Intel has reached an agreement to buy Israeli semiconductor company Tower Semiconductor for $ 5.4 billion, bolstering its plan to produce more “on demand” chips for other companies. Intel is offering $ 53 per share in cash, a statement read. The aim, it reads, “is to help meet the growing global demand for semiconductor manufacturing capacity and become a major provider of capacity in the United States and Europe to serve customers globally.”
The news had been anticipated by Wall Street Journal. Tower, whose shares are traded on Nasdaq, manufactures semiconductors and circuits used in everything from automobiles to consumer products to medical and industrial equipment. It operates manufacturing facilities in Israel, California, Texas and Japan and is headquartered in Migdal HaEmek in northern Israel near Nazareth. Tower Semiconductor manufactures power management chips, image sensors and a variety of other semiconductors. Its clients include Analog Devices and Broadcom, among others.
Chip “on demand” objective, but the market leader is far away
According to the intent of Pat Gelsinger, CEO of the chip giant of Santa Clara, California, for about a year, with the acquisition of Tower Semiconductor Intel will be able to better compete with Taiwan Semiconductor Manufacturing (Tsmc) in the manufacturing market at semiconductor contract for other companies, a sector where Intel had little presence until now. However, there remains a problem of market volume: if the last turnover of Tower Semiconductors was 1.3 billion dollars, that of Tsmc was 56 billion dollars.
Expenses weigh on budgets
The Tower deal is only part of Gelsinger’s plan to get Intel back on track. The company is also building an estimated $ 20 billion factory in Ohio and new facilities in Europe. However, the semiconductor giant’s ongoing spending is weighing on profit margins, so much so that the company’s earnings last quarter missed analysts’ projections. But Intel said profit margins are expected to return to high levels within five years.