CELEX: 32015M7688
Language: en
Date: 2015-10-14 00:00:00
Title: Commission Decision of 14/10/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7688 - INTEL / ALTERA) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 14.10.2015
C(2015) 7157 final

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|                                                                       |To the notifying party:                                                |

Dear Sir/Madam,

Subject:    Case M.7688 - Intel/ Altera
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement  on  the  European  Economic
Area[2]

    0. On 9 September 2015, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council  Regulation  (EC)
       No 139/2004 (1) by which Intel Corporation (“Intel” or the “Notifying Party”, USA) acquires within the meaning of Article 3(1)(b)  of  the
       Merger Regulation control of Altera Corporation (“Altera”, USA) by way of purchase of shares (the “proposed  transaction”).[3]  Intel  and
       Altera together are referred to hereinafter as the “Parties”.

THE PARTIES

    0. Intel 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.  Intel  recently  began
       offering to third parties semiconductor contract manufacturing, often referred to as foundry services.

    0. Altera 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”); 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.

THE CONCENTRATION

    0. Pursuant to the Agreement and Plan of Merger entered into between the Parties  on  31  May  2015,  a  wholly  owned  subsidiary  of  Intel
       established for the purpose of the proposed transaction, will merge with and into Altera, with Altera to be the  surviving  entity.  As  a
       result of the proposed transaction, Intel will therefore exercise sole control over Altera.

    0. The proposed transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

EU DIMENSION

    0. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5  000  million  (Intel:  EUR  42  055  million;
       Altera: EUR 1 489 million). Each of them has an EU-wide turnover in excess of EUR 250 million (Intel: EUR […]  million;  Altera:  EUR  […]
       million), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State.

    0. The proposed transaction therefore has an EU dimension under Article 1(2) of the Merger Regulation.

RELEVANT MARKETS

    0. The proposed transaction concerns the design and sale of semiconductor devices, in which both Parties are active.

    0. Semiconductors are materials, such as silicon,  which  can  act  as  an  insulator,  but  are  also  capable  of  conducting  electricity.
       Semiconductors are at the heart of devices such as diodes, transistors and other electronic components, and  can  be  found  in  virtually
       every electronic device today. The end-products that contain semiconductor devices range from base  stations,  mobile  phones,  computers,
       domestic appliances and cars to medical equipment, identification systems,  large-scale  industry  electronics  and  aerospace  equipment.
       Semiconductor devices are rarely bought as end-products by consumers. They are mainly bought by equipment manufacturers in  virtually  all
       sectors within the electronic equipment industry.

    0. The proposed transaction does not give rise to any  horizontal  relationships,  as  Intel  and  Altera's  semiconductor  devices  are  not
       substitutable with one another.

    0. However, given that many semiconductor suppliers (including those supplying FPGAs and  CPLDs)  rely  on  external  semiconductor  contract
       manufacturers, the proposed transaction gives rise to a vertical relationship between the contract manufacture of semiconductors (in which
       Intel is active) and the supply of FPGAs and CPLDs (in which Altera is active).

    0. Finally, CPUs and FPGAs can be used in some cases in the same applications. In most of the cases, the  functions  they  perform  in  those
       applications are distinct and not interchangeable. However, for some applications, such as, in particular, servers in data centres,  where
       FPGAs can be interconnected with CPUs to accelerate certain tasks normally performed by  a  CPU  ("so-called  workload  acceleration"),[4]
       those functions are complementary. Therefore, the proposed transaction also gives rise to a conglomerate relationship between  the  supply
       of CPUs (in which Intel is active) and the supply of FPGAs (in which Altera is active). The main application in which both CPUs and  FPGAs
       can be used, and the most relevant one for  the  purposes  of  the  competitive  assessment  of  the  proposed  transaction,  is  workload
       acceleration in servers.[5]

    0. In light of the above, the Commission will examine the relevant market  definition  in  relation  to  the  following  product  areas:  (i)
       manufacturing of CPUs; (ii) supply of CPLDs; (iii) supply of FPGAs; and (iv) contract manufacturing of semiconductors.

1 Microprocessors (CPUs)

1 Product market definition

    0. Microprocessors or CPUs operate as the “brains” of computer  systems.  Typical  microprocessor  operations  include  adding,  subtracting,
       comparing two numbers, and fetching numbers from memory, as well as transferring information to and from other system resources, typically
       via data transfer paths called “buses”.

    0. Intel’s CPUs are based on x86 architecture[6] and designed for notebooks, netbooks, desktops,  servers,  workstations,  storage  products,
       embedded applications (e.g. industrial machinery), communications products (e.g. routers and switches), consumer electronics and handhelds
       devices.

    0. In its 2009 Intel antitrust decision,[7] the Commission found that CPUs based on the x86 architecture ("x86 CPUs") and CPUs not  based  on
       the x86 architecture constituted two distinct product markets. In the same decision, the Commission left open whether the relevant product
       market for x86 CPUs included x86 CPUs for all computers (desktops, laptops and servers), or whether a further distinction should  be  made
       between (i) x86 CPUs for desktops, (ii) x86 CPUs for laptops, and (iii) x86 CPUs for servers. The Commission took the  same  view  in  its
       Intel/McAfee decision.[8]

1 The Notifying Party’s view

    0. The Notifying Party submits that the Commission's market definition in its Intel and Intel/McAfee decisions relied to a substantial extent
       on the fact that Microsoft’s Windows operating system only supported CPUs based on the x86 architecture and on network  effects  resulting
       from Windows compatibility with Intel's x86 CPUs. However, according to the Notifying Party, architecture-based competition has  increased
       since the Commission's decisions and, today, x86 CPUs also face competition from CPUs based  on  other  architectures,  such  as  the  ARM
       architecture[9]  ("ARM-based CPUs"). In particular, ARM-based CPUs are also used in servers, which is  the  only  computer  segment  where
       Intel is present in which FPGAs may be used. The Notifying Party points out that Microsoft is reportedly developing a Windows version  for
       the ARM architecture.

    0. The Notifying Party believes that the relevant product market definition for CPUs can be left open, because the proposed transaction  does
       not give rise to competition concerns, regardless of whether the relevant market covers all CPUs (irrespective of  the  architecture  used
       and the device into which they are incorporated) or only a segment thereof (e.g. x86 CPUs, CPUs for a particular device or x86 CPUs for  a
       particular device).

2 The results of the market investigation and the Commission’s assessment

    0. As regards a possible segmentation of CPUs according to the type of the device into which they are incorporated (i.e.  servers,  desktops,
       notebooks, wired and wireless communications), most of the respondents to the market investigation carried out in the  present  case  took
       the view that segmentation on this basis could indeed be justified.[10]

    0. In particular, most customers and competitors indicated that CPUs for the different types of devices are differentiated in terms of price,
       functionality, performance, power, architecture extensions and flexibility.[11] Market participants explained that the importance attached
       to CPUs varies according to the type of device at issue. For example, CPUs for notebooks prioritize energy efficiency to meet  computation
       requirements within battery life  or  data  centre  power  budgets,  whereas  CPUs  for  desktops  prioritize  reliability,  availability,
       serviceability and manageability capabilities to meet the requirements. Moreover, most of the respondents stated that CPUs for the  server
       space differ from other CPUs since they have functionalities that include a different number of CPU cores, larger caches  and  differences
       in terms of frequencies, memory, input-output ("IO") expandability, footprints and power.

    0. As regards a possible segmentation of CPUs according to the architecture used, the  market  investigation  expressed  mixed  views  as  to
       whether ARM-based CPUs, Power[12] architecture-based CPUs, MIPS[13] architecture-based CPUs, SPARC[14] architecture-based CPUs and General-
       purpose computing on graphics processing units ("GP-GPU") might become an alternative choice for x86 CPUs in the future for  certain  type
       of devices.[15] On the one hand, as regards wired, wireless, consumer electronics and industrial devices, respondents submitted that there
       is a certain degree of substitutability between different architectures.[16]  On  the  other  hand,  as  regards  servers,  notebooks  and
       desktops, respondents indicated that substitutability of the x86 architecture with  other  architectures  is  limited.  This  is  due,  in
       particular, to the fact that software for servers, desktops and notebooks generally requires the presence of at  least  one  x86  CPU.[17]
       Moreover, this seems to be supported by the fact that, in 2014, the volume of x86 CPUs sold accounted for the large majority of CPUs  for,
       respectively, servers, notebooks[18] and desktops.[19]

    0. In sum, the results of the market investigation suggest that it may be appropriate to segment the market for CPUs according  the  type  of
       the device into which they are incorporated (e.g. servers, desktops, laptops). The  market  investigation  expressed  mixed  views  as  to
       whether a segmentation according to the architecture used (e.g. the x86 architecture) would be appropriate for all types of  end  devices.
       However, for the purposes of the present decision, the precise product market definition can be left open,  as  the  proposed  transaction
       does not raise serious doubts as to its compatibility with the internal market as regards CPUs even  on  the  narrowest  possible  product
       market definition, namely x86 CPUs per type of device in which the CPU is installed (x86 CPUs for servers, x86 CPUs for desktops  and  x86
       CPUs for laptops).

2 Geographic market definition

    0. In its 2009 Intel antitrust decision,[20] the Commission indicated that the geographic dimension of the markets for  x86  CPUs  should  be
       considered worldwide. This conclusion was supported by the fact that the main suppliers compete globally, CPU architectures are  the  same
       across the world, the main customers, in particular the Original Equipment Manufacturers ("OEMs"), operate on a worldwide basis,  and  the
       cost of shipping CPUs around the world is low compared to their cost of manufacture. The Commission took the same view in its Intel/McAfee
       decision.[21]

    0. The market investigation confirms the Notifying Party's point of view that  the  relevant  geographic  market  for  x86  CPUs  are  indeed
       worldwide. This is true regardless of how the product market is defined. In particular, respondents confirmed that cost of shipping is low
       compared to the cost of manufacture, the products offered are based on similar architecture, the operators compete globally and  the  main
       customers operate on a global basis.[22]

    0. The Commission therefore concludes that the relevant market for CPUs (and possible segments thereof) is worldwide in scope.

2 Programmable logic devices (PLDs), including complex programmable logic devices (CPLDs) and field programmable gate arrays (FPGAs)

1 Product market definition

    0. Programmable logic devices (PLDs) are standard, off-the-shelf parts that offer customers a wide range of logic capacity, features,  speed,
       and voltage characteristics. These devices can be configured at any time to perform any  number  of  functions.  With  programmable  logic
       devices, designers use inexpensive software tools to quickly develop, simulate, and test their designs. Then,  a  design  can  be  quickly
       programmed into a device, and immediately tested in a live circuit.

    0. The term "PLDs" designates a product category that includes both field programmable gate arrays (“FPGAs”) and complex  programmable  logic
       devices (“CPLDs”).

    0. FPGAs are digital semiconductor devices that can be configured by customers (such as cloud service providers) after fabrication to perform
       desired logic and processing functions.[23] For certain computing tasks, specialised  programmable  hardware  (such  as  FPGAs)  may  have
       performance advantages over software running on a general purpose CPU (such as x86 CPUs).

    0. CPLDs are integrated circuits, the contents of which may be configured by customers. CPLDs are used primarily as “glue logic” to interface
       with other integrated circuits in a system. In addition, CPLDs are programmed electrically and maintain their configuration  when  powered
       off.

    0. Third-party industry reports, such as those prepared by Gartner, refer to PLDs as a whole and do not provide separate  figures  for  FPGAs
       and CPLDs.

    0. The following sections examine whether a distinction should be drawn between FPGAs and CPLDs for market definition purposes and the  scope
       of the relevant product markets.

1 The Notifying Party’s view

    0. The Notifying Party submits that, although CPLDs are similar to FPGAs since both types of products are  configurable  by  customers,  they
       also differ from each other in several aspects. In particular, according to the Notifying Party, CPLDs and FPGAs are  based  on  different
       architectural features and are used in different applications. First, CPLDs support more limited logic functions than FPGAs, as CPLDs only
       support an elementary processing function in a  digital  circuit.  Second,  CPLDs  use  non-volatile  memory,  while  FPGAs  use  volatile
       memory.[24] Third, FPGAs are generally much larger in size than CPLDs. FPGAs may contain hundreds of  thousands  of  logic  elements  (the
       smallest configurable unit of an FPGA), while CPLDs typically have less than 2,000. In addition, since FPGAs are typically used  for  more
       complex applications, prices for FPGAs are generally significantly higher than prices for CPLDs. Finally, since FPGA designs are far  more
       complex than CPLD designs, a CPLD supplier could not switch to designing FPGAs in the short term without incurring significant development
       costs or risks.

