(Reuters) - Intel (NASDAQ:INTC) will offer foundry services to Tower Semiconductor (NASDAQ:TSEM) in a new deal that will see the Israeli contract chipmaker invest $300 million in Intel's New Mexico factory, the companies said on Tuesday.
The partnership comes less than a month after both companies dropped their plans to merge as the proposed $5.4-billion deal failed to secure approval from regulators in China.
Under the latest agreement, Tower will acquire and own equipment and other fixed assets to be installed at the Rio Rancho fabrication unit.
It will gain a production capacity of over 600,000 photo layers per month at the site, helping the chipmaker support demand for the next generation 300 mm chips.
"We see this as a first step towards multiple unique synergistic solutions with Intel," Tower CEO Russell Ellwanger said.
"This collaboration with Intel allows us to fulfill our customers' demand roadmaps, with a particular focus on advanced power management and radio frequency silicon on insulator (RF SOI) solutions, with full process flow qualification planned in 2024."
The deal also strengthens Intel's foundry capacity as it advances on rivals such as industry leader Taiwan Semiconductor Manufacturing Co.
In 2021, Intel committed $3.5 billion to the New Mexico facility and a year later announced a $20-billion investment towards a chip-making complex in Ohio.
In the second quarter, Intel's foundry business reported revenue of $232 million, up from $57 million a year earlier.
The rise in foundry sales came from "advanced packaging," a process in which Intel can combine pieces of chips made by another company to create a more powerful chip.