Tower Semiconductor to Set Up Fab in India After Intel Deal Collapses?

Finding a new buyer for Tower Semiconductor might be tough if they decide to sell. This is because most chip companies now need approval from China's regulator for such transactions. India sees Tower as a welcome addition, especially since it's from Israel, a country not heavily involved in the chip war.

Introduction

In the dynamic landscape of the semiconductor industry, Tower Semiconductor, based in Migdal HaEmek, Israel, finds itself at a pivotal crossroads following the cancellation of its merger deal with Intel, valued at $5.4 billion.

While much of the spotlight was understandably on Intel and the implications of the collapsed merger, Tower Semiconductor’s potential gains or losses were often overlooked.

However, as the global chip war rages between China and the U.S., Tower Semiconductor might just have found a silver lining in India’s burgeoning chip market.

Read more: Intel Pays $353 M Penalty for Failed Tower Deal over china concerns

The Cancelled Intel Merger: A New Direction for Tower Semiconductor

Initially, Tower Semiconductor’s prospects seemed closely tied to its merger with Intel.

The Israeli chip manufacturer was to become a key player in Intel’s efforts to strengthen its chip manufacturing division, leveraging Tower’s chip factories for advanced production capabilities.

However, the merger deal fell through, and while Intel will pay Tower Semiconductor a cancellation fee of $375 million, the question arises: what next for Tower?

India’s Ascent in the Global Chip Market

Amidst the chaos of the canceled merger, Tower Semiconductor might just have a unique opportunity in India’s rapidly expanding chip market.

India, eyeing a substantial $300 billion in electronics production by 2026, including about $60 billion in chip production, has set out to establish itself as a significant player in the industry.

The Narendra Modi government has been actively encouraging chip manufacturers to establish factories within its borders through various incentives.

Under the leadership of Russell Ellwanger, the Israeli chip manufacturer was slated to take a prominent role as the technological lead within a consortium of companies aiming to construct a $3 billion chip manufacturing facility in India.

This announcement was made public in May 2022, a mere three months following Intel’s declaration of their intent to acquire Tower Semiconductor, following a laborious bureaucratic procedure.

Due to Tower’s ongoing merger discussions with Intel, the announcement received little attention and passed by inconspicuously. However, in India, there was palpable frustration as the Intel deal and the concurrent probe by Chinese regulators put a halt to their plans.

Meanwhile, a grand $19.5 billion scheme by Taiwanese behemoth Foxconn, in collaboration with an Indian enterprise, to establish a factory progressed at a sluggish pace.

India’s solitary accomplishment in this realm was Micron’s announcement—an American chip manufacturer—that it intended to invest $800 million in a manufacturing and assembly plant situated in Gujarat, located in western India.

Read more: Semicon India 2023: What all happened?

A win win for both

Tower Semiconductor’s previous missteps in its plans to establish a chip manufacturing plant in India can now be reframed as lessons learned.

While the Indian venture was halted due to the pending Intel merger, the company’s newfound independence could allow it to rekindle its relationship with India’s chip industry.

The cancellation fee from Intel, though not enough to fund a new factory entirely, serves as a solid foundation that Tower can leverage to initiate its Indian expansion.

According to Witte, chairman of SIGNAL, finding a new buyer for Tower Semiconductor might be tough if they decide to sell. This is because most chip companies now need approval from China’s regulator for such transactions.

India sees Tower as a welcome addition, especially since it’s from Israel, a country not heavily involved in the chip war. India aims to be a self-reliant chip production hub and is subtly aligning more with the U.S. and less with China to present itself as an attractive option for the chip market.

India’s Interest and Incentives

India’s desire to establish a competitive chip manufacturing industry opens the door for Tower Semiconductor.

With permission already granted for setting up a chip factory on Indian soil, Tower can position itself as an attractive partner for India’s ambitious plans. The cancellation fee can serve as a starting point for initial capital, making Tower’s entry into India’s chip market more feasible.

Furthermore, the cancellation fee pales in comparison to the incentives India is willing to offer. Initially, India expressed a willingness to provide incentives of $10 billion, but given the fierce competition against the U.S.’s plans under the Biden administration’s CHIPS act, these numbers might rise even higher.

Tower’s reputation as a company with Intel’s stamp of quality could further bolster its prospects in India.

Partnerships and Future Outlook

Collaboration could play a pivotal role in Tower Semiconductor’s success in India. As suggested by Carice Witte, the chairman of SIGNAL, Tower might attract foreign investment, potentially from countries like the UAE, which has a significant presence in India and an interest in technological advancements.

This support could help Tower establish a strong foothold in India’s chip market, capitalizing on the country’s ambition to become a global tech superpower.

Conclusion

While the cancellation of the Intel merger might have initially cast a shadow over Tower Semiconductor’s future, the company stands at the threshold of an exciting opportunity in India’s burgeoning chip market.

By turning setbacks into stepping stones and leveraging its cancellation fee and reputation, Tower has the potential to position itself as a vital player in India’s growing chip industry.

As the world witnesses the evolving landscape of technology and geopolitics, Tower Semiconductor’s strategic move towards India could indeed mark its transformation from a potentially overlooked player to a significant influencer in the global chip market.

Kumar Priyadarshi
Kumar Priyadarshi

Kumar Priyadarshi is a prominent figure in the world of technology and semiconductors. With a deep passion for innovation and a keen understanding of the intricacies of the semiconductor industry, Kumar has established himself as a thought leader and expert in the field. He is the founder of Techovedas, India’s first semiconductor and AI tech media company, where he shares insights, analysis, and trends related to the semiconductor and AI industries.

Kumar Joined IISER Pune after qualifying IIT-JEE in 2012. In his 5th year, he travelled to Singapore for his master’s thesis which yielded a Research Paper in ACS Nano. Kumar Joined Global Foundries as a process Engineer in Singapore working at 40 nm Process node. He couldn’t find joy working in the fab and moved to India. Working as a scientist at IIT Bombay as Senior Scientist, Kumar Led the team which built India’s 1st Memory Chip with Semiconductor Lab (SCL)

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