On Tuesday, Intel said it plans to acquire Tower Semiconductor for $5.4 billion in a deal that would help the firm meet the growing demand for computing chips.
On Monday, Intel shares were up roughly 1%. Tower Semiconductor’s stock was up by more than 36 percent.
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Intel’s acquisition of Tower Semiconductor is a significant bet on the future of Intel’s FPGA business. It will provide Intel greater access to niche technologies in which Tower works, such as radiofrequency and industrial sensors. The existing production facilities of Tower are “geographically complementary,” according to Intel, with a presence in the United States and Asia.
It’s also a continuation of CEO Pat Gelsinger’s efforts to make large acquisitions in order to increase output.
Intel has been working to meet the enormous worldwide demand for chips, which has resulted in an ongoing scarcity, in part by announcing a $100 billion investment in what could become the world’s largest chip manufacturing facility in Ohio.
“We need to set a goal, first and foremost,” Gelsinger said during the firm’s Q4 earnings call in January. “Capacity is something we’d want right now; we’re woefully short of it,” he continued. A year ago, Gelsinger took over as CEO.
Intel is set to pay $53 per share, more than tripling Monday’s closing price of $33.13. They anticipate the acquisition to be completed in approximately a year.
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Intel has announced that it will invest more than $20 billion to build two chip factories in China at a new manufacturing site in Ohio. The site is expected to accommodate up to eight chip factories—also known as fabs—over the next decade, covering nearly 1,000 acres.
Tower Semiconductors, located in northern Israel, produces semiconductors and circuits for automobiles, consumer products, medical and industrial technology. The firm operates manufacturing sites in Israel, California, Texas, and Japan.
“The acquisition significantly advances Intel’s IDM 2.0 plan by increasing manufacturing capacity, extending its global presence, and expanding its technology portfolio to meet unrivaled industry demand,” the company added.
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