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Intel Gains on Fresh Push for Foundry Business, Eyes Tower for $6 Billion
Published Feb 15, 2022 04:43AM ET
© Reuters.
By Dhirendra Tripathi
Investing.com – Intel stock (NASDAQ:INTC) traded 1% higher in premarket Tuesday on reports it is close to buying Israeli chipmaker Tower Semiconductor (NASDAQ:TSEM) for nearly $6 billion.
The transaction is in line with CEO Pat Gelsinger’s plans to turn Intel into a contract manufacturer, much like Taiwan Semiconductor Manufacturing (NYSE:TSM), the world’s largest chipmaker with 2021 revenue at about $57 billion. Tower is a much smaller business with 2020 revenue at $1.3 billion. Its shares climbed nearly 51% in premarket.
A foundry making chips that go into cars, servers, TVs and laptops is a complex unit. Very few companies do it all, most choosing to either just design it or manufacture for clients according to their needs. Making chips for more clients that will include rivals will help Intel achieve greater economies of scale.
Last month, Intel committed $100 billion to build potentially the world's largest chip-making complex in Ohio. It is also building two factories in Arizona with an investment of $20 billion. Gelsinger has been pushing to restore his company’s dominance of the industry, and also reshore manufacturing from Asia to shorten supply chains.
At Monday’s market cap of $3.6 billion, the final tag for Tower is likely to include a hefty premium, according to a report in The Wall Street Journal.
Besides its home country, Tower has plants in California, Texas and Japan.
According to a previous report by the WSJ, Intel had hoped to buy GlobalFoundries (NASDAQ:GFS), a bigger company worth around $30 billion, but owner Mubadala, an investment arm of the Abu Dhabi government, opted in favor of a public listing.
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