Early Tuesday, Intel announced its $5.4 billion acquisition of Tower Semiconductor, a contract chipmaker.
Intel gets a few advantages with its acquisition of Tower: the company has new chip factories in Israel, its headquarters, as well as two in the United States and another in Italy. Tower’s core business is manufacturing chips using older process manufacturing technology that Intel no longer uses. These older chip designs, however, have found markets in industries such as defense, automotive, wireless and industrial sensors, among others.
Intel is buying Tower, executives say, to give it a new product portfolio — and, in turn, bring them to its existing customers.
“Our strength in cutting-edge, scale-maker nodes, combined with Tower’s leadership in specialized technology and a customer-centric approach, is a perfect match for each other,” said Intel’s CEO, Pat Gelsinger, on a conference call this morning. “And it paves the way for us to unlock new opportunities for our customers and meet more needs in a broader market.
More importantly, perhaps, Intel is buying a company with 30 years of experience as a contract semiconductor manufacturer. Intel’s Foundry Services is less than a year old and lacks the experience that some of its rivals have gained over years of operation.
But Tower’s plan won’t take shape immediately. Intel said the deal would not be completed for 12 months, after which Intel announced its intention to integrate Tower Semi. Gelsinger estimated that it would take a few years to compose the new company and turn it into a “competitive foundry”.
Intel has promised huge spending to expand its manufacturing business. The company has committed $20 billion for a factory expansion in Arizona, up to $100 billion to build its new site in Ohio and up to $95 billion in Europe – and that doesn’t show no signs of slowing down.
“At the same time, however, only an idea of what it will cost to set everything up has so far been offered; we still don’t know when the trough is, how deep it is, and what the company on the other side of the chasm will really look like (assuming it gets there),” Bernstein analyst Stacy Rasgon wrote. , in a research note.