    0. As regards specifically FPGAs, the Notifying Party submits that, traditionally, device or system manufacturers have relied upon  so-called
       Application-specific integrated circuits ("ASICs")[25] or Application-specific standard products ("ASSPs")[26] as an alternative to  FPGAs
       to handle workloads that benefit from the use of dedicated hardware. According to the Notifying Party, device or system manufacturers rely
       on FPGAs in particular for low-volume products in respect of which the cost of developing an ASIC or an  ASSP  would  be  prohibitive.  In
       addition to entailing cost savings, FPGAs also offer a time-to-market advantage because they can be configured in less time than  required
       to design an ASIC or an ASSP. The Notifying Party submits that there are several main differences between PLDs  (including  FPGAs),  ASICs
       and ASSPs, as summarised in the table below.

                                      Table 1: Main characteristic differences between PLDs, ASICs and ASSPs

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                                                          Source: Altera Form 10-K 2015

    0. The Notifying Party also argues that the proposed transaction is unlikely to have a material impact on ASIC  and  ASSP  vendors.  Although
       there is a trend towards an increased use of FPGAs as compared to ASICs and ASSPs, this trend is independent of the proposed transaction.

    0. The Notifying Party further submits that FPGAs can be segmented by performance  characteristics  into  high-end,  mid-range  and  low-cost
       devices, depending on their features, capacity and performance. High-end FPGAs are developed for high performance purposes. Low-cost FPGAs
       are developed for low cost, low complexity and low power consumption per chip. Mid-range FPGAs provide a solution between  the  above  two
       and are developed as a balance between cost and performance.

    0. The different performance characteristics are also related to the manufacturing process used. While high-end FPGAs are manufactured  using
       advanced manufacturing processes (and therefore typically have greater performance and capacity), there is a tendency to manufacture  low-
       cost FPGAs using older manufacturing processes.[27] In any event, according to the Notifying Party, it is not necessary to define the FPGA
       market more narrowly based on the above segments.

    0. As described in recital (10), the main application for which FPGAs can be used in conjunction with an x86 CPU is workload acceleration  in
       servers. With specific regard to this application,  the  Notifying  Party  states  that  it  is  technically  more  efficient  to  perform
       computational workload on hardware instead of software but that, due to the higher cost of hardware, the workload  performed  on  hardware
       would have to be repetitive and run on a large number of platforms in order for it to be economically efficient to invest in hardware.

    0. Recently, cloud service providers ("CSPs") started to test the use of FPGAs  for  workload  acceleration  in  servers  to  accelerate  the
       performance of certain algorithms (such as for instance algorithms of search engines) on server platforms. In order to do  so,  FPGAs  are
       installed on an add-in board and are connected to the CPU in the server through the so-called Peripheral  component  interconnect  express
       ("PCIe").[28] An illustration of how CPU and FPGA interact is provided below as Figure 1.

                                       Figure 1: FPGA/CPU interaction for workload acceleration in servers

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                                                             Source: Notifying Party

    0. According to the Notifying Party, workload acceleration in servers is expected to be the main application for a combination of  FPGAs  and
       CPUs. The Notifying Party submits that Intel plans to develop integrated CPU/FPGA products which will bring substantial benefits  both  in
       terms of price and performance. However, according to the Notifying Party, this does not justify defining a separate market for FPGAs  for
       workload acceleration. Workload acceleration rather relates to a function that FPGAs can perform in an area where CPUs and FPGAs are  used
       as complementary products.

2 The results of the market investigation and the Commission's assessment

    0. Most of the customers and competitors who replied to the market investigation agreed that FPGAs and  CPLDs  are  not  interchangeable,[29]
       essentially because of their different functionalities and characteristics (with FPGAs offering higher performance), different  categories
       of users targeted and significantly different architectures. In particular, CPLDs have lower computational capabilities and  speed.  CPLDs
       are also more complex and offer a lower degree of configurability to customers. Only two customers  consider  that  CPLDs  and  FPGAs  are
       interchangeable to a certain degree, but they also acknowledge that CPLDs would provide a lower quality solution.[30]

    0. In light of the results of the market investigation and for the purposes of this decision, the Commission concludes that CPLDs  constitute
       a stand-alone product market separate from the product market for FPGAs.

    0. As regards FPGAs, the definition of the relevant market raises two additional issues, namely: (1) whether products that have traditionally
       been used as alternatives to FPGAs (that is, ASICs and ASSPs) should be considered to be part of the same market as FPGAs; and (2) whether
       further segmentations should be made between different types of FPGAs. These issues will be addressed in turn below.

    0. With respect to the substitutability between FPGAs, ASICs and ASSPs, respondents to the market investigation  expressed  mixed  views.[31]
       While most of the respondents agreed with the Notifying party's submission that FPGAs could be considered  an  alternative  to  ASICs  and
       ASSPs for low-volume products, they also acknowledged key differences between those products. First, FPGAs are characterized by  a  higher
       degree of customer configurability. FPGA customers have the ability to customize the functionality of the FPGA to meet their  needs  using
       advanced high performance software rather than the time consuming and cost intensive design process needed to create a semiconductor  from
       beginning to end. Second, FPGAs usually involve less time-to-market, lower fixed costs and  higher  variable  costs.  For  companies  with
       sufficient financial and technical resources and higher volume requirements, ASICs and ASSPs generally exhibit a  significant  performance
       advantage compared to FPGAs. Finally, some customers who replied to the market investigation acknowledged that the use of FPGAs  in  place
       of ASICs and ASSPs may increase in the future if the cost of developing ASICs and ASSPs becomes prohibitive.[32]

    0. Overall, from a demand-side perspective, it appears that FPGAs, ASICs and  ASSPs  target  different  customer  segments  as  they  address
       different customer preferences in terms of price, performance, configurability and time to market. From a supply-side  perspective,  there
       appears to be high barriers to entry into the FPGA market due to the significant number of patents needed and the time and cost to develop
       tools and IP required in the manufacturing process. These elements indicate that FPGAs should be considered separately from both ASICs and
       ASSPs for the purposes of defining the relevant product market.

    0. With respect to different types of FPGAs, the following possible segmentations within the market for FPGAs  are  considered  below:  (i) a
       segmentation on the basis of performance characteristics (i.e., between high-end, mid-range and low-cost devices; (ii) a  segmentation  on
       the basis of the type of device into which FPGAs are installed (i.e., between  desktops,  laptops  and  servers);  and,  (iii) within  the
       segment for FPGAs for servers, a further segmentation on the basis of the intended use of the FPGAs.

    0. As regards a possible segmentation of FPGAs on  the  basis  of  performance  characteristics,  most  of  the  respondents  to  the  market
       investigation took the view that FPGAs could indeed be further segmented on this basis into three groups, namely high-end,  mid-range  and
       low-cost FPGAs.[33] In the view of some respondents, it is widely accepted in the industry that different  customer  applications  require
       different capabilities within the FPGA roadmap and customers decide which FPGA to use based on their own use model. According  to  another
       respondent, high-end FPGAs are programmable to complete tasks that low-cost FPGAs are unable to perform. This  difference  in  performance
       levels also translates into different prices. The price of low-cost FPGAs is expected not to exceed $50, the price of mid-range  FPGAs  is
       estimated to be around $200 and that of high-end FPGAs is expected to range from $1 000 to over $6 000.[34]

    0. The segmentation of FPGA by performance characteristics is also reflected in the different process nodes used. Respondents to  the  market
       investigation confirmed that smaller process nodes are generally used for more complex and higher cost products. In  particular,  high-end
       FPGAs are manufactured using process nodes below 20 nm, mid-range FPGAs are manufactured based on process nodes of between 20 and  40  nm,
       while low-cost FPGAs are manufactured at over 40 nm nodes.[35]

    0. As regards a possible segmentation of FPGAs according to the type of devices into which they are incorporated (i.e., desktops, laptops  or
       servers), the market investigation provided mixed results. Almost half of  the  respondents  stated  that  they  do  not  have  sufficient
       knowledge on this point. Only a small majority of respondents submitted that such segmentation would be  appropriate,  though  limited  to
       specific devices only. In the server space, where Intel plans to combine FPGAs and CPUs, Xilinx, Altera’s  largest  competitor,  considers
       that any of its different FPGA products can be used for this purpose. Customers' choice of which FPGA to use is not driven by the type  of
       devices into which FPGAs have to be incorporated, but rather by the performance required for the customers' particular application.[36]

    0. As regards a possible further segmentation of FPGAs for servers according to their intended use, the majority of respondents to the market
       investigation considered that FPGAs for servers should  not  be  distinguished  according  to  their  intended  use,  i.e.  (i) computing;
       (ii) networking; and (iii) storage.[37] Such distinction would not be appropriate because FPGAs are generic,  programmable  logic  devices
       that can serve all three purposes. Nevertheless, some respondents, submitted that FPGAs intended for  computing,  networking  and  storage
       have different engineering specifications, performance power and price requirements and should therefore be considered separately.[38]

    0. Within computing, a particular intended use is workload acceleration, where FPGAs are beginning to be used alongside microprocessors as co-
       processors or accelerators in some CSPs’ data centres. In this regard, most of the respondents submitted that all kinds of  FPGAs  can  be
       used for the purpose of workload acceleration in  servers  and  a  segmentation  on  the  basis  of  performance  characteristics  is  not
       required.[39] However, one respondent explained that the choice of a specific FPGA depends on the specific  function  it  is  required  to
       accelerate. As such, even if, in principle, it would be possible to use all FPGAs to perform workload  acceleration,  in  practice,  if  a
       specific function requires the use of a high-end FPGA for technical  reasons,  then  the  use  of  other  types  of  FPGAs  would  not  be
       appropriate. Along similar lines, another respondent submitted that, by way of example, a  high-end  FPGA  would  typically  be  used  for
       applications that require 25G Ethernet, while a mid-range FPGA would be sufficient for applications such as image recognition.[40]

    0. In addition, the market investigation indicated that there are further solutions in the market other  than  FPGAs  that  may  be  used  in
       workload acceleration for servers.[41] In particular, several respondents regarded ASSPs, ASICs and GP-GPUs as  alternative  solutions  to
       FPGAs in the server space,[42] as all three products can be used for workload acceleration purposes. According to  one  respondent,  FPGAs
       are more flexible and programmable, although other products may provide greater speed and power. Another  respondent  submitted  that  the
       degree of substitutability of ASICs and ASSPs with FPGAs in the data centre environment depends on whether the user  wants  or  needs  the
       algorithm programmed in the FPGA to change. If such changes are not needed, then ASICs and ASSPs  are  a  feasible  alternative.  However,
       given the rate at which workloads are changing in the data centre  environment,  the  possibility  to  program  FPGAs  is  typically  more
       desirable. Most of the respondents also confirmed that GP-GPUs are already today  used  for  workload  acceleration  in  high  performance
       computing applications.

    0. In sum, the results of the market investigation indicate that it may be appropriate to further segment the market for FPGAs by performance
       characteristics into high-end, mid-range and low-cost FPGAs. By contrast, the market investigation yielded mixed views in  relation  to  a
       possible segmentation according the type of device into which FPGAs are incorporated and/or according to the intended use  (such  as,  for
       example, workload acceleration for servers).

    0. For the purpose of the present decision, the Commission concludes that there are  separate  product  markets  for  FPGAs  and  for  CPLDs.
       However, it can be left open whether the FPGA market should be further segmented according to performance characteristics, the type of the
       device into which FPGAs are incorporated and/or the intended use, as the proposed transaction does not raise  serious  doubts  as  to  its
       compatibility with  the  internal  market  even  on  the  narrowest  possible  product  market  (namely  FPGAs  of  different  performance
       characteristics used for workload acceleration in servers).

3 Geographic market definition

    0. In previous cases, the Commission considered that the geographic scope  of  semiconductor  markets  may  be  at  least  EEA-wide,  if  not
       worldwide, although the precise scope of the geographic market was ultimately left open.[43]

    0. The Notifying Party submits that the relevant geographic markets for both FPGAs and CPLDs is worldwide in scope, in light of the fact that
       (i) the main companies active in this sector operate on a global scale; (ii) products and architectures are the  same  around  the  world;
       (iii) many customers operate on a worldwide basis; and (iv) the costs of shipping around the  world  are  low  compared  to  manufacturing
       costs.

