Intel acquires Tower Semiconductor for $5.4B to expand chipmaking specialty

Intel is investing $5.4 billion to acquire Israel's chipmaking company, Tower Semiconductor. The acquisition was announced by the companies on Tuesday, Feb. 15.

The deal will allow Intel Corp to have access to more specialized chip production. This will also improve the company's position in the semiconductor industry and have a better advantage in responding to the surging demand for chips worldwide.

According to Reuters, the American tech company headquartered in Santa Clara, California, is paying $53 per share to Tower Semiconductor, which is equivalent to a total enterprise value of around $5.4 billion. It was stated that the deal will be fully paid in cash.

Moreover, the acquisition is expected to strengthen Intel's presence in the business currently being dominated by the Taiwanese chipmaker, TSMC, which has gained more prominence in the semiconductor industry at a time when chip shortage worldwide has become the biggest obstruction for businesses including electronics, smartphone companies, and automakers.

In any case, Intel is one of the largest exporters of Israel, so it is understandable why it has had a large presence in the country for almost 50 years now. The firm is operating in five sites in the region and employs about 14,000 workers there.

The American chipmaker's acquisition deal with Tower Semiconductor is expected to close within 12 months. The transaction was already approved by the companies' boards of directors, although it is still subject to regulatory approvals and customary closing conditions that are common for takeover deals.

"Tower's specialty technology portfolio, geographic reach, deep customer relationships and services-first operations will help scale Intel's foundry services and advance our goal of becoming a major provider of foundry capacity globally," Intel's chief executive officer, Pat Gelsinger, said in a press release. "This deal will enable Intel to offer a compelling breadth of leading-edge nodes and differentiated specialty technologies on mature nodes – unlocking new opportunities for existing and future customers in an era of unprecedented demand for semiconductors."

Tower Semiconductor's shares in Tel Aviv Stock Exchange (TASE) were 40% higher on Tuesday. The shares increased by 48% in Nasdaq's after-hours trading after the news of Intel's acquisition was published. Before the announcement, the Israeli company's market value was $3.6 billion.