Two weeks after Intel said it would cancel its plan to acquire Tower Semiconductor for $5.4 billion amidst pushback from regulators, the two companies intend to work together anyway.
Intel today said that it would provide foundry services and 300mm manufacturing capacity to Tower. As part of the deal, Tower would use Intel’s plant in New Mexico, operated by Intel Foundry Services (IFS), investing up to $300 million to “acquire and own equipment and other fixed assets” that would be installed in the manufacturing facility.
The deal will give Tower a new capacity corridor, it said, of “over 600,000 photo layers per month” to meet expected demand for 300mm chips. The deal will mean that Intel will be manufacturing Tower’s 65-nanometer power management BCD (bipolar-CMOS-DMOS) flows. Tower itself also owns manufacturing facilities in Israel (150mm and 200mm), the U.S. (200mm), Japan (200mm and 300mm) and soon in Italy in partnership with STMicroelectronics.
“We launched Intel Foundry Services with a long-term view of delivering the world’s first open system foundry that brings together a secure, sustainable, and resilient supply chain with the best of Intel and our ecosystem. We’re thrilled that Tower sees the unique value we provide and chose us to open their 300mm U.S. capacity corridor,” said Stuart Pann, Intel SVP and GM of Intel Foundry Services, in a statement.
“We are excited to continue working with Intel,” added Tower CEO Russell Ellwanger. “As we look to the future, our primary focus is to expand our customer partnerships through high-scale manufacturing of leading-edge technology solutions. 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.”
Semiconductors and the manufacturing of next-generation chips in the U.S. have been a key component of a wider effort in the U.S. to bring more hardware manufacturing and innovation back to U.S. companies and the U.S. economy after years of outsourcing operations and working with international businesses in countries like China, a strategy that’s been codified in the CHIPS and Science Act passed last year.
Intel, as one of the world’s biggest semiconductor companies, has been a cornerstone of that effort. So when the company’s deal to acquire Tower fell apart — after regulators in China, where Intel has significant business, pushed back and declined to approve the acquisition, possibly as its own effort to counterbalance the effects of U.S. policies and sanctions against Chinese companies — some asked whether the canceled deal would pose a setback for Intel’s modernization strategy. Others took a different view: Some believed that the deal was not a great one for Intel on paper, even if it filled out Intel’s wish to bring more foundry-style manufacturing services, working on other companies’ chip designs, into its stable; so it was possibly for the best that the deal was canceled.
The message with today’s news seems to be that Intel (and Tower) have found another way to tackle the opportunity to manufacture chips together — one that might not consolidate returns as well for Intel, but still represents progress on that bigger plan.