    0. Most of the respondents to the market investigation considered the geographic scope of both the FPGA and the CPLD market to be  worldwide.
       In particular, respondents highlighted that  (i) there  are  no  significant  differences  in  pricing,  supply  or  purchasing  patterns;
       (ii) shipping and handling costs are low compared to manufacturing costs; and (iii) suppliers and customers operate on a global basis.[44]

    0. In light of the results of the market investigation, for the purposes of  this  decision,  the  Commission  concludes  that  the  relevant
       geographic markets for FPGAs (and its possible segments) and CPLDs should be considered worldwide in scope.

3 Semiconductor contract manufacturing

    0. Semiconductor contract manufacturers serve the manufacturing needs of “fabless” semiconductor companies  –  i.e.  semiconductor  companies
       that lack their own manufacturing facilities – as well as system manufacturers that design microprocessors  or  ASICs  for  use  in  their
       platforms. Today, nearly all semiconductor companies are fabless.  Fabless  semiconductor  companies  (which  include  companies  such  as
       Qualcomm, Nvidia, or AMD) and system  manufacturers  (which  include  companies  such  as  Huawei,  Cisco,  or  Apple)  design  their  own
       semiconductor products and provide the designs to external manufacturers, which  manufacture  semiconductor  wafers  on  their  behalf  in
       semiconductor manufacturing facilities known as “fabs”.

    0. External manufacturers are generally referred to as “foundries”. They typically manufacture only semiconductor wafers,  which  are  plate-
       shaped substrates of silicon that, at the end of the manufacturing process, contain numerous “dies”,  which  are  the  foundry  customers’
       semiconductor chips. Fabs are defined by the diameter of wafers that they are tooled to produce. Wafers may be manufactured  at  different
       manufacturing process nodes expressed in nanometers (such as 16nm, 14nm, etc.). The smaller the process node used, the higher  the  number
       of transistors on a single chip and the stronger the performance of the final semiconductor. Customers  typically  take  the  manufactured
       wafers to another set of external suppliers, which assemble the dies into packages with external wiring that can be  integrated  into  the
       customers’ platforms. Thus, competition among foundries is in the manufacture of wafers for external customers.

    0. In order to be competitive, providers of contract manufacturing services need a wide range of tools  and  IP  libraries  to  ensure  their
       ability to implement their customers' design and translate the design into a final product. When choosing their supplier, customers  first
       contact several service providers. Second, customers proceed with an initial evaluation of the providers' technology and ensure  that  the
       manufacturing facility has sufficient capabilities to meet their needs. Third, customers negotiate the pricing with the selected providers
       and finally conclude the relevant agreements.

    0. Most semiconductor contract manufacturers specialize in manufacturing for other companies and do not develop products that they produce on
       their own behalf. However, a smaller number of companies, including Samsung and Intel, manufacture both their own products and products on
       behalf of external customers.

1 Product market definition

    0. The Notifying Party submits that, while the narrowest conceivable way of defining the market would be  to  distinguish  between  different
       process nodes, such segmentation would lead to overly narrow markets. In addition,  the  Notifying  Party  submits  that  the  market  for
       semiconductor contract manufacturing should not be further segmented by type of semiconductor (e.g. FPGAs, CPLDs, etc.), as  all  contract
       manufacturers produce a broad range of semiconductors for a variety  of  customers.  According  to  the  Notifying  Party,  the  only  key
       differentiating factor from a supply-side substitution standpoint is the process node used for manufacturing. In any event, the  Notifying
       Party submits that the exact product market definition can be left open because Intel’s market share is negligible under  any  conceivable
       market definition.

    0. In previous decisions (in the field of State aids), the Commission  did  not  differentiate  manufacturing  activities  according  to  the
       different process nodes used.[45]

    0. In the present decision, the precise scope of the product market can be left open, as the proposed  transaction  does  not  raise  serious
       doubts as to its compatibility with the internal market with regard to semiconductor contract manufacturing services even on the narrowest
       possible product market, namely semiconductor contract manufacturing for all different process nodes.

2 Geographic market definition

    0. The Notifying Party submits that the geographic scope of the market for semiconductor contract manufacturing (including its possible  sub-
       segments) is worldwide, in light of the fact that (i) contract manufacturers supply customers  from  around  the  world  and  compete  for
       customers on a global scale; (ii) customers routinely contact other customers to have their products manufactured in other continents; and
       (iii) the costs of shipping around the world are low compared to manufacturing costs. In particular, the Notifying Party submits  that  it
       provides manufacturing services to customers around the world from its the manufacturing facilities in Portland  (Oregon,  USA)  and  that
       Altera's third-party contract manufacturers are all active outside the EEA.

    0. Therefore, the Notifying Party takes the view that the geographic market for semiconductor contract manufacturing services should also  be
       considered worldwide in scope.

    0. In previous decisions (in the field of State aid), the Commission found the relevant geographic market to be worldwide in scope.[46]

    0. In the case at hand, the precise scope of the geographic market as regards semiconductor contract manufacturing can be left open,  as  the
       proposed transaction does not raise serious doubts as to its compatibility with the internal market with regard to semiconductor  contract
       manufacturing services irrespective of the precise geographic market definition.

COMPETITIVE ASSESSMENT

    0. As set out in paragraph (10) above, the proposed transaction gives rise to vertical relationships  between  the  contract  manufacture  of
       semiconductors (in which Intel is active) and the supply of FPGAs and CPLDs (in  which  Altera  is  active).  In  addition,  the  proposed
       transaction gives rise to a conglomerate relationship between the supply of CPUs (in which Intel is active) and the supply  of  FPGAs  (in
       which Altera is active). The vertical and conglomerate relationships created by the proposed transaction will be assessed in detail in the
       present section.

    0. In particular, Section 5.1. sets out the market shares  of  the  Parties  and  their  competitors  in  the  relevant  markets  and,  where
       appropriate, their potential segments identified in Section 4 above. On this basis, Section 5.2. identifies the relevant markets  affected
       by the proposed transaction, i.e. those markets where the market shares of one or both of the Parties are equal to or above  30%.  Section
       5.3. and Section 5.4. assess the impact of the proposed transaction on competition in the affected markets from  a  vertical  and  from  a
       conglomerate perspective, respectively.

1 Market shares

    0. This section presents the market shares of the Parties and their competitors in the relevant markets identified in Section 4, namely  CPUs
       (including possible segments), CPLDs, FPGAs (including possible segments) and semiconductor contract manufacturing services.

1 CPUs

    0. The following tables set out the market shares of the Parties and their competitors at a worldwide level in  (i) the  overall  market  for
       CPUs, and in its possible segments and sub-segments, namely (ii) x86 CPUs, (iii) CPUs for servers, and (iv) x86 CPUs for servers.

    0. Table 2 below sets out the market shares of Intel and its competitors on a possible worldwide market comprising all CPUs regardless of the
       architecture used and of the device into which they are incorporated.

                              Table 2: Shares in worldwide market for CPUs for all architectures and devices (2014)

|               |All CPUs (volume)      |
|Intel          |[10-20]%               |
|Altera         |[0-5]%                 |
|Combined       |[10-20]%               |
|Qualcomm       |[20-30]%               |
|MediaTek       |[10-20]%               |
|Apple          |[5-10]%                |
|Others         |[20-30]%               |

                                     Sources: Notifying Party's estimates based on third parties' reports[47]

    0. In a worldwide market comprising all CPUs irrespective of the architecture and the device at issue, Intel has a market share  of  [10-20]%
       by volume and is the second player after Qualcomm, which has a market share of [20-30]%. Competitors to Intel include ARM,  PowerPC,  IBM,
       Qualcomm, Texas Instruments, Samsung and Nvidia.

    0. Table 3 below sets out the market shares of Intel and its competitors in  a  possible  worldwide  market  for  CPUs  limited  to  the  x86
       architecture.

                                             Table 3: Shares in worldwide market for x86 CPUs (2014)

|               |x86 CPUs (volume)      |x86 CPUs (value)           |
|Intel          |[80-90]%               |[90-100]%                  |
|Altera         |[0-5]%                 |[0-5]%                     |
|Combined       |[80-90]%               |[90-100]%                  |
|AMD            |[10-20]%               |[5-10]%                    |
|VIA            |[0-5]%                 |[0-5]%                     |

                                       Sources: Notifying Party's estimates based on third parties' reports

    0. In a worldwide market for x86 CPUs, Intel would have a market share of [90-100]% in terms of revenues. The main competitor of Intel  would
       be AMD with a market share of [5-10]%, while VIA would only have a marginal presence, with a market share of around  [0-5]%  in  terms  of
       revenues.

    0. Table 4 below sets out the market shares of Intel and its competitors on a possible worldwide market limited  to  CPUs  used  in  servers,
       irrespective of the architecture used.

                                         Table 4: Shares in worldwide market for CPUs for servers (2014)

|               |CPUs for servers – All |
|               |architectures (volume) |
|Intel          |[80-90]%               |
|Altera         |[0-5]%                 |
|Combined       |[80-90]%               |
|AMD            |[0-5]%                 |
|C/RISK         |[10-20]%               |
|ARM            |[0-5]%                 |

                                        Source: Notifying Party on the basis of Intel's internal estimates

    0. In a worldwide market for CPUs for servers, Intel's market share would amount to almost [80-90]% in terms of revenues.  Other  competitors
       would include AMD, C/RISC[48] and ARM with revenue based market shares of [0-5]%, [10-20]% and [0-5]%, respectively.

    0. Table 5 below sets out the market shares of Intel and its competitors in a possible worldwide market limited to CPUs used in servers,  and
       further limited to the x86 architecture.

                                       Table 5: Shares in worldwide market for x86 CPUs for servers (2014)

|               |x86 CPUs for servers   |
|               |(volume)               |
|Intel          |[90-100]%              |
|Altera         |[0-5]%                 |
|Combined       |[90-100]%              |
|AMD            |[0-5]%                 |

                                        Source: Notifying Party on the basis of Intel's internal estimates

    0. In a worldwide market limited to x86 CPUs for servers, Intel's market share would amount to almost [90-100]% in terms of volume. The  only
       other competitor would be AMD, with a market share of [0-5]%.

2 CPLDs

    0. Table 6 below sets out the estimated market shares of Altera and its competitors in the worldwide market for the supply of CPLDs.

                                               Table 6: Shares in worldwide market for CPLDs (2014)

|                    |CPLDs (value)          |
|Intel               |[0-5]%                 |
|Altera              |[30-40]%               |
|Combined            |[30-40]%               |
|Lattice             |[50-60]%               |
|Semiconductor       |                       |
|Xilinx              |[5-10]%                |

                                           Source: Notifying Party based on Altera's internal estimates

    0. In the worldwide market for the supply of CPLDs, Altera has a market share of  [30-40]%  and  is  the  number  two  player  after  Lattice
       Semiconductor with a market share of [50-60]%.

3 FPGAs

    0. Table 7 below sets out the market shares of Altera and of its competitors in the worldwide market for  FPGAs  and  its  possible  segments
       (high-end, mid-range and low-cost FPGAs).

       Table 7: Shares in worldwide market for FPGAs and its market segments (2014)

|                    |All FPGAs              |High-end FPGAs (value) |Mid-range FPGAs (value)|Low-cost FPGAs (value) |
|                    |(value)                |                       |                       |                       |
|Altera              |[30-40]%               |[30-40]%               |[40-50]%               |[30-40]%               |
|Combined            |[30-40]%               |[30-40]%               |[40-50]%               |[30-40]%               |
|Others              |[5-10]%                |[5-10]%                |[0-5]%                 |[5-10]%                |

                                           Source: Notifying Party based on Altera's internal estimates

    0. In the worldwide market for the supply of FPGAs, the main competitor to Altera is Xilinx  ([50-60]%  market  share).  Smaller  competitors
       include Achronix, Microsemi and Lattice Semiconductor. The Notifying Party submits that the size of Xilinx's market share in the potential
       segment for high-end FPGAs is due to the fact that Xilinx has a "first to node" advantage[49] from using new generations of  semiconductor
       manufacturing technology, known as process nodes.

4 Semiconductor contract manufacturing

    0. Table 8 below sets out Intel's market shares in the worldwide market for semiconductor contract manufacturing.

                               Table 8: Shares in worldwide market for semiconductor contract manufacturing (2014)

|                    |Semiconductor contract |
|                    |manufacturing (value)  |
|Intel               |[0-5]%                 |
|Altera              |[0-5]%                 |
|Combined            |[0-5]%                 |
|TSMC                |[50-60]%               |
|Global Foundries    |[5-10]%                |
|UMC                 |[5-10]%                |
|Samsung             |[5-10]%                |
|SMIC                |[0-5]%                 |
|Others              |[10-20]%               |

                                                                Source: IC Insight

    0. In the worldwide market for semiconductor contract manufacturing, according to the Notifying Party, Intel's market share is below  [0-5]%.
       Other players competing with Intel include Taiwan Semiconductor Manufacturing Company ("TSMC") with a market share of [50-60]% in terms of
       revenues, Global Foundries with [5-10]%, United Microelectronics Corporation ("UMC") with [5-10]% and Samsung with [5-10]%.

