Intel has confirmed its $5.4 billion plans to acquire Tower Semiconductor, just hours after the first unofficial information about the move broke. The deal will boost Intel's IDM 2.0 strategy that involves outsourcing some production to foundries while making chips for third parties at Intel's fabs. The move will also bring in additional capacity of 2 million wafer starts per year to the semiconductor giant's Intel Foundry Services division.
Intel will fund the $5.4 billion transaction for Tower Semiconductor with cash from the balance sheet. The deal is expected to close in 12 months. For $5.4 billion, Intel will get a host of specialty process technologies, including radio frequency (RF), power, silicon-germanium (SiGe) and industrial sensors, extensive IP, electronic design automation (EDA), and customers partnerships.
"Tower's speciality 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."
In addition, Intel will get seven fabs: a 150-mm and a 200-mm fab in Migdal Haemek, Israel; two 200-mm fabs in the United States (Newport Beach, California and in San Antonio, Texas); two 200-mm fabs in Japan; and one 300-mm fab in Japan. The fabs in Japan are formally controlled by TPSCo, a joint venture between Tower (51%) and Nuvoton (49%). For now, Intel does not say whether it intends to buy Nuvoton’s stake, or will continue collaborating with the company. Tower Semi’s production capacity is about two million wafers starts per year.
Intel's acquisition of Tower Semiconductor not only greatly boosts the company's IFS division, but marks another important step in consolidation of the chip industry. Traditionally, Intel has strived to be the leader when it comes to leading-edge nodes and its fabrication processes are still among the most advanced in the industry. The acquisition of Tower Semi is not consistent with Intel's usual strategy, but with Intel's intention to seriously enter the foundry business, Tower Semiconductor broadens its scope with specialty technologies and will help attract appropriate talent, clients, contracts, and partnerships.
"Tower has built an incredible range of speciality analog foundry solutions based upon deep customer partnerships, with worldwide manufacturing capabilities," 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."
Tower competes against GlobalFoundries, Vanguard International Semiconductor, and United Microelectronics Corp. Meanwhile, Intel's IFS will compete against TSMC and Samsung Foundry. The takeover of Tower naturally expands IFS's portfolio of technologies as well as its clients base. That said, it remains to be seen how TSMC and Samsung Foundry will respond to Intel's acquisition.