Intel Corp. (Nasdaq: INTC) is close to buying Israeli chipmaker Tower Semiconductor Ltd. (Nasdaq: TSEM; TASE:TSEM) for $6 billion, according to a report in the "Wall Street Journal." Migdal Ha'Emek based Tower's share price is up 48.05% in afterhours trading on Wall Street, after closing last night at $33.13, giving a market cap of $3.821 billion. The acquisition is part of Intel's aggressive strategic plan to expand production capability in a range of technologies and products. According to the report the deal is expected to be announced this week, "assuming that the talks don't break down."
The global shortage of chips since the outbreak of the Covid pandemic and the growing worldwide appetite for technology have pushed up Tower's revenue and profits to record heights. The company, headed by CEO Russell Ellwanger, produces analog chips for a range of customers in the computer, vehicle, communications and defense industries.
Analog chips are simpler chips to design and manufacture compared with central processing unit (CPU) chips and are mainly used as electronic sensors for temperature, weather or exposure to light. Among other things Tower manufactures chips for reading security cameras, sensors for identifying passersby, monitoring energy consumption for cars, gas sensors for industrial plants and X-ray sensors for the medical sector. Acquiring Tower Semiconductor's fab would bring Intel deep into the foundry sector - in other words chipmakers serving external customers, rather than Intel itself.
The "foundry" strategy is one of the main foundation stones of Intel CEO Pat Gelsinger's strategy to make Intel able to compete against global giants like Samsung, ARM, and TSMC. In the past "The Wall Street Journal" has reported that Intel was interested in a similar deal to acquire Tower Semiconductor rival Global Foundries but the fund controlling that company, Abu Dhabi's Mubadala Fund, opted for an IPO instead.
If Intel goes ahead with its plans to buy Tower Semiconductor, then the chip fab in Migdal Ha'Emek will become Intel's second major fab in Israel after its chip manufacturing site in Kiryat Gat.
Published by Globes, Israel business news - en.globes.co.il - on February 15, 2022.
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