16 February 2022
Intel to acquire analog foundry Tower for $5.4bn
Intel Corp of Santa Clara, CA, USA has agreed to acquire specialty analog foundry Tower Semiconductor Ltd of Migdal Haemek, Israel for $53 per share in cash, representing a total enterprise value of about $5.4bn. The acquisition advances Intel’s IDM 2.0 strategy as it further expands its manufacturing capacity, global footprint and technology portfolio to address unprecedented industry demand.
The transaction has been unanimously approved by the boards of directors of both Intel and Tower and (subject to certain regulatory approvals and customary closing conditions, including the approval of Tower’s stockholders) is expected to close in about 12 months and be immediately accretive to Intel’s non-GAAP EPS. Intel intends to fund the acquisition with cash from the balance sheet.
To provide multi-fab sourcing and extended capacity for its customers, Tower has two fabrication plants in Migdal Haemek (150mm and 200mm), and two at its US subsidiaries in Newport Beach, CA and San Antonio, TX (both 200mm), and three at TowerJazz Japan Ltd (two 200mm and one 300mm) which it owns through its 51% holdings in TPSCo. Also, Tower is sharing a 300mm manufacturing facility being established in Italy with ST.
“Tower’s specialty technology portfolio, geographic reach, deep customer relationships and services-first operations will help scale Intel’s foundry services and advance our goal of becoming a major provider of foundry capacity globally,” says Intel’s CEO Pat Gelsinger. “This deal will enable Intel to offer a compelling breadth of leading-edge nodes and differentiated specialty technologies on mature nodes – unlocking new opportunities for existing and future customers in an era of unprecedented demand for semiconductors.”
As a key part of its IDM 2.0 strategy, Intel established Intel Foundry Services (IFS) in March 2021 to help meet the growing global demand for semiconductor manufacturing capacity and to become a major provider of US- and Europe-based foundry capacity to serve customers globally. IFS currently offers leading-edge process and packaging technology, committed capacity in the USA and Europe and other geographies in the future, and a broad intellectual property (IP) portfolio.
Tower’s expertise in specialty technologies, such as radio frequency (RF), power, silicon germanium (SiGe) and industrial sensors, extensive IP and electronic design automation (EDA) partnerships, and established foundry footprint will provide broad coverage to both Intel and Tower’s customers globally. Tower serves high-growth markets such as mobile, automotive and power. Operating a geographically complementary foundry presence with facilities in the USA and Asia serving fabless companies as well as IDMs, it offers more than 2 million wafer starts per year of capacity – including growth opportunities in Texas, Israel, Italy and Japan. Tower also has what is described as a foundry-first customer approach with a customer support portal and IP storefront, as well as design services and capabilities.
“Tower has built an incredible range of specialty analog foundry solutions based upon deep customer partnerships, with worldwide manufacturing capabilities,” says Tower’s CEO Russell Ellwanger. “Together with Intel, we will drive new and meaningful growth opportunities and offer even greater value to our customers through a full suite of technology solutions and nodes and a greatly expanded global manufacturing footprint,” he reckons.
“Their decades of foundry experience, deep customer relationships and technology offerings will accelerate the growth of Intel Foundry Services,” comments IFS’ president Dr Randhir Thakur. “We are building Intel Foundry Services to be a customer-first technology innovator with the broadest range of IP, services and capacity,” he adds. “Tower and IFS together will provide a broad portfolio of foundry solutions at global scale.”
Intel claims to be the only leading-edge player with both R&D and manufacturing in the USA, including recently announced capacity expansions in Arizona and New Mexico, as well as plans to build a new mega-site in Ohio. Tower’s technology and manufacturing footprint is complementary to Intel’s IFS capabilities in leading-edge processes, allowing the combined company to provide broader offerings to customers at scale. With the addition of Tower, Intel reckons that it is positioned to bring more value to customers across the nearly $100bn addressable foundry market.
Until the deal’s closure, IFS and Tower will run independently; IFS will continue to be led by Thakur, and Tower will continue to be led by Ellwanger. Intel’s intent is then for the two organizations to become a fully integrated foundry business.