Intel Corp. of Santa Clara has upped its role in Orange County’s chipmaker scene with the planned $5.4 billion acquisition of Tower Semiconductor Ltd. to help meet demand.
Intel CEO Pat Gelsinger said Feb. 15 that acquiring Tower (Nasdaq: TSEM) will help expand Intel’s foundry business, which makes chips for other firms.
Intel said it will benefit from Tower’s decades of experience in how to run a global foundry, estimating that the “addressable” foundry market is worth almost $100 billion.
Tower, based in Migdal Haemek, Israel but with a good portion of its domestic operations in Newport Beach, specializes in making analog chips used in cars and mobile devices and in industrial, medical and military sectors and calls itself a “global specialty foundry.”
The two companies said it could take a year for the deal to close. The acquisition has been approved by each company’s board of directors but will face scrutiny from government regulators.
Tower has factories in San Antonio, Japan and Israel, in addition to its spot just off Jamboree Road, near the Newport Beach and Irvine city lines. It also shares an Italian factory with another company.
Tower’s California facility—which previously operated under the Jazz Semiconductor name, and later TowerJazz—is focused on chips built for the U.S. aerospace and defense industries and could complement Intel’s own agreement with the Pentagon last year to build chips for military systems, according to news reports.
Tower is Orange County’s second-largest chipmaker with an estimated local workforce of 800 people. Broadcom is the top local chipmaker by employee count, with an estimated 1,300 local workers.
The planned purchase immediately raised questions about the future of the Orange County operations, a question that Tower itself declined to answer when contacted by the Business Journal.
However, Dylan Patel, the chief analyst at SemiAnalysis in Los Angeles, says he expects Tower’s Newport Beach operations to stay in place.
“Based on our sources, Orange County operations will continue as they currently are,” Patel told the Business Journal on Feb. 17.
He also predicted the possibility of more investment into the site for the production of high-speed silicon germanium chips, which are used in the automotive, telecommunications and aerospace industries.
“The acquisition is Intel’s latest move to add capacity and customers to its new foundry division, which focuses on making chips for other companies,” said tech website Ars Technica.
The takeover accelerates Intel’s path to becoming a major provider of foundry services and capacity globally, the buyer said.
“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,” Gelsinger said in a statement when the acquisition was announced earlier this month.
Tower says it is a “foundry of high-value analog semiconductor solutions,” and “provides technology and manufacturing platforms for integrated circuits in growing markets such as consumer, industrial, automotive, mobile, infrastructure, medical, and aerospace and defense.”
Tower’s stock is traded on the Tel Aviv and Nasdaq exchanges. The shares on the Nasdaq closed little changed at $46.94 apiece for a market cap of $5.12 billion on Feb. 18. Tower reported fourth-quarter revenue of $412 million, up 19% year-over-year.
The company was advertising for 29 jobs in Newport Beach on its website as of Feb. 21, including equipment engineering technician and yield technician.