Intel to Buy Tower Semiconductors for $5.4B as Chip Demand Remains High – CNET

Intel to Buy Tower Semiconductors for $5.4B as Chip Demand Remains High – CNET

Intel's Fab 42 in Chandler, Arizona

Intel’s Fab 42 is an enormous presence in Chandler, Arizona.

Stephen Shankland/CNET

Intel on Tuesday said it has reached an agreement to acquire Israel-based chipmaker Tower Semiconductor for about $5.4 billion. The deal, if approved, should bolster Intel’s ability to make specialty processors such as radio frequency communication chips and to manufacture them for other chip designers, not just itself.

The deal is set to close by the end of March 2023 and could improve the technology Intel can offer through its ambitious Intel Foundry Services unit. Intel Chief Executive Pat Gelsinger set up IFS in 2021 to build chips for outside customers, not just Intel — a major new direction for Intel and part of its plan to fund Intel’s effort stay on the leading edge of the chipmaking business.

“Tower’s specialty technology portfolio, geographic reach, deep customer relationships and services-first operations will help scale Intel’s Foundry Services and advance our goal of becoming a major provider of foundry capacity globally,” Gelsinger said in a statement. 

The deal won’t add much scale to Intel’s manufacturing business, but Tower is profitable, Bernstein Research analyst Stacy Rasgon said in a research note Tuesday.

And it helps bolster the credibility of Intel Foundry Services as a more serious effort than Intel’s earlier, unsuccessful forays into the foundry business dominated by Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung, said BMO Capital Markets analyst Ambrish Srivastava. “The acquisition does show Intel’s commitment to its foundry strategy, versus the various starts and stops under prior management teams,” Srivastava said.

Intel has been working to meet soaring chip demand amid a global shortage that caused product and shipping delays, especially for cars. In January, Intel unveiled New Albany, Ohio, as the site for its third major US chipmaking location, with operations expected to start in 2025 and investments that could reach $100 billion in coming years.

Intel isn’t the only company making big moves in an attempt to capitalize on chip demand. Rival AMD on Monday completed its $50 billion acquisition of programmable chipmaker Xilinx. Its FPGA chips (field programmable gate arrays) are popular when fast and adaptable chips are worth the extra cost, such as in network equipment and data centers running AI jobs where algorithms still haven’t settled down. Intel acquired its own FPGA company, Altera, in 2015.

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