Intel expands chip-making capacity with Tower acquisition

Intel continues its spending spree to remain competitive in the chip market, this time acquiring Israeli-based chip maker Tower Semiconductor for $5.4 billion.

Unlike some of Intel's recent investments, including a recent commitment to build a $100 billion facility in Ohio -- one of its multiple chip plants -- and partnerships with IBM and Taiwan Semiconductor Manufacturing Co. that focus mainly on leading-edge CPUs, the Tower Semiconductor deal is focu

Tower's strength lies in delivering specialty technologies such as radio frequency, silicon-geranium, industrial sensors and electronic design automation that fuels a range of products, including cars, medical and industrial equipment.

Pat Gelsinger

In a prepared statement, Intel CEO Pat Gelsinger said the deal enables Intel to offer a balanced combination of its own leading-edge nodes, complemented by Tower's. The vendor will also be able to offer differentiated lower-end chips that live on mature nodes.

"Tower's specialty technology portfolio, geographic reach and services-first operations will help scale our foundry services and advance our goal of becoming a major provider of foundry capacity globally," Gelsinger said.

The Tower acquisition provides them with a stronger bench in specialty technologies.

The deal also benefits Intel's continuing integrated device manufacturer (IDM) 2.0 strategy by further expanding Intel's manufacturing capacity and global footprint to address the worldwide chip shortage.

A key element to IDM 2.0 is Intel Foundry Services (IFS), which launched in March 2021 and should gain momentum from the deal. IFS provides process and packaging technologies in the U.S. and European markets and will be expanded to serve other international markets during the next year or two.

"Intel's current foundry business focuses on CPUs for x86, Arm and RISC-V," said Dan Newman, principal analyst at Futurum Research and CEO of Broadsuite Media Group. "But the Tower acquisition provides them with a stronger bench in specialty technologies."

Dan Newman

Newman added that Tower focuses on chips that are between 45 and 250 nanometers, a market that has been significantly affected by the worldwide chip shortage.

The acquisition is consistent with Intel's strategy of opening chip facilities around the world. Tower has foundry presence in the U.S. and Asia that serve fabless companies and IDMs.

"This deal enables Intel to better compete as a foundry to go after what is a $100 billion market that figures to continue to grow quickly," Newman said.

The deal is expected to take approximately 12 months to close, officials from both companies said, adding it will go through the usual regulatory approval. Intel intends for the two companies to become a fully integrated foundry business once the deal closes.

As Editor At Large with TechTarget's News Group, Ed Scannell is responsible for writing and reporting breaking news, news analysis and features focused on technology issues and trends affecting corporate IT professionals.