California, US (BBN)-The world's biggest chipmaker, Intel, has agreed to buy smaller rival Altera in a $16.7bn (£10.9bn) deal.
Intel said it would pay $54 a share for the firm, 10.5% higher than the level Altera's shares closed at on Friday, reports BBC.
The combination will enable "new classes of products", said Intel.
The deal comes less than a week after Avago Technologies agreed to buy Broadcom Corp for $37bn, marking the most expensive deal ever for the chipmaking sector.
And earlier in the year, NXP Semiconductors' said it would spend $12bn to buy Freescale Semiconductor.
'CLOSE PARTNERSHIP'
The two firms already work together, with Intel manufacturing some of the chips designed by Altera, while Altera has used some of Intel's technology in the design of its chips.
While most of Intel's chips are used in servers, Altera's chips are used in phone networks and cars - an area Intel has been looking to expand into.
Given our close partnership, we've seen first hand the many benefits of our relationship with Intel," said Altera chief executive and chairman John Danne.
Intel chief executive Brian Krzanich said said the acquisition would enable it to "do more".
Intel's growth strategy is to expand our core assets into profitable, complementary market segments," he added.
The boards of both firms have already agreed the deal, and Intel said it expected the acquisition to be completed within six to nine months.