    0. The Notifying Party has not been able to provide market shares by process node for all market players. However, on the basis of  estimates
       contained in the 2014 International Business Strategies (“IBS”) Global system IC industry service report concerning the total market  size
       by process node, Intel's market share for the 22/20 nm process node has been estimated to have been around  [0-5]%  in  2014.[50]  Intel's
       market shares relating to narrower process nodes (14 nm) are not available since such narrower process nodes are still  in  a  development
       stage and are not yet commercially available.[51] According to the Notifying Party, if the market  were  to  be  segmented  based  on  the
       process nodes used to manufacture FPGAs, Intel’s market share would be considerably smaller than [0-5]%, because Intel  provides  contract
       manufacturing only on leading edge process nodes while many  FPGAs are produced using older generations of process nodes.

2 Identification of affected markets

    0. As can be seen from the market share tables presented in  Section  5.1  above,  the  proposed  transaction  does  not  give  rise  to  any
       horizontally affected markets, given the absence of horizontal overlaps between the Parties.

    0. However, the proposed transaction gives rise to the following vertically affected markets:

         • The downstream market for FPGAs (including its possible sub-segments), where Altera is active (with  market  shares  exceeding  30%),
           which is vertically linked to the upstream market for semiconductor contract manufacturing services, where Intel is active; and

         • The downstream market for CPLDs, where Altera is active (with market shares  exceeding  30%),  which  is  vertically  linked  to  the
           upstream market for semiconductor contract manufacturing services, where Intel is active.

    0. In addition, the proposed transaction gives rise to affected markets from a conglomerate perspective. As indicated in paragraph  (10)  and
       as explained in further detail in paragraphs (117) to (121) below, for servers in data centres, FPGAs can be interconnected with  CPUs  to
       accelerate certain tasks normally performed by a CPU. The two products are thus complementary. Therefore, as explained in  further  detail
       in paragraphs (115) to (122), the market segment for FPGAs of different performance characteristics  used  for  workload  acceleration  in
       servers and the market for x86 CPUs for servers (where Intel's market shares exceed 30%) are closely related markets within the meaning of
       paragraph 91 of the Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control  of  concentrations
       between undertakings ("non-horizontal Guidelines").[52]

    0. The Commission will assess the impact of the proposed transaction  as  regards  those  vertical  and  conglomerate  relationships  in  the
       following sections.

3 Assessment of vertical relationships

    0. In this section, the Commission assesses the vertical relationships created by the proposed transaction between the  upstream  market  for
       semiconductor contract manufacturing services (where Intel is active) and the downstream markets for, respectively, the  supply  of  FPGAs
       and of CPLDs (where Altera is active).

1 Introduction

    0. As discussed in Section 4.3 above, companies providing contract manufacturing services are mainly active in the production of wafers which
       may be manufactured at different process nodes. The subsequent  production  steps  are  assembly  and  testing,  which  are  performed  in
       coordination with the customer through a process of qualification. During this process, customers and contract manufacturers cooperate  to
       guarantee that a specific product meets the customer's quality and reliability criteria  as  specified  in  the  original  design  of  the
       product.[53]

    0. The main differentiating feature between semiconductor contract manufacturers  concerns  the  process  node  at  which  they  produce  the
       different wafers. Accordingly, even though Intel does not currently provide contract manufacturing services for CPLDs,[54] it  would  have
       the manufacturing capability to produce wafers at process nodes which could also be used for  the  purpose  of  CPLDs.  For  this  reason,
       despite the fact that Intel does not provide contract manufacturing services in  relation  to  CPLDs,  the  Commission  has  analysed  the
       vertical relationship between the upstream market for contract manufacturing services and the downstream markets for both FPGAs and CPLDs.

    0. In the upstream market for contract manufacturing services for semiconductors, Intel's market share at a worldwide  level  was  [0-5]%  in
       2014 in terms of revenue. Intel currently supplies manufacturing services to, among others, Altera[55] and  Achronix.[56]  Competitors  in
       the market for semiconductor contract manufacturing include the market leader TSMC, with a market share of  [50-60]%,  and  other  players
       such as Global Foundries, UMC, Samsung and SMIC, each with a market share ranging from around [0-5]% to around [5-10]%.

    0. In the downstream market for the supply of FPGAs, according to the estimates provided by the Notifying Party,  Altera's  market  share  in
       2014 was [30-40]% in terms of revenues. Altera sells all types of FPGAs, including  high-end,  mid-range  and  low-cost  FPGAs.  The  main
       competitor who also offers the whole range of FPGAs is Xilinx, with a market share of  [40-50]%  in  terms  of  revenues  in  2014.  Other
       competitors include Microsemi and Lattice Semiconductor, with market shares of respectively [5-10]% and [5-10]% in terms  of  revenues  in
       2014. Finally, an additional competitor active in the FPGA market is Achronix, a smaller supplier founded in  2004  and  the  most  recent
       entrant. Altera's and its competitors' market shares for FPGAs do not materially differ in the possible segments of the FPGA market  based
       on performance characteristics, i.e. the segments for high-end, mid-range and low-cost FPGAs. In particular, Altera's market share in each
       of these segments is between [30-40] and [40-50]%, as set out in Section 5.1.3 above.

    0. In the downstream market for the supply of CPLDs, according to the estimates provided by  the  Notifying  Party,  Altera  was  the  second
       largest market player in CPLDs in 2014, with a market share of [30-40]% in terms of revenues worldwide. The other main competitors in this
       market are Lattice Semiconductor, with a revenue-based market share of [50-60]% worldwide and Xilinx with a revenue-based market share  of
       [5-10]%.

2 Legal framework

    0. According to the non-horizontal Guidelines, non-coordinated effects may significantly impede effective competition as a result of  a  non-
       horizontal merger if such merger gives rise to foreclosure. Foreclosure occurs where actual or potential rivals'  access  to  supplies  or
       markets is hampered or eliminated as a result of the merger, thereby reducing these companies' ability and/or  incentive  to  compete.[57]
       Such foreclosure may discourage entry or expansion of rivals or encourage their exit.[58]

    0. The non-horizontal Guidelines distinguish between two forms of foreclosure. Input foreclosure occurs where the merger is likely  to  raise
       the costs of downstream rivals by restricting their access to an important input. Customer foreclosure occurs where the merger  is  likely
       to foreclose upstream rivals by restricting their access to a sufficient customer base.[59]

    0. The Commission investigated whether the proposed transaction is likely to create a risk  of  input  and/or  of  customer  foreclosure.  In
       particular, the Commission examined (i) whether the merged entity would have the  ability  and  incentive  post-transaction  to  foreclose
       access by other FPGA or CPLD suppliers  to  the  market  for  semiconductor  contract  manufacturing  services  (input  foreclosure);  and
       (ii) whether the merged entity  would  have  the  ability  and  incentive  post-transaction  to  foreclose  other  semiconductor  contract
       manufacturers from providing their services to Altera as regards FPGAs and/or CPLDs (customer foreclosure).

3 Input foreclosure

1 The Notifying Party’s view

    0. The Notifying Party submits that the proposed transaction raises no concerns of input foreclosure in relation to  competing  suppliers  of
       either FPGAs or CPLDs. In particular, the Notifying Party points out that Intel has only recently entered the upstream market for contract
       manufacturing services and that there are alternative operators in the market with the necessary technical expertise and fab  capacity  to
       meet customers' demand on the downstream markets for the supply of FPGAs and CPLDs.

2 The results of the market investigation and the Commission’s assessment

    0. Although Intel might theoretically have the ability to terminate the manufacturing agreements it currently  has  in  place  with  Altera's
       competitors, including Achronix,[60] it is unlikely that it would have any incentives to do  so,  given  that  Intel  would  need  certain
       volumes to optimise its foundry services and benefit from economies of scale.[61]

    0. Even assuming that Intel would have both the incentive and the ability to deny Altera's competitors access to its manufacturing  services,
       such foreclosure strategy would be unlikely to have any impact on effective competition in the market, for the following reasons.

    0. First, as explained above, Intel's market share in the market for contract manufacturing services was below [0-5]% in 2014.  Second,  even
       according to the narrowest conceivable market segmentation (i.e. by process technology), Intel's market share for  the  22/20  nm  process
       technology was only [0-5]% in 2014.[62] Third, even irrespective of the proposed transaction, […]. Finally, the proposed transaction would
       also not have an impact on Xilinx, Altera's main competitor in the supply of FPGAs. Xilinx currently cooperates with TSMC,  the  worldwide
       market leader in the provision of semiconductor contract manufacturing services. The partnership is also  focused  on  product  innovation
       with the two companies already working on the production of FPGAs at the 7nm process node.[63]

    0. Moreover, several competitors with much higher market shares than Intel are currently present on the  market  for  contract  manufacturing
       services. These competitors include TSMC, with a market share of [50-60]% in terms of revenues, Global Foundries with [5-10]%, UMC with [5-
       10]% and Samsung with [5-10]%. These competitors have the required technical expertise to provide similar services to  those  provided  by
       Intel to Altera's competitors. In particular, TSMC announced that it is manufacturing products on its 16nm process,  which  it  claims  is
       comparable to other companies’ 14nm process.[64] Global Foundries also stated that it offers contract manufacturing services at  the  14nm
       node.[65]

    0. In addition, none of the competitors and customers who replied to the market investigation raised concerns of possible  input  foreclosure
       by Intel after the proposed transaction.

    0. For the reasons set out above, the proposed transaction is unlikely to give rise to input foreclosure in  relation  to  the  provision  of
       contract manufacturing services to Altera's competitors in the downstream markets for the supply of FPGAs and of CPLDs.

4 Customer foreclosure

1 The Notifying Party’s view

    0. The Notifying Party submits that the proposed transaction does not raise any customer foreclosure concerns since, post-transaction,  Intel
       plans to […].  Moreover, the Notifying Party submits that Altera's overall demand for contract manufacturing services is limited  compared
       to the overall demand in the market.

2 The results of the market investigation and the Commission’s assessment

    0. The Commission acknowledges that Intel would have the ability to reduce Altera's purchases from  other  contract  manufacturing  companies
       upstream[66] and move the manufacture of Altera's FPGAs in-house. However, it is not clear whether Intel would have the  incentive  to  do
       so, since this would require additional costs and investments. In particular, Altera currently […].[67]

    0. In addition, Altera's cost of sales in 2014, which can be used as a proxy to estimate its  demand  for  contract  manufacturing  services,
       accounted for only [0-5]% of the revenues of the overall worldwide market for semiconductor contract manufacturing services. Even  if  all
       of Altera's FPGA needs were to be satisfied by Intel post-transaction, they would only account for a minor share of the overall  worldwide
       demand for contract manufacturing services.

    0. In relation to the possibility of customer foreclosure, a respondent to the market investigation highlighted  that,  post-transaction,  if
       Intel were to become the sole provider of FPGAs used in conjunction with Intel's CPUs,[68] this would provide  it  with  increased  market
       power in the upstream market for semiconductor contract manufacturing  services,  as  Intel  would  manufacture  its  integrated  FPGA/CPU
       products in-house.[69] In this regard, the Commission notes that: (i) post-transaction, other FPGA  and  CPU  manufacturers  would  remain
       active in the market and would be able to cooperate to produce integrated products, in particular based on CPU  architectures  other  than
       the x86 architecture; (ii) other competitors would remain active in the semiconductor contract manufacturing market and would compete with
       Intel on innovation and first-to-node advantage; (iii) even if Intel were to manufacture all the integrated CPU/FPGA products for workload
       acceleration, this would only account for a limited share of the overall semiconductor contract manufacturing market and may  actually  be
       pro-competitive, as it would help Intel grow its limited position in a market where the market leader (TSMC) has a market share above [50-
       60]%.

    0. For the reasons set out above, the proposed transaction is unlikely to give rise to customer foreclosure in relation to the  provision  of
       contract manufacturing services by Intel's competitors.

