Intel to Acquire Israeli Chip Company Tower for $6bn

The race to capture more shares in the burgeoning semiconductor market means the players are buying other chip firms to boost production.

Last week, Nvidia called off efforts to acquire Arm due to regulatory objections to the $40 billion deal that has lasted more than one year, and would have given it a huge chance to dominate the market.

However, other semiconductor industry firms have been picking one deal after another, even though it’s at lower prices. Intel Corp. is close to a deal to buy Israeli chip company Tower Semiconductor Ltd. for nearly $6 billion, WSJ reports citing people familiar with the matter.

The deal, which bolsters Intel’s plan to make chips for other companies, could be unveiled as soon as this week, assuming the talks don’t fall apart, the people said.

It would likely include a hefty premium, given Tower’s market value of roughly $3.6 billion. The shares soared 49% in after-hours trading on Monday after The Wall Street Journal reported on the expected deal.

Tower, whose shares trade in the U.S. on the Nasdaq Stock Market, makes semiconductors and circuits used in everything from cars and consumer products to medical and industrial equipment.

It operates manufacturing facilities in Israel, California, Texas and Japan, according to its website. The company is based in Migdal HaEmek, in northern Israel near Nazareth.

Tower is similar to GlobalFoundries Inc., a much larger manufacturer that Intel explored a deal for over the summer. GlobalFoundries and its owner, Mubadala Investment Co., an investment arm of the Abu Dhabi government, ultimately decided to pursue an initial public offering instead, and the company now trades publicly with a market value of around $30 billion.

Intel in January said it plans to invest at least $20 billion in new chip-making capacity in Ohio, bolstering the company’s production ambitions as greater demand for digital products and a global chip shortage have amplified the need for more semiconductor manufacturing. Intel Chief Executive Pat Gelsinger said the Ohio site could eventually grow to accommodate eight chip factories, also known as fabs, with spending potentially reaching around $100 billion over the next decade.

The company, with a market value of nearly $200 billion, had already made more than $100 billion in investment pledges over the past year.

Intel has been busy on the strategic front lately. The company plans to publicly list shares in its Mobileye unit in a deal that could value the self-driving-car unit at north of $50 billion.

Intel lost its leadership in the semiconductor industry, and has struggled to bounce back as competition intensifies amidst pandemic-induced global chip scarcity. The move to acquire Tower is part of its push to regain its place in the market.