In the midst of a fairly forgettable year, Intel (INTC -0.62%) has finally done something noteworthy: Last month, it started shipping its Agilex field-programmable gate arrays (FPGAs) to early access customers, including Microsoft.

Why is this important? Well, rival Xilinx (XLNX) has been enjoying terrific growth of late thanks to its dominance in this fast-growing tech niche. Intel, by contrast, had been behind Xilinx on the FPGA curve. But with the debut of this new line, which is built on its 10-nanometer platform, Chipzilla should be able to challenge Xilinx for a significant piece of the FPGA pie.

A pair of boxing gloves hanging on a rope that surrounds a boxing ring.

Image Source: Getty Images.

5G networks are propelling FPGA demand

In the second quarter, revenue from Intel's programmable solutions group (PSG) fell 5% year over year to $489 million. This was in sharp contrast with Xilinx's latest quarterly report, which revealed a 24% increase in total revenue to a record $850 million.

Xilinx is a pure-play provider of FPGAs -- chips that can be bought off the shelf and configured to perform a variety of tasks. Their advantage is that they're reprogrammable, so customers can make tweaks to their functionality.

That flexibility is why FPGAs have been in high demand by telecoms that are deploying fifth-generation (5G) wireless networks across the globe, and Xilinx has been a prime beneficiary of that demand. Revenue from the chipmaker's wired and wireless segment shot up 66% year over year last quarter, as its FPGAs have gained traction in markets such as South Korea where 5G deployments are in full swing.

Intel, by contrast, has largely been left out of the party.

Going toe-to-toe with its rival

Xilinx has prospered in this niche because it had a significant technological lead. It was the first to ship 14/16-nanometer FPGAs, and they reached the market a year before Intel's competing product. By the time Intel's 14nm FPGAs arrived, Xilinx had scored more than 200 customers.

But with its Agilex FPGAs, Intel has narrowed the lag to just two months as Xilinx only started shipping its 7nm Versal ACAP (adaptive compute acceleration platform) chips in June.

Intel says that its Agilex FPGAs are well-suited to the needs of data centers and 5G networks because they can ramp up performance and lower power consumption. In fact, Intel says that Agilex can deliver 40% higher performance than its previous-generation Stratix FPGAs, or reduce power consumption by 40% compared to those chips.

What's more, Intel says that the artificial intelligence (AI) capability of the Agilex FPGAs will help its customers build smarter networks thanks to real-time insights.

Xilinx had similar things to say a couple of months ago when it began the commercial shipments of its Versal line, asserting that its new chips are more capable than conventional FPGAs, and can be deployed in data centers, automotive applications, and 5G networks.

So both companies now seem to be toe-to-toe in the FPGA space, and Intel has already fired its salvo by landing Microsoft as a partner. This is an important development as Microsoft had reportedly picked Xilinx's FPGAs to power more than half of its Azure cloud servers less than a year ago.

There's now a possibility that Intel could close its big gap with Xilinx in the FPGA space and significantly boost its PSG revenue.

Moreover, annual revenues in the FPGA market are expected to clock in at more than $11 billion by 2025, according to estimates. So Intel has a lot to gain -- and with Agilex, a real chance to gain it.