2023-08-17 19:18:00
► Why did Intel want to buy Tower Semiconductor?
Intel, the American chip champion, announced in 2022 its intention to buy the Israeli semiconductor manufacturer Tower Semiconductor for 5.4 billion dollars (5 billion euros). He wanted to develop a new business as a semiconductor manufacturer for third-party companies.
The Californian company has been trying to diversify its activities for two years by also working as a subcontractor for other groups. This strategy was inspired by Pat Gesinger, Intel leader since January 2021.
The purchase of Tower Semiconductor was particularly strategic for Intel since it would have enabled it to acquire a portfolio of major customers, such as Panasonic or Samsung. And to try to compete with the number one year in the world in the field of the manufacture of electronic chips, the Taiwanese TSMC.
► Why was the acquisition project blocked?
The approval of the Chinese regulatory authorities was essential to ratify the takeover. As with all major combinations of this type, the operation had to be approved by the competition authorities of all the major markets in which the companies concerned are present.
However, the Chinese regulator has remained silent. Despite the August 15 deadline, Beijing has not given the green light. In a press release published on Wednesday August 16, Intel cautiously invoked “the inability to obtain the required regulatory authorizations in a timely manner”while Tower Semiconductor specified that one in particular was missing.
This blocking of Beijing is part of a context of trade tensions with the United States. For almost five years, American measures have tried to limit competition from the Chinese semiconductor industry.
On June 30, 2023, the Netherlands, the European leader in chip manufacturing machinery, for example gave in to American pressure by restricting its exports to China. The move put a damper on Chinese ambitions to develop their own microchip industry.
On August 10, President Joe Biden signed an executive order again limiting US investment in China in quantum computing, artificial intelligence and microelectronics. China’s refusal to authorize the acquisition looks like a retaliatory measure, in the eyes of industry analysts.
► What will be the consequences for Intel’s business?
Intel shares took a hit on the stock market, losing nearly 2%. However, the group assures that it wants to continue its diversification. The third-party foundry business still weighs very little in Intel’s overall business. It only made $232 million (€213 million) according to the latest quarterly results of the group, while its total turnover amounted to 12.9 billion dollars (11.8 billion euros) over the same period.
Intel is planning huge investments in its own factories at the same time, as the sector has experienced shortages and the electronics giants are engaged in a fierce battle to dominate the market. Intel strives to stay in the game by being among the first to bring next-generation components to market.
In Germany, Intel will put 30 billion dollars (27.5 billion euros) to finance the construction of two factories. And 12 billion dollars (11 billion euros) will be used to modernize the group’s Irish site. The group will also have to compensate Tower Semiconductor in the amount of 353 million dollars (324 million euros) to repair the damage linked to this agreement which fell through.
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