Semiconductor Equipment

Intel ends Tower Semiconductor acquisition

17 August 2023
An Intel engineer inside a fab. Intel has terminated the acquisition of Tower Semiconductor and will focus instead on its Intel Foundry Services programs moving forward. Source: Intel

Intel Corp. and Tower Semiconductor have mutually agreed to terminate a previous agreement of acquisition. The companies blamed the inability to obtain regulatory approvals in a timely manner to complete the deal.

The acquisition was originally announced early last year for $5.4 billion. The deal would have given Intel mature processing nodes that are used in several automotive semiconductor sectors. Intel had been looking to improve its capabilities for automotive manufacturing while simultaneously expanding its advanced process technologies for more sophisticated semiconductors.

The move was an overall part of Intel’s IDM 2.0 strategy that included the formation of Intel Foundry Services (IFS), a program to give U.S. and European fabless companies the ability to use Intel for semiconductor manufacturing. The move would help not just these customers have more regional manufacturing but enhance the supply chain after COVID-19 revealed flaws in the aggregation of chip making in mostly Asia.

Very active

Intel has been very active in semiconductor manufacturing with numerous new fabs under construction to expand its resurgence into the foundry landscape as well as to enhance its own ambitions of expanding U.S. manufacturing to reduce the dependency on Korean, Taiwanese and Chinese foundry vendors.

These moves include constructing:

All these fabs will be state-of-the-art facilities for the most advanced semiconductors. However, not all semiconductor manufacturing requires leading-edge process technology. The Tower acquisition would have broadened Intel’s portfolio for manufacturing at lower processing nodes but also would up the capacity for making automotive chips in the future.

Intel’s desire to move significantly into the automotive chip market is due to the electric vehicle market exploding in popularity and the inclusion of more electronics in all vehicles. When COVID-19 hit the supply chain hard, the automotive semiconductor market was hammered, leading to shortages of vehicles and push back of releases.

No acquisition

Under terms of the agreement originally signed, Intel will pay a termination fee of $353 million to Tower.

“Our foundry efforts are critical to unlocking the full potential of IDM 2.0, and we continue to drive forward on all facets of our strategy,” said Pat Gelsinger, CEO of Intel. “We are executing well on our roadmap to regain transistor performance and power performance leadership by 2025, building momentum with customers and the broader ecosystem and investing to deliver the geographically diverse and resilient manufacturing footprint the world needs. Our respect for Tower has only grown through this process, and we will continue to look for opportunities to work together in the future.” ​

Another reason for the termination may be in Intel’s own admission that its IFS has made significant progress during the past year with more than 300% year-over-year revenue increases in the second quarter of 2023. Just this week, Synopsys and Intel expanded their electronic design automation and intellectual property agreement to include IFS process technology.

Additionally, Intel has won U.S. Department of Defense contracts, gained a multi-generational agreement with Arm for foundry system-on-chips and signed a strategic partnership with MediaTek, who will use Intel’s foundry services for future chipsets.

According to Stuart Pann, senior VP and GM of IFS, the goal is to become the second largest global external foundry by the end of the decade.

To contact the author of this article, email PBrown@globalspec.com


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