logic devices, SRAMs, and other products). Altera President Rodney Smith told Computer Design that the production purchasing option with Cypress would save Altera approximately $30 million in construction costs over sharing production with another vendor. Although Altera had never before entered into this type of relationship with a fab, the company already had exchange and foundry agreements with Intel, Texas Instruments, and Sharp. These arrangements enabled the company to continue producing state-of-the-art chips with no production facilities.

Altera's partners also benefit from these relationships. For example, Texas Instruments used Altera's erasable programmable logic chip to design a compact, high-resolution video camera that was flexible enough to be used under different lighting systems, and for uses ranging from closed-circuit security to industrial inspection and monitoring systems. The chip proved a low-cost, high-yield option.

In 1991, another new chip generation was introduced. The Max 7000 family of ultraviolet-erasable programmable logic devices provided between 4,000 and 40,000 gates, increasing up to five times the capacity of previous high-density programmable chips. Sales surpassed the $100 million mark, reaching $106.9 million with net income of $17.8 million.

Challenges During the 1990s

The year 1992 included the development of another new chip generation, as well as a series of challenges for Altera. The slowdown of Japanese business caused by overseas economic conditions, as well as competitive pricing by rival companies, led Altera to drop its chip prices. A drop in sales brought the company down to $101.5 million with net income of only $11.5 million. The crisis was short-lived, however; sales in Japan increased by 87 percent in 1993. At this time, Altera's Japanese sales accounted for about 20 percent of business, with NEC serving as the company's largest customer, and Matsushita, Sony, Mitsubishi Electric, and Toshiba among the company's biggest clients. Altera's Japanese-bound chips primarily serviced two types of products: telecommunications equipment, including digital telephone exchanges and cellular telephone base stations; and professional audio visual equipment such as portable camcorders.

Also in 1992, a class action lawsuit was filed against Altera and some current and former officers and directors. The suit alleged violations of federal security laws, and was settled out of court in July 1994.

Overall 1993 revenues surged to $140.3 million, with an 84 percent increase in net income to $21.2 million. That year, the company also invented a system to protect delicate leads from ruin during burn-in and test processes, as well as after customer purchase. The device also reduced time-to-market by facilitating programming and prototyping. The company also developed two compatible sockets, one for use on PC boards and the other for programming EPLDs in carriers.

As new products aged, manufacturing costs went down and Altera was able to drop prices on its products over time. In 1993, such a discount was passed on to Altera's customers, with 30 percent price cuts on the volume-driven FLEX 8000 family of PLDs. At the end of 1993, Altera and Xilinx each introduced Pentium-compatible products, seeking to migrate programmable array logic (PAL) markets toward programmable logic device solutions. Altera's product targeted the high-density macrocell portion of the PLD business, while Xilinx's was aimed at the low-density segment. Altera also released the MAX 7000E family of complex PLDs, which featured architectural improvements of circuit performance of complex PLDs, as well as enhanced routability and usability features. At this time, Altera was the number three volume manufacturer of programmable CMOS logic devices, with a 15 percent market share. Ahead of Altera was Advanced Micro Devices, and in the number one position was competitor Xilinx, Inc., with a 24 percent share.

For Altera, 1994 was a year characterized by new product innovations and an ongoing effort to beat the competition with presence in new market segments. Seeking to gain a lead, Altera increased its market share to 20 percent in 1994 with the purchase of Intel's PLD business, for about $50 million in cash and stock. In addition, the Intel acquisition delivered new customers and 15 new products to Altera. Further, Altera established itself as a programmable logic vendor supporting Microsoft's Windows NT operating system by releasing MAX PLUS II version 4.0, representing a shift to the fully 32-bit software environment. MAX PLUS II incorporates VHDL very-high-speed integrated circuit hardware description language synthesis. This VHDL standard was promoted when 11 companies joined to form Analog VHDL International (AVI), an industry group that helped develop the IEEE 1076.1 standard (the analog extension of VHDL).

Altera Battles Xilinx

Altera also made a first step into the reconfigurable hardware products market in 1994. The company introduced a high-capacity programmable logic add-in board for PCs--the Reconfigurable Interconnect Peripheral Processor (RIPP 10). This ISA bus board supports up to 100,000 gates of reconfigurable logic, allowing up to eight Altera FLEX 8188 devices. The company also put forth the industry's highest density single-die device, the 16,000-gate EPF51500 PLD, which was immediately followed by Xilinx's introduction of a 25,000-gate device. In April, the company introduced the largest capacity PLD on the market and the first off-the-shelf PLD/MCM--the 50,000-gate PLD multichip module PEF8050M, targeted at the ASIC prototyping market, as well as imaging applications and reconfigurable hardware products (RHPs).

Altera and Xilinx continued to race each other for introduction of industry-leading products. In June 1994, both companies came forth with products moving their devices to unprecedented 5 nanosecond pin-to-pin delay time range. Xilinx targeted new markets with faster speed devices, while Altera's EPM7032 was aimed at applications requiring logic integration in systems with next-generation microprocessors. In July, Altera made its first overtures to the military market, offering four PLDs as military standard compliant. Although defense spending was decreasing, a new emphasis on upgrading existing programs made design engineers receptive to off-the-shelf solutions to integrate system features into smaller board space, while keeping design costs low. As add-in card designers began to look toward PCI-compliant PLDs, Xilinx and Altera both claimed to introduce the industry's first programmable logic devices that were fully compliant with the Peripheral Component Interconnect (PCI) specification.

