Intel Inks Foundry Deal With Tower After Acquisition Deal’s Collapse

Following the collapse of its deal to acquire Tower Semiconductor in August, Intel says it has landed a deal to provide foundry services and capacity to the smaller chipmaker in the U.S. The semiconductor giant says the new foundry deal validates its strategy to win chip manufacturing deals by using its global factory network to help companies expand in various areas.

Intel’s contract manufacturing business has landed a to deal to provide foundry services and capacity to Tower Semiconductor after its deal to acquire the company fell apart last month.

The business, Intel Foundry Services, said Tuesday that Tower will use Intel’s 300mm wafer manufacturing capacity at the semiconductor giant’s New Mexico fab, giving the smaller chip manufacturer a “new capacity corridor” on top of its existing network of fabrication plants.

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Tower, based in Israel, plans to spend up to $300 million to acquire and install equipment along with other fixed assets at the New Mexico plant, where Intel will manufacture advanced analog chips for power management and radio frequency using Tower’s 65-nanometer bipolar-CMOS-DMOS processes.

The two chip manufacturers unveiled the deal less than a month after Intel said it was walking away from a deal to acquire Tower for $5.4 billion because it was unable to receive the necessary approvals required by its merger agreement. As a result, Intel paid Tower a $353 million termination fee.

The collapse of the deal was a setback for Intel CEO Pat Gelsinger’s grand comeback plan because the chipmaker believed the Tower acquisition would “significantly” advance its plan to manufacture chips for other companies by using Tower’s complementary set of fabs, technologies and customers.

However, Intel said the new foundry deal with Tower validates its strategy to win chip manufacturing deals by using its global factory network in the U.S., Europe, Israel and Asia to help companies expand capacity in various geographies.

“We launched Intel Foundry Services with a long-term view of delivering the world’s first open system foundry that brings together a secure, sustainable and resilient supply chain with the best of Intel and our ecosystem,” said Stuart Pann, general manager of Intel Foundry Services, in a statement.

“We’re thrilled that Tower sees the unique value we provide and chose us to open their 300mm U.S. capacity corridor,” he added.