Intel is nearing a deal to acquire Altera, a maker of "programmable" processors, for as much as $15bn, according to people familiar with matter.
A deal could be announced as early as next week, said one person informed about the negotiations, reports James Fontanella-Khan in New York.
Although deal talks are in an advanced stage they could still fall apart, the person warned, stressing that an earlier attempt between the two companies to reach an agreement had collapsed after they failed to agree on a transaction price.
The revival of a deal between Intel and Altera comes on the heels of a wave of mergers and acquisitions in the chip making sector.
On Thursday Singapore-based Avago agreed to buy US rival Broadcom for $37bn in cash-and-stock in the largest acquisition seen in the technology world since the late-1990s dotcom bubble.
News of a possible deal between Intel and Altera was first reported by the New York Post.
Shares in Altera are up 3.5 per cent at $48.61 on Friday, after closing 1.9 per cent lower the previous day.