In August 1994, competitor Advanced Micro Devices filed a suit against Altera. AMD charged Altera with violating six of AMD's programmable logic device technology patents. Altera followed with a countersuit, stating that AMD infringed upon at least two perhaps as many as six of Altera's PLD patents. The case would be decided against AMD in 1996. Another suit had been initiated against Altera by Xilinx in June 1993, also regarding patent infringement. In the winter of 1994, Judge Aguilar indicated plans to appoint a special master with the technical background necessary to sort out the companies' claims regarding master-slave configurations and interconnect patents. Altera filed a separate suit against Xilinx and the case continued to boomerang with multiple countersuits probing the company patents over the next couple of years. In 1994, Xilinx continued to lead the CMOS PLD market with a 29 percent share, while Altera retained 18 percent, followed by AMD with 16 percent.

Another innovation in the MAX family, the MAX 9000 architecture, was introduced in October 1994. The 9000 family more than doubled the density of currently available EPLDs, reaching system speeds of up to 80Mhz, and increasing cell utilization. Sales in 1994 neared $200,000, with almost 50 percent of revenues derived from foreign sales. Data communications and telecom customers comprised about 44 percent of sales. The $58 million increase in sales over 1993 represented the largest one-year increase in Altera's history. International semiconductor shipments reached $100 billion, along with sales of CMOS PLDs (the newly preferred method for implementing logic design).

In 1995, Altera came out with its MAX 9000 family of erasable PLDs. After a 30 percent drop in the price of the MAX 7000 family of erasable PLDs, the company's sales burst to more than twice the previous year's, reaching an incredible $401.6 million with $86.9 million in net income. By this time, Altera had 881 employees, as compared to 370 just five years earlier. Also in 1995, Altera and Xilinx announced that their chips could service the lucrative $3 billion DSP semiconductor market, competing with dedicated and general-purpose DSP chips. Altera introduced Flexible Logic Element matrix (FLEX) 10000, another programmable logic architecture which sent the market over the 100,000 gate barrier. The device was created with what Altera called a "sea of programmable bits" architecture, using the embedded/standard logic block combination.

The company put a new face on an old model in 1995, augmenting the three-year-old MAX 7000 line with the MAX 7000S family. This new line of CPLDs was based on a new 0.5 micron, triple-layer metal process developed with Altera's foundry partners. The MAX 7000, since its introduction in 1992 when it generated $5 million in sales, had grown to an $80 million sales product by 1994, making it Altera's most successful CPLD line. Also in 1995, while industry reports bemoaned longer lead times in the field programmable gate array (FPGA) market, Altera announced that it had reduced lead times for two devices--the 12,000-gate EPF81188A and 16,000-gate EPF81500A--from 20 weeks to 10 weeks.

Altera and Xilinx once again were neck-and-neck in their announcements of industry landmark products, with Xilinx's introduction of the industry's fastest FPGA and Altera's announcement of the highest gate count FPGA shipped in volume.

Partnerships in the Mid-1990s

Joining six intellectual property providers, Altera launched the Altera Megafunctions Partners Program (AMPP) in August 1995. Megafunctions are hardware description language (HDL)-based designs of system-level functions that may be compiled in MAX-PLUS II software and targeted to Altera's device architectures. This new alliance was charged with the development of synthesizable function blocks for Altera's PLDs. The five other partners in AMPP--Eureka Technology, CAST Inc., RAVIcad, Silicon Engineering, and Advacel--were provided with access to Altera's 21,000 design seats.

In another partnership development, Altera entered into a U.S. joint venture wafer fabrication site, to be located in Camas, Washington, with foundry partner Taiwan Semiconductor Manufacturing Corp. (TSMC). The agreement caused TSMC to displace Sharp as Altera's biggest wafer supplier. Later, the companies were joined by Analog Devices and Integrated Silicon Solutions, Inc., forming a joint venture company named WaferTech.

The industry's largest capacity chip was introduced by Altera in 1996. The 10K100 has 10 million transistors. Also that year, the company unveiled MegaCore and OpenCore, software programs which allowed engineers to evaluate MegaCore functions prior to licensing them. A major industry slowdown in computers led to downsizing, and Altera was no exception. An oversupply of inventory and reduction of chip demand led to revenue decline during the year's first quarter, and the company cut its workforce by 11 percent in June, eliminating about 100 positions. At the same time, the company authorized the repurchase of up to two million company shares.

Forging a new union, Altera joined Synopsis in a five-year agreement to jointly develop and market designer tools to support complex programmable logic devices (CPLDs). The partnership targeted two market segments: second wave designers changing to HDL-based designs for CPLDs and FPGAs, and gate array designers migrating to programmable logic for designs with gate densities of 100,000 or less.

The end of 1996 gave signs of a semiconductor industry downturn, similar to those of the 1980s and early 1990s. Several semiconductor manufacturers, including Altera, closed for the Christmas holidays, asking employees to take vacation days, borrow vacation days from the next year, and/or take time off without pay.

Predictions for Future Growth

In 1983, Altera brought a new idea to the market, introducing the reprogrammable logic device. In the 1990s, that innovation is a billion-dollar industry, bustling with competition. Altera's niche is, and always has been, its emphasis on new-product development, through an investment in research and development over production. A market research firm, Dataquest, estimated in 1994 that the overall semiconductor market would grow at a compound annual growth rate of 15 percent a year through 1998. And, according to Money, analysts believed in 1996 that CPLD sales would grow 25 percent over the next five years. By 1996, the CPLD market had reached $1.6 billion, and Altera was well-protected from competition, due to the complexity of its chips--fueled by its long-time emphasis on research and development over production&mdash well as its close customer relationships. It seems likely that if the industry downturn reverses itself and the market grows more lucrative and technologically advanced Altera will be at the forefront.

Altera Corporation History

Company Perspectives:

Company History:

Further Reading:

Read more company histories