4 Assessment of conglomerate relationships

1 Introduction

    0. According to paragraph 92 of the non-horizontal Guidelines, “conglomerate mergers in the majority of circumstances will not  lead  to  any
       competition problems”. According to paragraph 93 of the non-horizontal Guidelines, “the  main  concern  in  the  context  of  conglomerate
       mergers is foreclosure. The combination of products in related markets may confer on the  merged  entity  the  ability  and  incentive  to
       leverage a strong market position from one market to another by means of tying or bundling or other exclusionary practices.”

    0. In light of its very high market shares in the CPU markets (see Section 5.1.1), notably in the possible markets for CPUs for  servers  and
       for x86 CPUs for servers, the Commission considers that Intel has a strong market position within the meaning of paragraph 93 of the  non-
       horizontal Guidelines in the CPU markets.[70] The Commission therefore investigated if, post-transaction, the merged entity could have the
       ability and incentive to pursue strategies of tying and bundling aimed at foreclosing competitors in the markets for CPUs for servers  and
       x86 CPUs for servers and/or in the market (or segment thereof) for FPGAs  of  different  performance  characteristics  used  for  workload
       acceleration in servers.

    0. The Commission premised its assessment of the conglomerate relationships on the narrow market definitions for CPUs for servers and for x86
       CPUs for servers on the one hand and on the narrowest possible market definition for FPGAs, that is to say FPGAs of different  performance
       characteristics used for workload acceleration in servers for the following reasons. As set out further in  the  following  paragraphs,  a
       close relationship between Intel's CPUs and Altera's FPGAs within the meaning of paragraph 91 of the non-horizontal Guidelines,  according
       to which markets are, for instance, closely related if a merger involves suppliers of complimentary products, only exists in  relation  to
       workload acceleration in servers, and the proposed transaction does not raise any competition concerns even on  those  narrowest  possible
       market definitions.

    0. As described in Section 5.1.1, Intel is a leading producer of CPUs worldwide. Altera is not present on the CPU market but it is the second
       largest market player in the FPGA market worldwide (see Section 5.1.3).

    0. In data centre servers, CPUs and FPGAs complement each other in that they are used alongside each other in the computing layer of servers,
       that is to say the layer that is in charge of processing the data, as opposed to the storage layer which stores data in the memory and the
       networking layer which manages the flow of data. As indicated in section 4.2.1, an FPGA paired with a CPU in the compute layer can perform
       certain computational workload faster and in a more energy-efficient way.[71]

    0. CPUs and FPGAs can be paired for the purposes of workload acceleration in servers and  thus  complement  each  other  in  different  ways.
       Firstly, they can be interconnected through an electro-mechanical interface technology. In order to do so, FPGAs are installed on an  add-
       in board and are connected to the CPU in the server through the so-called Peripheral Component Interconnect express ("PCIe").[72] The  use
       of PCIe goes well beyond the products at hand. PCIe is a widely used interface that is built into every server. It is used for  installing
       a wide range of high-performance components such as graphics boards, network controllers and solid state drives ("SSDs"). It is also  used
       for other peripheral devices in servers, but also in computers more generally. PCIe is an open standard solution. Its specifications  have
       been developed though cooperative standard-setting under the auspices of  the  PCI-SIG,  the  community  responsible  for  developing  and
       maintaining the standardised approach to peripheral component I/O data transfers.

    0. Secondly, CPUs and FPGAs can be interconnected through proprietary interconnect  technologies  which,  similarly  to  open  standard  PCIe
       technology, allow for the pairing of discrete CPUs and FPGAs. CPU suppliers, including Intel, have developed  such  technologies  and  may
       decide to license them to FPGA suppliers for them to interconnect their FPGAs with the CPU suppliers’ CPUs. When, in 2007,  Intel  started
       to collaborate with FPGA producers and third party vendors to develop FPGA acceleration solutions for Intel  platforms  in  data  centres,
       Intel developed its proprietary direct interconnect technology called QuickPath Interconnect  (“QPI”).  In  2018  Intel  plans  to  launch
       commercially a new version of its proprietary direct interconnect technology, referred to as Keizer  Technology  Interconnect  ("KTI")  or
       UltraPath Interconnect ("UPI").[73]

    0. Thirdly, Intel submits that the rationale to acquire Altera is to develop an integrated product that combines a CPU[74] and an  FPGA  more
       tightly. In a first step, Intel plans to integrate two discrete chips in a multi-chip package (“MCP”). In a second step,  Intel  plans  to
       integrate the two on the same piece of silicon, also called "die" ("single-die solution").

      Figure 2: Intel's FPGA/CPU integration plan

      [pic]

      [pic]

    0. Both envisaged solutions would place the CPU and the FPGA in  the  same  socket  on  the  server's  motherboard.  The  MCP  solution  will
       interconnect the two semiconductors via Intel's KTI technology.

    0. In light of the above considerations regarding the complementarity of CPUs and FPGAs that are interconnected  for  the  purposes  workload
       acceleration in servers, the Commission considers that the markets for servers and for x86 CPUs for servers on the one hand and the market
       (or segment thereof) for FPGAs of different performance characteristics used for workload acceleration in servers are closely related  and
       will analyse, in the following sections, whether Intel will have the ability and incentive to foreclose FPGA and CPU suppliers, as well as
       the overall likely impact of such possible foreclosure on prices and choice.

2 Foreclosure of FPGA suppliers

1 Ability to foreclose FPGA suppliers

       The Notifying Party's view

    0. As regards the ability to foreclose competing suppliers of FPGAs of different performance characteristics used for  workload  acceleration
       in servers, Intel submits that the use of FPGAs in such a  market  (or  segment  thereof)  would  be  very  limited  absent  the  proposed
       transaction and that, therefore, the proposed transaction plays a catalyst role in growing this nascent and limited market.

    0. In relation to its proprietary interconnect technologies QPI and KTI, Intel submits that  it  will  not  have  the  ability  to  foreclose
       competing FPGA suppliers by choosing not to license those proprietary interconnect technologies to them. In particular, Intel submits that
        interconnection via PCIe is currently the predominant solution for discrete FPGA acceleration and will remain a viable alternative  post-
       transaction. Intel explains that PCIe is a high-bandwidth interconnect that serves as the universal interface for connecting components to
       servers and presents technological and cost advantages over QPI and KTI. Intel also submits that KTI and QPI interconnection […].

    0. As regards specifically PCIe, Intel submits that it will not have the ability to degrade the PCIe interconnect technology given  that  its
       specifications are set by PCI-SIG, an industry organisation with over 700 members and a board of directors independent from both Intel and
       Altera. PCIe is available to everyone on FRAND[75] terms, supports  numerous  different  technologies  and  is  supported  by  all  server
       manufacturers in their platforms as this interface is a central part of the server platform.

    0. Moreover, Intel has licensed QPI for use by, among others, FPGA vendors, […]. Intel explains that […]. From  a  technological  standpoint,
       […].[76]

    0. Intel has also licensed KTI to a number of companies, namely […]. As of mid-2013, Intel also negotiated the terms of a licence  with  […].
       […]. The Commission has not received any evidence during its investigation that the […] was  related  to  the  proposed  transaction.  The
       Commission notes, in particular, that […][77] […].[78] Contrary to QPI based solutions, KTI  based  solutions  are  not  yet  commercially
       available. Also, based on the information provided by Intel, […].[79]

    0. More generally, the "add-in board" integration of CPUs and FPGAs based on PCIe, QPI or KTI as described in the  preceding  paragraphs  has
       not yet taken off commercially. A major limitation, as also identified by Intel itself, is that the FPGA is inserted into a CPU socket  in
       place of another CPU, leaving customers with only one CPU in a server designed for two, thereby negatively impacting  the  performance  of
       the server. Some companies have been working on developing FPGA based workload acceleration solutions. However, no such solution has  been
       launched on a commercial scale. The only company that, according to Intel, is expected to launch such a solution in  the  near  future  is
       […]. In addition, according to Intel, workload acceleration based on QPI is only carried out […].

    0. Intel also considers that, based on its behaviour during the term of the QPI licence and  during  licensing  negotiations  regarding  KTI,
       Altera's main competitor Xilinx does not need access to QPI and/or KTI in order to be able to compete on the market (or  segment  thereof)
       for FPGAs of different performance characteristics used for workload acceleration in servers. […].[80] […].

       The results of the market investigation and the Commission’s assessment

    0. Although a number of respondents to the market investigation voiced concerns regarding Intel's ability to foreclose  FPGA  suppliers,  the
       overall feedback received suggests that market participants expect that the merger would not have a negative impact on prices and  choice.
       One respondent, for instance, considers that integrating the relevant products would reduce the number  of  parts  to  be  included  in  a
       server, that it could optimise form factors and that it could ultimately generate cost savings.[81] Another respondent submits that Altera
       will continue to have leading edge technology based on the investment capabilities of Intel and together the two companies could  offer  a
       greater range of products than they could individually.[82]

    0. As regards Intel's argument on the possible catalyst role of the proposed transaction in growing the market of FPGAs used in  servers  for
       workload acceleration, some of the respondents to the market investigation indicated that the forecast in the short term for  the  use  of
       FPGAs in servers is stable or would experience only limited growth.[83] Furthermore the majority of respondents who expressed  an  opinion
       consider indeed that the proposed transaction will likely boost demand for FPGAs.[84]  One  respondent  for  instance  explains  that  the
       benefits of relying on FPGA acceleration will become well known and easy for customers to implement.[85]

    0. When analysing the possible interfaces used to perform workload acceleration, the majority of  respondents  to  the  market  investigation
       currently relies on PCIe for workload acceleration rather than on the commercially available QPI interconnect.[86] The  reasons  for  such
       choices are mixed. Certain respondents consider that PCIe provides better performance, while others consider that QPI  and  KTI  are  more
       time consuming and costly to implement. Conversely, a number of respondents submit that QPI and KTI provide  better  performance.  At  the
       same time, a number of respondents were not even aware of the existence of QPI and KTI,[87] or mistakenly believed  that  Intel  does  not
       make QPI and KTI available to third parties.[88]

    0. Despite the current situation, in which PCIe is widely used for workload acceleration and despite some market participants  being  unaware
       of the existence of QPI and KTI, the majority of respondents consider that having access to Intel’s QPI or KTI interconnection  technology
       will be important to compete in relation to workload acceleration in the future.[89]

    0. As regards a closer integration of CPUs and FPGAs via a MCP solution or a single-die solution, contact with market  participants  and  the
       replies to the market investigation highlighted that market participants generally consider that,  if,  post-transaction,  Intel  were  to
       launch such an integrated product (either an MCP solution or a single-die solution), a sufficient number of  third  party  FPGA  suppliers
       would be able to continue competing against such MCP or single-die solutions with add-on board solutions, that is to  say  with  solutions
       where the FPGA is connected to the CPU through PCIe, QPI, KTI or any other proprietary interconnect technologies.[90]

    0. In light of the feedback received from market participants during the market investigation,  and  for  the  reasons  set  out  below,  the
       Commission considers that Intel would not have the ability to foreclose FPGA suppliers by refusing to grant a licence to  its  proprietary
       interconnect technologies QPI and KTI for the following reasons.

    0. First, the Commission considers that Intel would not have the ability to foreclose FPGA suppliers because the PCIe interconnect technology
       is a valid alternative to Intel's proprietary interconnect technologies.

    0. The Commission notes that, despite the presence of certain market participants which consider that the current version of PCIe (PCIe  3.0)
       does not perform as well and is less adapt to workload acceleration than QPI and KTI,[91] a comparison of the key technical specifications
       of the three interconnect technologies (as well as of the future PCIe 4.0) shows that it is likely that PCIe is a viable  alternative  for
       the majority of workload acceleration tasks.

    0. Table 8 below lists the key technical parameters, on which the Commission's comparison is based.[92] Those  comprise,  among  others,  the
       number of lanes connecting the CPU and the FPGA,  the  lane  bandwidth,  the  overall  data  throughput  capacity,  the  latency  of  data
       transmission, the protocol efficiency[93] and the cost of a solution based on the respective interconnect technology.[94]

       Table 9: Performance on specified parameters

                                                                      [pic]
    0. The above comparison shows that, while each technology has its strengths and weaknesses, PCIe 3.0 is largely comparable to  QPI  and  KTI.
       […].

    0. In addition, Intel submits that its current generation of x86 CPUs used in servers supports 40 PCIe lanes. As  PCIe  lanes  are  so-called
       "point-to-many" lanes, it is possible to connect an FPGA using 32 PCIe 3.0 lanes. […]. QPI and KTI, on the other hand, are interconnection
       technologies that possess only 20 (16 for data) point-to-point lanes that can be used to connect a CPU to a FPGA. In  other  words,  using
       QPI or KTI, it is not possible to use more than those lanes to improve performance.

