The saga of Intel Corp. and Tower Semiconductor is not over as the two companies have formed an agreement where Intel will provide 300 mm foundry services to Tower customers.
Intel Foundry Services (IFS) will provide manufacturing capacity and utilize Intel’s Fab 11X manufacturing facility in Rio Rancho, New Mexico.
Tower will invest up to $300 million to acquire and own equipment and other fixed assets that will be installed in the New Mexico facility. This will be after Intel said it would spend $3.5 billion on the New Mexico fab to expand advanced semiconductor packaging technologies.
Previously, Intel planned to acquire Tower for $5.4 billion early in 2022. However, last month, Intel terminated the agreement after it failed to obtain regulatory approvals in a timely manner mostly from China. This hindered the completion of the deal.
Now, the companies will work together in another capacity to expand IFS’ business while giving Tower’s customers access to manufacturing process technologies that it otherwise wouldn’t be able to get.
This facility will provide a new capacity of more than 600,000 photo layers per month to expand Tower’s manufacturing growth and support demand for 300 mm analog processing. Intel will also manufacture Tower’s highly differentiated 65 nm power management bipolar CMOS-DMOS (BCD) flows and other flows at the New Mexico fab.
Why it matters
Intel has been looking to expand the manufacturing capabilities of the U.S. and Europe to compete against the aggregation of semiconductor manufacturing that currently resides in three main countries in Asia: Taiwan, Korea and China.
It has taken a keen interest in expanding the supply chain so that in the event of a new pandemic that cripples parts of the economy or a geopolitical event that hinders electronic parts from flowing internationally, the supply chain will not be as weak and compromised as it was during the COVID-19 lockdowns.
Additionally, the company is looking to bolster its own revenue baseline into an area it sees as ripe for expansion after the supply chain issues that happened from 2020 through 2022, particularly in certain sectors like automotive that were hit especially hard by semiconductor shortages related to COVID-19 lockdowns.
Intel has already pledged to build two new fabs in Ohio and is expanding its Ocotillo campus in Arizona with two other fabs that have already broken ground. It is also building out a new megafab in Magdeburg, Germany, to expand its operations in Europe.
IFS is part of Intel’s IDM 2.0 strategy to transform its manufacturing scale and long-term growth. IFS has made major strides in the past year with a more than 300% year-over-year revenue increase in the second quarter of 2023.
