Intel to buy Tower Semiconductor in $5.4 billion deal
The announcement came the day AMD surpassed Intel for the first time in terms of market cap
Intel announced on Tuesday that it is buying Israeli semiconductor firm Tower Semiconductor for $5.4 billion (about £4 billion), boosting a strategy to produce more chips for other companies.
The company said it will acquire Tower for $53 (£39) a share, exceeding Tower's closing price of $33.13 (£24.40) on Monday.
Both companies expect the deal to close in about 12 months.
Tower Semiconductor is a chipmaker based in northern Israel that specialises in CMOS image sensors, radio frequency (RF) devices, and power management components.
The chips produced by the firm are used in a wide range of items, from automobiles and consumer goods to medical and industrial machinery.
The firm's manufacturing facilities are located in Israel, Texas, California and Japan.
Intel expects the acquisition to give it access to more specialised production and help it catch up with Samsung and TSMC, amid rising demands for chips worldwide.
The deal is specifically designed to strengthen Intel Foundry Service division, which was established last year to use Intel's chipmaking expertise and manufacturing facilities to make chips for other firms.
Once the deal closes, Intel plans to integrate Tower and IFS together as a 'fully integrated foundry business'.
"Tower's speciality 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," said Pat Gelsinger, Intel CEO.
"This deal will enable Intel to offer a compelling breadth of leading-edge nodes and differentiated speciality technologies on mature nodes - unlocking new opportunities for existing and future customers in an era of unprecedented demand for semiconductors."
Intel's announcement to buy Tower Semiconductor came a day after rival Advanced Micro Devices (AMD) announced the completion of its $50 billion acquisition of Xilinx Inc, which the company believes would give it an extra edge in the data centre market.
AMD revealed its intent to buy Xilinx in October 2020. The deal was originally valued at $35 billion, but owing to a surge in AMD's shares, it is now estimated to be worth over $50 billion.
Notably, on Tuesday, AMD surpassed Intel for the first time in its history, with a market cap of $197.75 billion at the close of the market, compared to Intel's $197.24 billion, according to TomsHardware.
Following AMD's acquisition of Xilinx, 248.38 million Xilinx shares were converted into 428 million new AMD shares.
That brought AMD's total share count to 1.628 billion, giving AMD a market valuation of $197.75 billion, just $51 million ahead of Intel.
AMD CEO Lisa Su said she expects the Xilinx acquisition to enable AMD "capture a larger share of the approximately $135 billion market opportunity we see across cloud, edge and intelligent devices".
AMD has long been Intel's main competitor for CPUs in the personal computer business.
Over recent years, Intel has repeatedly missed chipmaking targets, and as a result, its newest desktop chips use older transistor technology than rival chips from Apple and AMD.
Pat Gelsinger, who became Intel CEO in 2021, is trying to reverse the decline by expanding Intel's chip-making capabilities in different regions.
Last month, the firm announced that it was investing $20 billion for two chip factories in Ohio that could eventually become the world's largest chip making complex.
In May last year, Intel announced a $3.5 billion investment in its existing chip fab in Rio Rancho, New Mexico, to develop its 'Foveros' chip-stacking technology.
Earlier in March, Gelsinger said that the company would invest about $20 billion (£14.6 billion) on two new fabs in Arizona as part of plans to make processors for other chipmakers based on their own designs.