    0. During the market investigation it was submitted that one major deficit of PCIe is that, compared to QPI  and  KTI,  PCIe  is  not  cache-
       coherent, that is to say, PCIe does not automatically ensure consistency between certain data it performs operations on, while QPI and KTI
       do. However, the Commission considers that cache-coherence is not a crucial performance indicator in the present  context.  In  particular
       based on the information provided by Intel, the Commission considers that cache coherence does not offer performance improvements for most
       of the possible workload acceleration functions including, among others, the running of search algorithms.

    0. The Commission also notes that PCI-SIG is in the final stages of defining the specifications of the  next  generation  PCIe  interconnect,
       PCIe 4.0 (see specifications set out in Table 9 above). As per those specifications, PCIe 4.0 will offer considerably improved performance
       compared to PCIe 3.0 as well as QPI and KTI as regards lane bandwidth and overall throughput. It is expected to be commercially  available
       as of 2016.[95] In light of the set-up of PCI-SIG further described in paragraph (125), the Commission considers that Intel will not  have
       the ability to delay the launch of PCIe 4.0. The lack of incentives of Intel do to so is further discussed in section 5.4.2.2 below.

    0. Therefore, in conclusion, the Commission considers that the PCIe interconnect technology that is openly available  on  FRAND  terms  is  a
       viable alternative to Intel's proprietary QPI and KTI interconnect technologies. As a result, Intel would not be able  to  foreclose  FPGA
       competitors from the market (or segment thereof) for FPGAs of different performance characteristics  used  for  workload  acceleration  in
       servers.

    0. Second and in any event, Intel has granted licences to QPI and KTI or offered to enter into licence agreements for QPI and KTI to  several
       FPGA suppliers other than Altera.

    0. The licences already agreed upon constitute commercial agreements by which Intel is  bound  during  their  term  and  which  it  can  only
       terminate if the conditions set out in those agreements are met.[96]

    0. In addition, the Commission notes that Intel has further underpinned its willingness to continue working with FPGA  suppliers  other  than
       Altera by making an unconditional and binding offer to two FPGA suppliers,  […],  for  a  licence  to  its  proprietary  KTI  interconnect
       technology.

    0. The offer was made to both companies on 30 September 2015 and remains valid until 31 December 2016.

    0. […].

    0. At the time of the present decision the terms of the package negotiated between Intel and […] foresees that Intel would grant a worldwide,
       non-exclusive, non-transferrable, non-sublicenseable, terminable, royalty-free and fully paid licence to its KTI  technology  to  […].  In
       exchange for that licence, […] would agree to a covenant not to sue ("CNTS"). […]. Most importantly, the licence agreement  covers  future
       changes to the KTI technology, […].

    0. The Commission considers that this advanced stage of the negotiations indicates that the offers provide a genuine means of enabling two of
       Altera's competitors to compete on the market (or segment thereof) for FPGAs of different performance characteristics  used  for  workload
       acceleration in servers. In particular, in the short-term following the merger, two potential competitors of Altera have  the  ability  to
       enter the market on the basis of licences to Intel's proprietary KTI interconnect technology without Intel being able to  foreclose  those
       two companies. […] would thus not only be able to offer competing FPGA acceleration solutions on the basis of PCIe, but also on the  basis
       of Intel's proprietary KTI interconnect technology.

    0. In light of the above, the Commission considers that, post-transaction Intel will not have the ability to foreclose  FPGA  suppliers  from
       the market (or possible segment) for FPGAs of different performance characteristics used for workload acceleration in servers.

2 Incentive to foreclose FPGA suppliers

       The Notifying Party's view

    0. Even if it did have the ability to foreclose FPGA suppliers, Intel submits that it would not have any incentive to do so as regards  FPGAs
       of different performance characteristics used for workload acceleration in servers.

    0. First, Intel submits that the proposed transaction would not alter its incentives to license QPI and KTI. The primary purpose of those two
       interconnect technologies is to connect CPUs with each other. Intel has granted licences to QPI and KTI to companies who  provide  certain
       compute elements such as node controllers and repeaters so that Intel can enable server manufacturers to support CPU-to-CPU communications
       in servers that contain more than eight Intel CPUs, thereby enabling Intel to compete in the  high  end  of  the  server  segment  against
       servers from IBM and Oracle who use their own proprietary CPUs  and  interconnection  technologies.  Intel  has  an  incentive  to  remain
       competitive in this segment and will thus continue licensing QPI and KTI.

    0. Second, Intel submits that it would not have any incentive to impair the use of PCIe[97] since,  by  doing  so,  Intel  would  impair  the
       performance of a number of Intel products (i.e. network controllers, switches, solid state drives, etc.) that operate via PCIe. Therefore,
       if Intel were to impair PCIe, it would reduce the value of Intel-based servers to customers, which would be counter-productive for Intel.

       The results of the market investigation and the Commission’s assessment

    0. As already indicated in paragraph (132), a number of respondents voiced concerns as regards the possibility to licence QPI  and  KTI  from
       Intel. Respondents to the market investigation, however, did not raise any concerns regarding the incentives of Intel to degrade PCIe.

    0. The Commission considers that, in light of the setup of PCI-SIG and in light  of  the  fact  that  PCIe  is  a  widely  used  interconnect
       technology upon which Intel also relies in relation to other products it sells, it would be commercially unattractive for Intel to degrade
       PCIe. Indeed, Intel would run the risk of cannibalising sales that are unrelated to its activities on the market (or segment thereof)  for
       FPGAs of different performance characteristics used for workload acceleration in servers.

    0. As regards the incentives of Intel to refuse licensing QPI and KTI to FPGA suppliers who intend to  compete  on  the  market  (or  segment
       thereof) for FPGAs of different performance characteristics used for workload acceleration in servers, the Commission notes that Intel has
       recently submitted offers for a KTI licence to two of Altera's competitors, […] (see paragraphs (144)  to  (150)).  Notwithstanding  those
       offers and based on the information available, the Commission cannot exclude that Intel would not have an incentive  to  refuse  licensing
       QPI and KTI to other FPGA suppliers who intend to compete  on  the  market  (or  segment  thereof)  for  FPGAs  of  different  performance
       characteristics used for workload acceleration in servers. In particular, in the Form CO Intel merely  argues  that  it  […].  During  the
       course of its investigation, however, the Commission has not gathered any information that would allow it to conclude that, apart from the
       two offers for a KTI licence made by Intel and apart from having an incentive to  licence  QPI  and  KTI  for  purposes  other  than  FPGA
       acceleration in servers, Intel would have an incentive to continue licencing QPI and KTI to other competitors of Altera on the market  (or
       segment thereof) for FPGAs of different performance characteristics used for workload acceleration in servers.

    0. However, even if Intel were to have such an incentive, the Commission considers that the overall assessment on the conglomerate effects of
       the proposed transaction would not change as Intel would not have the ability to foreclose  FPGA  suppliers  on  the  market  (or  segment
       thereof) for FPGAs of different performance characteristics used for workload acceleration in servers.

3 Possible pro-competitive effects of the proposed transaction

       Introduction

    0. Intel submits that the proposed transaction will enable it to integrate FPGAs and CPUs more closely, which would improve  the  performance
       of workload acceleration technology […]. Intel expects that developing those solutions would  increase  demand  for  FPGA  based  workload
       acceleration solutions in servers or create such demand in the first place. Although the Commission considers that Intel would not be able
       to foreclose other FPGA suppliers in the first place, it nevertheless  also  investigated  the  overall  likely  impact  of  the  proposed
       transaction on FPGA based workload acceleration solutions in servers.  The  Commission  investigated,  in  particular,  whether  the  pro-
       competitive effects claimed by Intel would outweigh any potential anti-competitive effects of the proposed transaction on  FPGA  suppliers
       (such anti-competitive effects being, in the Commission's estimation, unlikely to arise in any event, for the reasons set out  in  Section
       5.4.2.).

       The Notifying Party's view

    0. As indicated in paragraph (120), Intel submits that the proposed transaction will enable it to develop a better-performing, […] integrated
       solution for FPGA based workload acceleration that would otherwise not exist. This will help grow the  market  for  workload  acceleration
       solutions, which is at present almost non-existent. The proposed transaction will not result in limiting Intel's customers' ability to use
       FPGAs for workload acceleration or their choice of FPGAs.

    0. In particular, Intel considers that the MCP solution will […] the performance of the current add-in board solution and save customers  the
       cost of developing their own add-in board with technical and cost advantages. Intel expects to start selling this solution  […]  and  that
       this solution would be used commercially […].

    0. Moreover, when considering the single-die option, Intel submits that it will bring further significant benefits for customers:  (i)  lower
       acquisition cost relative to the MCP solution; (ii) further performance […]; (iii) further improvements in  power  consumption;  and  (iv)
       improved access to standard software programming models that will lower the cost of use even  more.  According  to  Intel,  the  cost  and
       performance advantages of the integrated product will boost the demand for FPGAs in (server) workload  acceleration  for  the  benefit  of
       customers. Intel submits that this integrated product will be available only from […].

    0. According to Intel, workload acceleration is a very  recent  trend  which  does  not  account  for  a  big  portion  of  sales  for  FPGAs
       manufacturers. Intel submits that FPGAs are predominantly used in applications where Intel's CPUs are not used. Most  of  Altera's  sales,
       for example, concern telecom and wireless applications, such as mobile infrastructure but also smartphones and tablets (44%  in  terms  of
       revenues). Only 16% of Altera's sales concern networking, compute and storage applications.[98] Only a  very  limited  fraction  of  those
       sales concern FPGAs of different performance characteristics used for workload acceleration in servers where both FPGAs and Intel CPUs are
       used in a complementary way. By way of reference, and as further set out below in paragraph (172), Intel estimates that less  than  [0-5]%
       of Altera's FPGA sales go to CSPs, which are considered to be the most important customers for FPGA based workload acceleration solutions.

    0. As regards the growth potential of the market, Intel estimates that, absent the proposed transaction, demand  for  FPGAs  as  accelerators
       would be limited, amounting to around […] units until 2020-23 or less than […] units on average per year.[99] Intel expects  a  growth  of
       demand with the proposed transaction. It expects that virtually all of the projected demand for integrated solutions would be new  demand,
       and not demand resulting from displacement of existing discrete solutions. Intel projects that with the proposed  transaction  demand  for
       single-die solutions will be […] units in the […] period, or approximately [5-10]% of Intel’s estimated CPU sales in the […] period.  This
       projected volume is expected to come almost entirely from new demand for integrated CPU/FPGA products rather  than  from  displacement  of
       discrete solutions, although Intel has not analysed the exact extent to which the availability of the integrated  product  could  displace
       sales of discrete solutions.

    0. In addition, Intel submits that the FPGAs of different performance characteristics used for workload acceleration in servers are the  same
       as those also used in other applications and can be bought off-the-shelf by any customer.

    0. Customers will moreover continue to have the choice between Altera's FPGAs and those of competitors, most notably of  Xilinx,  the  market
       leader.

       The results of the market investigation and the Commission’s assessment

    0. Overall, responses of market participants to the market  investigation  do  not  indicate  that  they  are  concerned  that  the  proposed
       transaction would have a negative impact on competition in the affected markets.

    0. Respondents to the market investigation also  submitted  that  integrated  FPGA  acceleration  solutions  could  exist  next  to  distinct
       acceleration solutions which would remain available on the market. FPGA suppliers would continue to  be  able  to  compete  on  price  and
       performance with integrated solutions, both in general and also especially for customers not using x86 CPUs.[100]

    0. The majority of respondents to the market investigation consider that the proposed transaction will have no impact or a positive impact on
       the overall FPGA market. As regards the impact of the proposed transaction on the market  (or  possible  segment  thereof)  for  FPGAs  of
       different performance characteristics used for workload acceleration in servers, replies were more mixed.[101]

    0. The majority of respondents replied that  the  proposed  transaction  is  likely  to  have  no  impact  or  a  positive  impact  on  their
       companies.[102]

    0. The Commission considers that the proposed transaction is unlikely to have a negative impact on prices and choice as  regards  the  market
       (or possible segment thereof) for FPGAs of different performance characteristics used for workload acceleration in servers.

