Israel’s Tower Semiconductor Ltd., which runs a chip plant in Newport Beach, plans to sell its stake in a Chinese foundry it acquired in 2003.

The chipmaker said Thursday it agreed to sell its holdings in Shanghai’s Hua Hong Semiconductor Ltd. for $32 million in cash. The company, which operates under the brand name TowerJazz, owns 10% of Hua Hong shares. The stake is valued at $17 million on its balance sheet.

The transaction, subject to customary closing conditions, is expected to close in the third quarter.

TowerJazz projects a net gain of $8 million through the sale after taxes and fees.

The proceeds will be used to fund growth initiatives, according to Chief Executive Russell Ellwanger.

Last month the company finalized a $140 million deal with Micron Technology Inc. to buy a Japanese silicon wafer chip plant in Nishiwaki, an area not severely affected by March’s earthquake and tsunami.

The acquisition nearly doubled TowerJazz’s production capacity by 60,000 wafers a month.

The added capacity is needed to serve growing demand from big chip customers, according to the company.

The company aims to double annual revenue to $1 billion by 2014.

Tower Semiconductor bought what was Newport Beach’s Jazz Semiconductor Inc. in 2008 for $40 million plus an additional $129 million in debt. It renamed the locally based operation TowerJazz.

TowerJazz got its start as the chip making arm of Rockwell International Corp., which no longer exists but left behind Milwaukee-based Rockwell Automation Inc. and Cedar Rapids, Iowa-based Rockwell Collins Inc.

Rockwell first spun off the chip making business as part of Newport Beach-based Conexant Systems Inc. in 1999.

In 2002, Conexant split off its Newport Beach chip factory as Jazz Semiconductor.