Intel partners with former acquisition target Tower Semiconductor

Weeks after Intel’s proposed $5.4 billion acquisition of Israel-based Tower Semiconductor fell apart, the two firms announced plans for Intel to provide foundry services to its former acquisition target.

As part of the deal, Tower will invest up to $300 million to acquire and own equipment and other fixed assets at Intel’s New Mexico fabrication plant. Tower will eventually have a capacity of over 600,000 photo layers per month to manufacture its analog CMOS chips.

Tower already owns fabs in Israel, the U.S., and Japan, and it plans to launch in Italy soon. But the existing fabs create 200 mm wafers. The New Mexico facility will create 300 mm wafers, increasing production quantity.

“We are excited to continue working with Intel,” Tower CEO Russell Ellwanger said in a statement. “This collaboration with Intel allows us to fulfill our customers’ demand roadmaps, with a particular focus on advanced power management and radio frequency silicon on insulator (RF SOI) solutions, with full process flow qualification planned in 2024. We see this as a first step towards multiple unique synergistic solutions with Intel.”

Intel was unable score the acquisition, but this is the next best thing, says Glenn O’Donnell, vice president and research director with Forrester Research. “I do think the deal Intel and Tower consummated is a good move to save face after the failure of the acquisition. Both parties still get to enjoy the fruits of their original plan,” he said.

“Is this the next best thing for Intel? It’s clearly a Plan B where both companies benefit,” said Steve Leibson, analyst with Tirias Research. Intel is getting Tower’s CMOS manufacturing, and Tower is footing all or most of the cost for the equipment needed to make it happen. Tower gets access to an operational, state-of the-art, 300mm fab without the expense and hassle of building one.

Plus, Intel has access to Tower’s highly specialized sales force that Intel does not have, nor will it need to hire at this point.

Intel and Tower first announced the proposed $5.4 billion acquisition in February 2022, and the deadline for completing the acquisition was extended twice as they waited for approval from China for the purchase. Finally, with no approval coming, the deal was scuttled last month.