Intel’s US$5.4 billion acquisition of Israel’s Tower Semiconductor to help it take on TSMC in contract chip-making
- The acquisition gets Intel customers and expertise in the foundry business as it seeks to expand beyond producing its own designs
- The chip maker’s recent spending spree, including a US$20 billion plant in Ohio, has put investors on edge as it has weighed on profit margins
Intel will pay US$53 per share in cash for Tower, according to a statement Tuesday. The offer represents a 60 per cent premium to Tower’s closing share price in US trading on Monday. The companies’ boards have approved the transaction, which they expect will close in about 12 months.
Shares of Tower rose 42 per cent in New York on Tuesday while Intel gained 1.4 per cent.
With Tower, Intel is acquiring customers and expertise. The chip-foundry industry requires experience in handling different types of chips and designs. Intel has previously had little success in that area because of a lack of commitment to it, Gelsinger has said. Intel’s factories have historically produced only its own designs.
Tower makes power management chips, image sensors and a variety of other semiconductors. Its customers include Analog Devices Inc and Broadcom Inc, according to data compiled by Bloomberg.
What the move doesn’t provide is scale. Tower had annual sales of about US$1.3 billion last year, a fraction of TSMC’s US$56 billion.
Analysts at KeyBanc Capital Markets called the deal “moderately positive” for Intel. Since Taiwan Semiconductor is a specialty foundry, it’s unclear whether the acquisition will help Intel expand to the same volumes and compete with Samsung and TSMC on mainstream process technologies.