Intel set to acquire Tower Semiconductor • The Register

Intel has confirmed plans to spend $5.4 billion to acquire Israeli chip company Tower Semiconductor as part of its plan to expand and diversify its chip manufacturing business.

The US chipmaker announced that it has entered into a definitive agreement to acquire Tower Semiconductor, which specializes in manufacturing high-value analog semiconductor components for more than 300 customers worldwide. The company serves markets such as automotive, medical, industrial, consumer, aerospace and defense.

The transaction is expected to close in approximately one year. It was unanimously approved by the boards of Intel and Tower, the two companies said.

Intel said the deal is a “highly complementary transaction” that combines its own expertise in large-scale manufacturing with specialized technologies from Tower Semiconductor. Under terms of the agreement, Intel will acquire Tower for $53 per share in cash, which values ​​the company at approximately $5.4 billion.

Intel also said the acquisition will accelerate the company’s path to becoming a major provider of foundry services and capabilities globally, adding that Tower Semiconductor will enable it to offer one of the world’s most differentiated technology portfolios. largest in the sector.

The chip giant hinted that the move would allow Intel to meet the growing demand for semiconductors that has been seen as economies begin to recover from the pandemic.

“This agreement will allow Intel to offer a compelling portfolio of cutting-edge nodes and differentiated specialty technologies on mature nodes, unlocking new opportunities for existing and future customers at a time of unprecedented demand for semiconductors,” CEO Pat Gelsinger said in a statement.

The move is part of the Intel Integrated Device Manufacturing (IDM) 2.0 strategy, which Gelsinger unveiled last year as part of a plan to revitalize the chipmaker’s fortunes. IDM included plans for significant manufacturing expansion, beginning with an estimated $20 billion investment for two new manufacturing plants in Arizona. He also launched plans for Intel to become a major provider of foundry capability in the United States and Europe to serve customers worldwide.

As part of this latest ambition, Intel created Intel Foundry Services (IFS) in March 2021. It currently offers processing and packaging technology, with planned capacity in other geographies beyond the United States. and Europe, as well as what Intel describes as broad intellectual property (IP).

Intel has also committed $20 billion to build semiconductor factories in Ohio, and reports last year said the company was pursuing a $30 billion acquisition for chip-making operation GlobalFoundries. , but the latter was instead made public with an IPO on the Nasdaq stock exchange.

Who benefits? Tower currently has no controlling shareholders and is backed by several large institutional investors from the United States and Israel. Institutional holdings of Tower Holdings at the end of 2021 indicated that the major shareholder was Wellington Management Group of the United States.

The company said it has two manufacturing plants in Israel (150mm and 200mm), two in the United States (200mm) and three in Japan (two 200mm and one 300mm), which it owns through its 51% stake in TPSCo and also shares a “300mm fab being established in Italy with ST Microelectronics”.

According to Richard Gordon, vice president of semiconductors and electronics at analyst Gartner, the latest move makes sense because Tower isn’t too big an operation for Intel to swallow, and Intel already has a long history and a presence in Israel. “The timing is right; foundry capacity is limited so there is no shortage of customers and prices for finished wafers are healthy,” he said. The register.

Gordon said Intel’s motivation for this and the whole IDM 2.0 strategy is that the company’s traditional market for high-performance microprocessor chips is becoming more saturated, more competitive and therefore lower growth, from so the chip giant needs to diversify its business.

“Future market growth will come from more specialized high-performance processors (as in AI) rather than general-purpose x86,” he said.

The foundry services business is highly concentrated and capital intensive. It is already largely dominated by TSMC, Samsung and GlobalFoundries. Nonetheless, Intel is “well positioned as a manufacturing powerhouse with deep pockets to enter this market and compete at the highest level,” Gordon said. ®

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