Intel’s Tower deal sidesteps competition snafu

Tower Semiconductor

05/09/2023 16:54

(The author is a Reuters Breakingviews columnist. The opinions
expressed are their own.)
       NEW YORK, Sept 5 (Reuters Breakingviews) - Call it
conscious uncoupling. On Tuesday, $155 billion chip giant Intel
 INTC.O  inked a new partnership with Tower Semiconductor
 TSEM.TA , which Intel boss Pat Gelsinger recently gave up on
acquiring for $5 billion. The deal will see Tower spend $300
million on equipment at Intel’s New Mexico campus, bolstering
Gelsinger’s nascent chip-manufacturing-for-hire services. It’s a
smart way to get around regulatory knockbacks that killed the
two companies’ planned merger, and makes more sense than that
deal.
    Intel ended its year-and-a-half-long quest to acquire Tower 
in August, after failing to win sign-off from Chinese antitrust
enforcers. Signed in February 2022, the deal was aimed at
strengthening Intel’s pivot into manufacturing chips designed by
others by bringing in Tower’s know-how. But weak profitability
and sagging results made the acquisition look questionable. 
    By signing up Tower as a partner, Gelsinger wins a chunk of
its business without the trouble of competition roadblocks. Plus
there’s a twist. Tower is paying to build up its former suitor’s
facilities to build the chips, but squint and the funding really
comes from Intel: The company paid Tower a $353 million break
fee after their tie-up fell through. Still, better for Intel
that the money is used on its own business than someone else’s.
Gelsinger has salvaged a minor victory from the jaws of defeat.
(By Jonathan Guilford)
 
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 (Editing by Lauern Silva Laughlin and Sharon Lam)
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