Intel to acquire Tower Semiconductor for $5.4 billion as part of their IDM 2.0 expansion

Intel takes its next step to expand their contract foundry buisness

Intel to acquire Tower Semiconductor for $5.4 billion as part of their IDM 2.0 expansion

Intel's upping its manufacturing game by acquiring Tower Semiconductor

Intel's investing heavily into their IDM 2.0 strategy, setting up the company as a contract foundry like TSMC, GlobalFoundries, and Samsung. To do this, Intel has set up Intel Foundry Services (IFS), and has starting building new manufacturing sites to meet the world's growing demand for semiconductor products. 

Today, Intel has confirmed that they intend to spend $5.4 billion to acquire Tower Semiconductor, an Israeli semiconductor manufacturer that specialises in analog products that Intel doesn't currently manufacture. Intel is a long-term customer of Tower Semiconductor, and with this acquisition, Intel will expand its manufacturing offerings and acquire Tower Semiconductor's experience within the contract foundry market.

Intel's acquiring Tower Semiconductor for two reasons. First, Tower Semiconductor can manufacture speciality products that Intel cannot. Second, Tower Semiconductor can use Tower Semiconductor's expertise and customer relationships to accelerate the growth of IFS. IFS will gain access to more exotic manufacturing capabilities and Intel will acquire the talent they need to expand IFS in other areas.

Intel expects to acquire Tower Semiconductor using its cash reserves and expects the acquisition to be completed within a year. Acquiring Tower Semiconductor will also grant Intel ownership of Tower's manufacturing facilities, and access to the facilities that Tower jointly owns with other companies. 

To acquire Tower Semiconductor, Intel will need the approval of Tower's stockholders and regulatory approval from various governments. While this deal is unlikely to be seen as anti-competitive, there is a chance that this deal will fall through before it closes. The deal isn't closed until it is closed. 

What follows is Intel's Press Release on their planned acquisition of Tower Semiconductor. 

Intel to acquire Tower Semiconductor for $5.4 billion as part of their IDM 2.0 expansion

Press Release - Intel to Acquire Tower Semiconductor for $5.4 Billion

- Transaction creates a globally diverse end-to-end foundry to help meet growing semiconductor demand and brings more value to customers across the nearly $100 billion addressable foundry market.
- Acquisition accelerates Intel’s path to becoming a major provider of foundry services and capacity globally, now offering one of the industry’s broadest portfolios of differentiated technology.
- Highly complementary transaction brings together Intel’s leading-edge nodes and scale manufacturing with Tower Semiconductor’s specialty technologies and customer-first approach to deliver leading technology and manufacturing capabilities and enhanced value to customers globally.
Transaction is expected to be immediately accretive to Intel’s non-GAAP EPS.
- Intel and Tower Semiconductor management will host a conference call for investors, media and industry analysts at 5:30 a.m. PST today (3:30 p.m. Israel Standard Time) to provide further details on the transaction.

Acquisition accelerates Intel’s global, end-to-end foundry business

SANTA CLARA, Calif., and MIGDAL HAEMEK, Israel, Feb. 15, 2022 – Intel Corporation (Nasdaq: INTC) and Tower Semiconductor (Nasdaq: TSEM), a leading foundry for analog semiconductor solutions, today announced a definitive agreement under which Intel will acquire Tower for $53 per share in cash, representing a total enterprise value of approximately $5.4 billion. The acquisition significantly advances Intel’s IDM 2.0 strategy as the company further expands its manufacturing capacity, global footprint and technology portfolio to address unprecedented industry demand.

“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,” said Pat Gelsinger, Intel CEO. “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 U.S.- and Europe-based foundry capacity to serve customers globally. IFS currently offers leading-edge process and packaging technology, committed capacity in the U.S. 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. Tower operates a geographically complementary foundry presence with facilities in the U.S. and Asia serving fabless companies as well as IDMs and offers more than 2 million wafer starts per year of capacity – including growth opportunities in Texas, Israel, Italy and Japan. Tower also brings a foundry-first customer approach with an industry-leading customer support portal and IP storefront, as well as design services and capabilities.

“With a rich history, Tower has built an incredible range of specialty analog foundry solutions based upon deep customer partnerships, with worldwide manufacturing capabilities. I could not be prouder of the company and of our talented and dedicated employees,” said Russell Ellwanger, Tower CEO. “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. We look forward to being an integral part of Intel’s foundry offering.”

Dr. Randhir Thakur, president of Intel Foundry Services, said: “We are thrilled to welcome the Tower team to Intel. Their decades of foundry experience, deep customer relationships and technology offerings will accelerate the growth of Intel Foundry Services. We are building Intel Foundry Services to be a customer-first technology innovator with the broadest range of IP, services and capacity. Tower and IFS together will provide a broad portfolio of foundry solutions at global scale to enable our customers’ ambitions.”

Intel is the only leading-edge player with both research and development and manufacturing in the U.S., 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 highly 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 is strongly positioned to bring more value to customers across the nearly $100 billion addressable foundry market.

Transaction Details and Timing

The transaction is expected to be immediately accretive to Intel’s non-GAAP EPS. Intel intends to fund the acquisition with cash from the balance sheet.

The transaction is expected to close in approximately 12 months. It has been unanimously approved by Intel’s and Tower’s boards of directors and is subject to certain regulatory approvals and customary closing conditions, including the approval of Tower’s stockholders.

IFS and Tower Semiconductor will run independently until deal closure; IFS will continue to be led by Thakur, and Tower will continue to be led by Ellwanger during this time. Upon the close of the transaction, Intel’s intent is for the two organizations to become a fully integrated foundry business. The company will share more details on integration plans at that time.

Goldman Sachs & Co. LLC served as financial advisor to Intel; and Skadden, Arps, Slate, Meagher & Flom LLP and Yigal Arnon & Co. served as legal advisors. J.P. Morgan Securities LLC served as financial advisor to Tower; and Latham & Watkins, LLP and FISCHER (FBC & Co.) served as legal advisors.

You can join the discussion on Intel's planned acquisition of Tower Semiconductor on the OC3D Forums.

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