    0. The Commission notes, first, that demand for FPGA based workload acceleration solutions is very limited today. As explained  in  paragraph
       (128), such solutions have not yet been launched on a commercial scale and their current use seems to be very  limited.  This  is  further
       corroborated by the fact that in 2014, Altera's sales of FPGAs to CSPs represented less than [0-5]% of Altera's overall FPGA sales both in
       terms of value and volume.[103] Despite Intel's growth estimates, the Commission considers that the development  of  FPGA  based  workload
       acceleration solutions for servers is essentially still nascent. The market may take more than two to three years to meaningfully develop.

    0. If demand were not to take off as a result of Intel developing integrated workload acceleration  solutions  to  be  used  in  data  centre
       servers, the proposed transaction would likely not have any negative impact on prices and  choice  as  regards  the  market  (or  possible
       segment thereof) for FPGAs of different performance characteristics used for workload acceleration in servers. On  the  contrary,  if  new
       demand were to be created as a result of Intel developing such solutions, the impact  of  the  proposed  transaction  on  the  market  (or
       possible segment thereof) for FPGAs of different performance characteristics used for workload  acceleration  in  servers  might  even  be
       positive, including by increasing demand for integrated FPGA acceleration solutions.

    0. In that context the Commission notes that respondents to the market investigation even  consider  that  they  will  be  able  to  continue
       competing against Intel's integrated solutions on the basis of discrete solutions (see paragraph (168)). Indeed,  given  that  PCIe  is  a
       viable alternative to QPI and KTI and given that, as explained in paragraphs (126) and (127) and in paragraphs (146) to  (149),  Intel  is
       granting access to its proprietary QPI and KTI interconnect technologies, the Commission considers that any innovative integrated solution
       launched by Intel would either have no impact on the market or would add an innovative solution to existing  ones,  thereby  creating  new
       demand.

    0. Second, according to paragraph 113 of the non-horizontal Guidelines, it is “only when a sufficiently large fraction of  market  output  is
       affected by foreclosure resulting from the merger that the  merger  may  significantly  impede  effective  competition.  If  there  remain
       effective single-product players in either market, competition is unlikely to deteriorate following a conglomerate merger”.

    0. As regards the FPGA market, the Commission notes that only a minor part of the revenues of FPGAs suppliers are generated in the market (or
       segment thereof) for FPGAs of different performance characteristics used for workload acceleration in servers,[104] which  would  indicate
       that any foreclosure of this segment would have a very limited impact on the ability of FPGA suppliers to continue competing with Altera.

4 Conclusion on foreclosure of FPGA suppliers

    0. In light of the above, the Commission considers that the proposed transaction does not give rise to serious  doubts  with  regard  to  its
       compatibility with the internal market on the basis of foreclosure of FPGA suppliers.

3 Foreclosure of CPU suppliers

1 Ability to foreclose CPU suppliers

       The Notifying Party's view

    0. As regards Intel's ability to foreclose other CPU suppliers post-transaction in the potential market  for  x86  CPUs  for  servers,  Intel
       submits, first, that Altera will continue to operate as a separate business and that no early termination of  Altera's  product  lines  is
       planned.

    0. Second, Intel submits that [70-80]% of Altera's sales are done via independent distributors.  Neither  Intel  nor  Altera  will  have  the
       ability to foreclose CPU suppliers form sourcing Altera's FPGAs post-transaction since the distributors are free to sell Altera's FPGAs to
       any market participant.

    0. Third, Intel submits that workload acceleration can be achieved in different ways and not only with FPGAs. For instance, GPUs can be  used
       to accelerate computations associated with large vectors or matrices of floating point numbers and GP-GPUs  can  accelerate  non-graphical
       server workloads. According to Intel, its market share in the market for GP-GPUs is limited (below [10-20]%) while the main market player,
       Nvidia, had a share of [80-90]%.

       The results of the market investigation and the Commission’s assessment

    0. The majority of respondents to the market investigation consider that Intel will continue selling Altera's  FPGAs  compatible  with  third
       party CPUs both in the market (or segment thereof) for FPGAs of different performance characteristics used for  workload  acceleration  in
       servers and outside such a market/segment.[105] Several respondents considered that any foreclosure in  that  respect  of  FPGA  customers
       would result in an unsustainable decline of Altera's revenues.

    0. Market participants also consider that post-transaction there would be a sufficient number of FPGA suppliers to ensure  proper  supply  of
       FPGAs.

    0. Despite some CPU suppliers considering the risk of being foreclosed from purchasing Altera's FPGAs[106], the majority  of  respondents  to
       the market investigation highlighted also that there will be sufficient suppliers of FPGAs for workload acceleration even  if  the  merged
       entity were to stop selling FPGAs to third parties.[107] Respondents consider this to be the  case  even  when  considering  the  narrower
       segment of FPGAs of different performance characteristics used for workload acceleration in servers.[108]

    0. Moreover, even if, post-transaction, the prices of Altera's FPGAs were to increase, the majority of respondents consider that  they  would
       be able to find an alternative supplier for FPGAs both in a broader sense as well as for FPGAs of  different  performance  characteristics
       used for workload acceleration in servers.[109]

    0. Nonetheless, switching suppliers might not be easy, since, according to the majority of the respondents to the  market  investigation,  it
       is, already today, not easy to switch FPGA supplier.[110] In this regard, respondents to the market investigation  pointed  out  that  the
       proposed transaction will not have an impact on the difficulties involved in switching FPGA suppliers.[111]

    0. The general market interest for workload acceleration solutions is confirmed by the majority of respondents to the  market  investigation,
       which includes both FPGA and CPU suppliers, indicating that CPU suppliers and other market participants are planning to  launch  competing
       solutions to those of Intel and Altera for workload acceleration in data centres.[112]

    0. The Commission notes, first, that Intel already has a strong position in the market for x86 CPUs. This  position  will  not  change  as  a
       result of the proposed transaction.

    0. Moreover, CPU suppliers will indeed continue to be able to source FPGAs from Altera. In addition, CPU suppliers will have the  possibility
       to source FPGAs also from other suppliers such as Xilinx, the current  market  leader.  In  relation  to  the  concern  voiced  by  a  CPU
       manufacturer that post-transaction Xilinx would be the only remaining FPGA supplier, the Commission notes that there are a number of other
       FPGA suppliers left in the market, including Lattice Semiconductor and Achronix, who will continue to be  able  to  compete  on  the  FPGA
       market in general […].[113]

    0. Finally, in relation to the willingness of market participants  to  develop  competing  solutions  for  FPGA  workload  acceleration,  the
       Commission notes that on 9 October 2015, Xilinx and Qualcomm announced a strategic technical collaboration to develop  competing  workload
       acceleration solutions for servers based on different levels  of  integration  between  CPUs  and  FPGAs.[114]  This  partnership  further
       corroborates the Commission's view that Intel will not have the ability foreclose CPU suppliers from competing against Intel  in  relation
       to the development of FPGA based workload acceleration solutions for servers.

    0. In light of the above, and on the basis of the information before it, the Commission considers that, post-transaction, Intel will not have
       the ability to foreclose CPU suppliers from sourcing FPGAs from Altera or from its competitors.

2 Incentive to foreclose CPU suppliers

       The Notifying Party's view

    0. Intel submits that the primary customers of FPGAs are not data centre operators and that FPGAs used in workload acceleration are  off-the-
       shelf products which can be used in a variety of applications. Therefore terminating sales or curtailing the future development  of  FPGAs
       that are suitable for use in acceleration would require Intel to give up the large stream of revenues associated with these products.

       The results of the market investigation and the Commission’s assessment

    0. The Commission considers that it is thus unlikely that Intel would have any incentive in selling Altera's FPGAs only in connection to  its
       x86 CPUs. Indeed, [80-90]% of Altera's revenues are  generated  mainly  from  market  segments  outside  FPGAs  of  different  performance
       characteristics used for workload acceleration in servers.[115] The additional revenues from the exclusive sale of  FPGAs  connected  with
       Intel's x86 CPUs would not, therefore, compensate the loss of revenues in the other FPGA markets or segments.

    0. This assessment might change when considering only the potential market for  FPGAs  of  different  performance  characteristics  used  for
       workload acceleration in servers. Here, the incentives to sell Altera's FPGAs only in connection with Intel x86 CPUs might be  present  in
       light of the strong position of Intel in the market for x86 CPUs. However,  the  majority  of  respondents  to  the  market  investigation
       consider that Intel will continue to sell Altera's FPGAs that are compatible with third party CPUs both in the broader FPGA market as well
       as in the market (or segment thereof) for FPGAs of different performance characteristics used for workload acceleration in servers.[116]

    0. In conclusion, the Commissions considers that, while, on the  basis  of  the  information  available,  it  is  not  clear  whether,  post-
       transaction, Intel will have the incentive to foreclose CPU suppliers, Intel would not have the ability to foreclose CPU suppliers in  any
       event. As such, the proposed transaction would not give rise to serious doubts as to its compatibility with the  internal  market  on  the
       basis of conglomerate effects concerning CPU suppliers.

3 Overall likely impact on prices and choices of foreclosing CPU suppliers

    0. The market investigation gave mixed results with regards to the impact of the proposed transaction on the  CPU  market.  Some  respondents
       took the view that the proposed transaction would have a negative impact in light of Intel's already dominant  presence  in  such  market.
       Other respondents considered that there would be no impact or even a positive impact in the CPU market (both in the broader sense, as well
       as the x86 CPU market and the potential market for x86 CPUs for servers.)[117]

    0. For the reasons set out below, the Commission considers that the proposed transaction is unlikely to have a negative impact on prices  and
       choice as regards the markets for CPUs.

    0. As regards the market for x86 CPUs, the Commission considers that the strong position of Intel in this market is not  merger-specific  and
       most likely will not change as result of the proposed  transaction.  Intel's  CPU  suppliers  will  be  able  to  supply  FPGAs  or  other
       semiconductors for their workload acceleration solutions and the competitive dynamics will not be significantly altered as compared to the
       current situation.

    0. With regards to other CPU markets (e.g. CPUs used in telecommunications devices or Internet Of Things applications) the presence of  Intel
       among CPU suppliers is rather limited, which would reduce even further the effect of the proposed transaction.

4 Conclusion on foreclosure of CPU suppliers

    0. In light of the above, and on the basis of the information before it, the Commission considers that the proposed transaction does not give
       rise to serious doubts with regard to its compatibility with the internal market on the  basis  of  conglomerate  effects  concerning  CPU
       suppliers.

CONCLUSION

    0. For the above reasons, the European Commission has decided not to oppose the notified operation and to  declare  it  compatible  with  the
       internal market and with the EEA Agreement. This decision is adopted in application of  Article  6(1)(b)  of  the  Merger  Regulation  and
       Article 57 of the EEA Agreement.

For the Commission
(Signed)
Margrethe VESTAGER
Member of the Commission

-----------------------
[1]   OJ L 24, 29.1.2004, p. 1 ('the Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the  European  Union
('TFEU') has introduced certain changes, such as the replacement of 'Community'  by  'Union'  and  'common  market'  by  'internal  market'.  The
terminology of the TFEU will be used throughout this decision.

[2]   OJ L 1, 3.1.1994, p. 3 ("the EEA Agreement").

[3]   Publication in the Official Journal of the European Union No C 310, 19.09.2015, p. 7.

[4]   For a detailed description of the functioning of workload acceleration in servers see recitals (117) to (121).

[5]   In other applications where FPGAs can be used, such as wireline, wireless,  industrial,  military,  medical  and  automotive  applications,
Intel's CPUs are not used or have a limited presence. In addition, for those other applications, Intel does not  plan  to  launch  an  integrated
FPGA/CPU product.

[6]   x86 is a specific CPU architecture. Other CPU architectures comprise, for instance, the ARM-architecture and the Power architecture.

[7]   Commission decision of 13.05.2009 relating to a proceeding under Article 82 of the EC Treaty and Article 54 of the EEA  Agreement  (COMP/C-
3/37.990 – Intel), paragraph 835.

[8]   Case M.5984 – Intel/McAfee, Commission decision of 26 January 2011, paragraphs 29-30.

[9]   ARM stands for Acorn RISC Machine, which is a family of reduced instruction set computing (RISC) instruction set  architectures  (the  part
of the computer architecture related to programming), configured for various environments, developed by ARM Holdings.

[10]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 6.

[11]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 6.1.

[12]  Power Architecture is a family of RISC instruction set architectures, configured for various environments, developed by IBM.

[13]  MIPS stands for Microprocessor without Interlocked Pipeline Stages, which is a family of RISC  instruction  set  architectures,  configured
for various environments, developed by MIPS Technologies.

[14]  SPARC stands for Scalable Processor Architecture, which is  a  family  of  RISC  instruction  set  architectures,  configured  for  various
environments, developed by Sun Mycrosystems.

