In a deal between two mainstay Silicon Valley chip makers, Avago Technologies has agreed to buy LSI for $6.6 billion in cash. In doing so, Avago will  move into networking and storage chips, which are becoming more popular based on the growth of cloud and mobile computing.

Avago, which was formerly known as Agilent Technologies and before that the chip division of Hewlett-Packard, has turned to Silver Lake Partners to finance the deal. Silver Lake acquired Agilent with Kohlberg Kravis Roberts in 2005 and then took it public in 2008.

“This highly complementary and compelling acquisition positions Avago as a leader in the enterprise storage market and expands our offerings and capabilities in wired infrastructure, particularly system-level expertise,” Hock Tan, Avago’s chief executive, said in a statement. “This combination will increase the company’s scale and diversify our revenue and customer base.”

LSI was formed 32 years ago by Wilf Corrigan (pictured above at the Semiconductor Industry Association dinner last month) as a custom chip maker. Corrigan is a well-known figure in the chip industry. A native of Liverpool, England, and the son of a dock worker, he got a degree in chemical engineering and moved to the U.S. to work for Motorola Semiconductor.

Corrigan was known for telling hilarious stories. Upon arriving at his first chip job, he said he opened a dictionary to find out what a “semiconductor” was. Then the door burst open and a manager ordered him to get out on the factory floor and find out why the semiconductor line was down.

He formed LSI in 1981 — relatively late in the game when there were already immense chip makers like Intel — to create custom chips. LSI would fashion the substrate of a chip and then leave the final layers unfinished. A customer, such as a computer maker or game console designer, would come in and finish the design, tailoring it to their own needs. Then the chip could be manufactured in much less time compared to starting from scratch.

Corrigan was a statesman of the semiconductor industry during its formative years in Silicon Valley. He was a founder of the Semiconductor Industry Association, which was created in 1977 to erect trade policies to deal with unfair competition from overseas rivals such as Japan, which had erected trade barriers in its own country even as its chip makers were dumping chips in the U.S. (that is, selling chips below price in order to drive competitors out of the market). Corrigan served two terms as president of the SIA.

LSI had great success supplying custom chips to Sony for the original PlayStation, but as the chip industry matured, it shifted its focus. Corrigan retired in 2005 as the company made its move into storage and networking.

Silver Lake Partners sold its Avago holdings last year, but it retained a seat on its board. The New York Times said the transaction was one of the most lucrative in Silver Lake’s history, generating a return of five times the initial investment.

Under the deal, Avago will pay $11.15 a share, a 41 percent premium above LSI’s closing stock price on Friday. Avago makes chips for mobile devices, network infrastructure, and industrial companies.

Silver Lake is providing $1 billion in a convertible note, while banks are providing $4.6 billion in loans.

LSI shifted in recent years from a broad custom chip strategy to one focused on making chips for networks and storage devices in data centers. It reported profits of $196.2 million last year on sales of $2.5 billion.

“We are pleased to renew our highly successful partnership with Hock Tan and the Avago management team,” Kenneth Hao, a managing partner at Silver Lake, said in a statement. “We believe this is a strategically compelling transaction that creates a tremendous opportunity in the enterprise storage and networking markets, and will position Avago as one of the global leaders in the semiconductor industry.”

The deal is expected to close in the first half of 2014, pending approvals.

Will Strauss, analyst at Forward Concepts, said, “The deal strengthens Avago’s wired and wireless infrastructure business and adds leadership enterprise storage capabilities to its product portfolio. Avago’s wireless business (primarily power amplifiers and film bulk acoustic resonators/duplexers) has accounted for about 45 percent of the company’s revenue, with Apple as their biggest wireless customer. The combined company is said to be strongly positioned to capitalize on the growing opportunities in data center IP and mobile data traffic and annual revenues of about $5 billion are projected.”