Intel to acquire Tower Semi of Israel for $5.4B in specialty chip bid

Intel will acquire Tower Semiconductor of Israel for $5.4 billion to help round out Intel’s young foundry business primarily for access to specialty analog processors used in power applications, including those needed in automotive.

The companies announced the acquisition Tuesday, noting that Intel will pay $53 per share of Tower in cash. The deal is subject to regulatory review, including from China, and is expected to close within a year.

Intel CEO Pat Gelsinger said the regulatory approval is expected since the two companies are highly complementary with Tower’s technology filling Intel’s foundry services with its creation of Intel Foundry Services nearly a year ago.

On a call with analysts and reporters, Gelsinger said Tower’s  management experience of running a foundry business for decades will be of value to Intel. “My expectation is to fully merge IFS and Tower into a single foundry business [and] fully benefit from decades of experience in how to run a customer-centric business,” Gelsinger said.

Tower has global operations, including a relationship with ST Microelectronics to share a manufacturing facility in Italy, that Intel will benefit from, Gelsinger added.

Tower specialty technologies include sensors and chips to support radio frequency, power, silicon-germanium and industrial uses.  In addition, Tower has intellectual property and electronic design automation partnerships to provide broad coverage in a $100 billion market, the companies said.

Gelsinger also said Tower’s technologies will be used to support commercial as well as defense and intelligence opportunities. Last year, Intel joined the RAMP-C program to support a domestic U.S. foundry ecosystem that gives the U.S. Department of Defense access to leading edge technology. Gelsinger said intel’s involvement with RAMP C and work with Tower gives Intel “a great opportunity to step into that space with commercial and defense and intelligence as well. The augmentation with specialty technology with Tower will be nicely complementary.”

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Gelsinger summarized the value of the Tower acquisition in two words: "scale and synergy" added to Intel’s foundry efforts. Power-related chip technologies “have extraordinary interest for customers,” he said.

Tower CEO Russell Ellwanger said Intel’s global reach with customers and operations will help Tower improve its profit margins in power management.  “Power management we have not capitalized on because of scale,” he said. “But battery management is extremely needed…We have a one-of-a-kind technology, and it’s an amazing match” with Intel’s scale.

Gelsinger added: “We see greater opportunities with scale…Obviously, it will take a couple of years to get there.”

Tower had 5,500 employees in 2020 and $1.2 billion in revenues. 

In addition to a variety of processors, Tower also makes sensors, including CMOS image sensors, non-imaging sensors and integrated power management and MEMS. The company owns two manufacturing facilities in Israel, two in the U.S. and three in Japan. It is sharing a 300 mm wafer facility in Italy with ST Microelectronics. Specialty process technologies it uses include SiGe, BicMOS, SOI, and RFCMOS.

Tower shares soared 42% on news of the Intel acquisition, reaching $46.92 at 10 a.m. ET. Intel shares were up slightly to $47.64.