[15]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 7.

[16]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 7.

[17]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 7.1.

[18]  As Intel only sells x86 CPUs, its position in the overall CPU market can be used as a proxy of the relevance of x86  CPUs  in  the  overall
CPUs market. Intel has respectively a volume market share of [80-90]% in the overall market of CPUs for notebooks (see Table 10 of  Annex  12  to
the Form CO), and of [90-100]% in the overall market of CPUs for servers (see Table 1 of Annex 12 to the Form CO).

[19]  The Notifying Party submits that sales of non x86 CPUs for desktops are […] (see Notifying Party's reply to Request for Information, N.1  –
First part of reply, question 31 of 3 July 2015).

[20]  Commission decision of 13.05.2009 relating to a proceeding under Article 82 of the EC Treaty and Article 54 of the EEA Agreement  (COMP/C-3
/37.990 – Intel), paragraph 836.

[21]  Case M.5984 – Intel/McAfee, Commission decision of 26 January 2011, paragraphs 31-33.

[22]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 17.

[23]  An FPGA contains programmable logic components called logic elements (“LEs”) and a hierarchy of  reconfigurable  interconnects  that  allow
the LEs to be physically connected.

[24]  Volatile memory is computer storage that only maintains its data while the device is powered. Volatile memory contrasts  with  non-volatile
memory, which does not lose content when power is lost. Non-volatile memory has a continuous source of power  and  does  not  need  to  have  its
memory content periodically refreshed.

[25]  ASICs are integrated circuits (semiconductor chips) that are designed  for  a  specific  application  by  a  system  manufacturer  for  its
exclusive use.

[26]  ASSPs are integrated circuits that are designed for a specific application by a semiconductor supplier and sold to multiple  customers  for
integration into their products.

[27]  High-end products are manufactured at a smaller process node, which  delivers  better  performing  products.  As  of  today,  the  smallest
manufacturing node at which Altera's FPGA are manufactured is 14 nanometer (nm). By way of comparison, Xilinx's FPGAs are manufactured at 16  nm.
The semiconductor manufacturing process is further explained in section 4.3 below.

[28]  PCIe is a high-speed serial computer expansion interconnect used to connect  expansion  cards  to  the  motherboard  of  a  computer.  PCIe
specification has been developed though cooperative standard-setting under the auspices of the PCI-SIG, the community responsible for  developing
and maintaining the standardized approach to peripheral component I/O data transfers.

[29]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 8.

[30]             See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 8.1.

[31]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 9.

[32]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 9.1.

[33]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 10.

[34]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 10.1.

[35]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 11.

[36]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 12.

[37]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 13.

[38]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 13.1.

[39]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 14.

[40]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 14.1.

[41]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 15.

[42]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 15.1.

[43]  Commission decision of 24 June 2002 in Case M.2820 - STMicroelectronics/AlcatelMicroelectronics; Commission decision  of  3  July  2001  in
Case M.2439 - Hitachi/STMicroelectronics/SuperH JV; Commission decision of 10 August 2007 in Case M.4751- STM/Intel/JV;  Commission  decision  of
27 June 2008 in Case M. 5173 - STM/NXP/JV; Commission decision of 25 November 2008 in Case M. 5332 - Ericson/STM/JV; and Commission  decision  of
2 December 2009 in Case M.5535 - Renesas Technology/NEC Electronics.

[44]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question to question 18.

[45]  Commission decision of SA 30596 (N 101/2010) – GLOBALFOUNDRIES Group (Fab Booster Investment) Dresden, para. 77; State aid No.  N  480/2000
– UK - Motorola Limited, Dunfermline, Scotland; and State Aid N 434/2001 – France Aide à ATMEL.

[46]  Commission decision of SA 30596 (N 101/2010) – GLOBALFOUNDRIES Group (Fab Booster Investment) Dresden, para. 77; State aid No.  N  480/2000
– UK - Motorola Limited, Dunfermline, Scotland; and State Aid N 434/2001 – France Aide à ATMEL.

[47]  According to the Notifying Party, the market shares provided in this table overestimate Intel's position, since the  total  market  against
which those shares are calculated does not include non x86 based products in the PC and server space.

[48]  C/RISC consists of IBM's POWER architecture and SPARQ architecture. C/RISC as ARM is part of  RISC  architecture.  RISC  architectures  are
characterized by a relatively small set of instructions which typically execute more quickly than CISC architectures, on which Intel is based.

[49]  "First to node" advantage refers to the competitive advantage that an FPGA supplier enjoys from a commercial perspective  when  it  is  the
first to provide a product at a narrower process node. For example, Xilinx's higher market share in the high-end FPGA market segment compared  to
Altera’s is due to its time-to-market advantage in releasing FPGAs manufactured at 22 nm process node.

[50]  IBS, Global system IC industry service report, December 2014, Table 2.

[51]  See Notifying Party's reply to Request for Information of 7 October 2015.

[52]  OJ C 265, 18.10.2008, p. 6.

[53]  By way of example, the multi-chip package resulting from the planned integration of Intel's  CPUs  and  Altera's  FPGAs  is  an  electronic
assembly wherein multiple integrated circuits are linked onto a unifying substrate. This latter operation is carried out after the first  process
of wafer manufacturing.

[54]  See Notifying Party's reply to Request for Information N. 3 of 15 September 2015.

[55]  Pre-transaction, Altera and Intel signed a foundry agreement with […]. See Annex 39 to the Form CO.

[56]  See Annex 29 and Annex 30 to the Form CO.

[57]  See non-horizontal Guidelines, paragraph 18.

[58]  See non-horizontal Guidelines, paragraph 29.

[59]  See non-horizontal Guidelines, paragraph 30.

[60]  In particular, Intel's contract manufacturing agreement with Achronix concerns the access to Intel's 22 nm process technology. […].

[61]  Form CO, paragraph 441.

[62]  IBS, Global system IC industry service report, Dec. 2014, Table 2.

[63]  See https://forums.xilinx.com/t5/Xcell-Daily-Blog/TSMC-and-Xilinx-collaborate-on-7nm-process-technology-and/ba-p/630642.

[64]     See    Jessica    Lipsky,    TSMC    Outlines    16nm,    10nm    Plans,     EETimes.com,     8     April     2015,     available     at
http://www.eetimes.com/document.asp?doc_id=1326286.

[65]  GlobalFoundries, Global Foundries Solidifies 14nm FinFET Design Infrastructure for Next-Generation Chip Designs, 2 June 2015, available  at
http://globalfoundries.com/newsroom/press-releases/2015/06/02/globalfoundries-solidifies-14nm-finfet-design-infrastructure-for-next-generation-
chip-designs.

[66]  Currently, Altera purchases the majority of its chips from […]; some of Altera's products are manufactured by [...] and […].

[67]  See Intel's presentation, "Project alphabet – Preliminary due diligence" of 22 March 2015. See  Notifying  Party's  reply  to  Request  for
Information, N.1 – First part of reply, question 31 of 3 July 2015.

[68]  On the potential effect of the proposed transaction as regards the integration of FPGAs and CPUs, see section 5.4 below.

[69]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 5.

[70]  See non-horizontal Guidelines – paragraph 99

[71]  Companies testing this solution (based on PCIe) include large cloud service providers such as Microsoft  and  Baidu.  Apart  from  workload
acceleration in data centre servers, there seems to be no demand or testing of integrating CPUs with FPGAs.

[72]  PCIe is a high-speed serial computer expansion interconnect used to connect expansion cards to the motherboard of a computer.

[73]  KTI is the name used during the development phase, while UPI is the commercial name of the very same technology.

[74]  Notably, Intel's CPU product used in servers called "Xeon".

[75]  Fair Reasonable And Non-Discriminatory.

[76]  […].

[77]  The proposed transaction was publicly announced on 1 June 2015.

[78]  The merger agreement ("Agreement and Plan of Merger") was signed on 31 May 2015.

[79]  In particular, according to Intel […].

[80]  […].

[81]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 47.1.

[82]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 51.1.

[83]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 33.

[84]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 34

[85]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 34.2.

[86]  Replies to question 41

[87]  Replies to question 41.1

[88]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 41.1.

[89]  Replies to question 44

[90]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 35.

[91]  See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 41.1.

[92]  The Commission notes that, although the table has been provided by Intel, the parameters  listed  correspond  to  a  large  extent  to  the
parameters listed by other market participants as key parameters for comparison of the respective interconnect technologies.

[93]  A higher protocol efficiency means that bigger strings of data can be transported and that they have less overheads (identifiers  that  are
not part of the actual data being transported).

[94]  The cost estimates are based on recent bids that Intel received for  purchases  of  QPI-attached  FPGAs  and  PCIe  –attached  FPGAs,  both
configured with the same Altera FPGA. The bids were for small quantities. The prices can thus not be compared  to  prices  that  a  vendor  would
quote for much larger quantities.

[95]  The Commission notes that this does not mean that acceleration solutions based on PCIe 4.0 will be available as  of  2016.  FPGA  suppliers
will first have to develop their technologies on the basis of this standard.

[96]  The QPI licence between Intel and […] which became effective in […] has an initial term until […]. The initial  term  of  the  QPI  licence
between Intel and […], which became effective in […]. At present, the agreement can be terminated within the applicable notice  periods  by  both
sides, provided the applicable conditions are met. The Commission also notes that the KTI licences offered by  Intel  to  […]  would  run  for  a
period of […] years upon signature by […] respectively.

[97]  According to one respondent to the market investigation Intel could do so by refusing to grant a licence to proprietary extensions  to  the
PCIe standards that enable users to access certain functions  of  Intel's  CPUs  (see  replies  to  Commission  questionnaire  to  customers  and
competitors Q1 of 9 September 2015, question 45.1).

[98]  […].

[99]  This corresponds to less than [0-5]% of Intel's projected sales for CPUs used in servers in the same time period. Intel submits  that  more
recent estimates expect a slightly higher demand, but that, even if the number were to be doubled, it would still not amount to more than  [0-5]%
of Intel's expected CPU sales in the same period of time.

[100]       See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 35.1.

[101]       See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 51.

[102]       See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 50

[103]       Based on the data provided by Intel, Altera's overall FPGA sales amounted to approximately EUR 1.23 billion in 2014.  […]%  in  terms
of value would thus correspond to EUR […] million (see reply to question 1 of Intel's reply to the RFI dated 1 October 2015).

[104]       See also paragraphs (163) and (172).

[105]       See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, questions 48 and 49.

[106]       A CPU manufacturer raised concerns that the proposed transaction would leave Xilinx as the only remaining source of  FPGAs,  even  if
Altera were to continue to sell FPGAs to third parties. That competitor  explains  that  CPU  designers  need  to  share  extensive  confidential
information about their designs with FPGA vendors. Sharing such information with  Intel  "would  create  unacceptable  risks,  which  means  that
following the Proposed Transaction, [the CPU manufacturer] and other CPU designers will be unwilling  to  use  the  combined  Intel/Altera  as  a
supplier of FPGAs. Having Xilinx as the sole feasible supplier would likely result in increased costs and decreased innovation, and will  deprive
[the CPU manufacturer] of the ability to dual source  FPGAs  to  ensure  continuity  and  reliability  of  supply".  See  replies  to  Commission
questionnaire to customers and competitors Q1 of 9 September 2015, question 50.1

[107]       See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 36

[108]       See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 26

[109]       See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 36

[110]       See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, questions 25 and 25.1

[111]       See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 25.2

[112]       See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 40

[113]       In particular, capacity does not seem to be a constraint in the present case as most semiconductor companies, […], rely on  fabs  for
the production of their products and, as long as the overall demand for FPGAs does not increase, FPGA suppliers and their manufacturing  partners
would be able to accommodate a shift in demand.

[114]        See   https://www.qualcomm.com/news/releases/2015/10/08/qualcomm-and-xilinx-collaborate-deliver-industry-leading-heterogeneous   and
https://forums.xilinx.com/t5/Xcell-Daily-Blog/Qualcomm-and-Xilinx-Collaborate-to-Deliver-Industry-Leading/ba-p/659168 .

[115]       Data for 2014, source: Form CO.

[116]       See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, questions 48 and 49.

[117]       See replies to Commission questionnaire to customers and competitors Q1 of 9 September 2015, question 51.

-----------------------
 In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC)  No  139/2004
 concerning non-disclosure of business secrets and other confidential information.  The  omissions  are  shown  thus  […].  Where  possible  the
 information omitted has been replaced by ranges of figures or a general description.

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE