Intel Corp has agreed to acquire Tower Semiconductor Ltd for about US$5.4 billion, part of chief executive officer Pat Gelsinger’s push into the outsourced chip manufacturing business.
Intel is to pay US$53 per share in cash for Tower, it said in a statement on Tuesday.
The offer represents a 60 percent premium to Tower’s closing share price in US trading on Monday. The companies’ boards have approved the transaction, which they expect to close in about 12 months.
Gelsinger, who took the job a year ago, is betting he can compete with Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) in the chip foundry market — the contract manufacturing of semiconductors for other companies.
His comeback plan for Intel involves modernizing its factories and building new ones aimed at restoring its leadership in chip technology.
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, data compiled by Bloomberg showed.
What the move does not provide is scale. Tower had annual sales of about US$1.3 billion last year, a fraction of TSMC’s US$56 billion.
KeyBanc Capital Markets analysts called the deal “moderately positive” for Intel.
As TSMC is a specialty foundry, it is unclear whether the acquisition would help Intel expand to the same volumes and compete with Samsung Electronics Co and TSMC on mainstream process technologies.
TSMC’s sales are expected to grow about 27 percent this year, data compiled by Bloomberg showed.
The Hsinchu-based company, which pioneered the market, accounts for more than 50 percent of industry revenue and makes chips for many of Intel’s key rivals, a list that includes Advanced Micro Devices Inc and Nvidia Corp.
Tower, which is based in northern Israel, was formed from the combination of other companies’ plants, starting in the 1990s. It also owns a factory in Texas.
It is similar to, but much smaller than GlobalFoundries Inc, a US-based chip manufacturer that Intel considered making a bid for last year. A deal never materialized and GlobalFoundries’ owner, Mubadala Investment Co, proceeded with an initial public offering of the company in October last year.
On a conference call with analysts to discuss the deal, Gelsinger said that Tower complemented Intel’s military contracts.
Intel also plans to build on Tower’s partnership with STMicroelectronics NV, Gelsinger said.
The Tower deal is just part of Gelsinger’s plan to get Intel back on track. He is also building a factory in Ohio that could cost US$20 billion and new facilities in Europe. The spending spree is weighing on Intel’s profit margins and has put investors on edge.
The company’s earnings missed analysts’ projections last quarter, and it gave a disappointing outlook, but Intel has said that profit margins could be back to historically high levels within five years.
Gelsinger also is seeking government funding to rebuild manufacturing in the US and Europe, saying that too much of the industry’s production has shifted to Asia.
Starlux Airlines Co (星宇航空) today unveiled a long-haul network expansion plan at a shareholders’ meeting in Taipei, including direct flights to Barcelona, Spain, and Zurich, Switzerland, as well as a service connecting Taipei, Sydney and New Zealand. Starlux is to become the first Taiwanese carrier to offer non-stop services to the two European cities, while the inaugural oceanic route is expected to expand transit opportunities within the Australia-New Zealand market, Starlux said. Flight services to Chicago, Dallas, Washington and New York are under evaluation, the airline added. Prior to the shareholders’ meeting, the airline earlier this year announced that it would be
Netherlands-based semiconductor equipment supplier ASML Holding NV yesterday said that it is planning to hire an additional 1,000 people in Taiwan this year in response to growing demand from clients. ASML had previously planned to recruit 600 people this year, but that the plan has been adjusted upward, ASML vice president and ASML Taiwan general manager Grace Wang (汪佳慧) told reporters. ASML has a workforce of more than 4,500 in Taiwan, accounting for about 10 percent of its global total, Wang said. This year’s recruitment campaign would focus on adding people in the customer support, manufacturing and supply chain domains to assist ASML
UNDER MICROSCOPE: Taiwan detained three people who allegedly conspired to buy servers in Taiwan and export them using fraudulent documentation, prosecutors said Nvidia Corp chief executive officer Jensen Huang (黃仁勳) on Saturday urged Super Micro Computer Inc to tighten up on compliance after Taiwan detained three people this week for allegedly making fraudulent declarations about artificial intelligence (AI) servers made by its US partner. The development marked the nation’s first crackdown on semiconductor smuggling, which grew after the US slapped restrictions on exports of high-end chips such as Nvidia AI accelerators to China. Nvidia is “rigorous” in explaining regulations to all of its partners, Huang told reporters after arriving in Taipei. “Ultimately Super Micro has to run their own company,” he said in response to
Nvidia Corp yesterday announced that CEO Jensen Huang (黃仁勳) would attend an employee meeting in Taipei tomorrow to celebrate the launch of the company’s Taiwan headquarters project. Huang would attend a gathering at the site of Nvidia’s planned headquarters in Beitou Shilin Technology Park (北投士林科技園區), the company said in a statement. After arriving in Taiwan on Saturday last week, Huang told reporters that he plans to meet with Quanta Computer Inc (廣達) chairman Barry Lam (林百里) and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) chairman C.C. Wei (魏哲家), and would attend the groundbreaking ceremony for Nvidia’s Taiwan headquarters tomorrow. Nvidia has not yet applied
RSS