Intel Corp will expand its presence in Israel by buying chipmaker Tower Semiconductor Ltd for US$5.4bn, Reuters reported.
The acquisition will enhance Intel’s access to specialised production and help reduce the global semiconductor shortage, Intel said.
The US company will pay US$53 per share for Tower, which produces analogue chips for cars, medical sensors, and power management, according to Reuters.
This tops Tower’s US$33.13 closing share price on Monday.
The deal, which is expected to be completed in about a year and is still subject to regulatory and Tower shareholder approval, will be funded in cash.
"By the time (Intel) gets this business going, supply constraints will no longer be an issue and both TSMC and Samsung are both aggressively ramping up capacity in the next five years," Angelo Zino, CFRA Research analyst, said.
Intel and Tower’s technologies were complementary, Pat Gelsinger, Intel chief executive said, with the foundry market expected to rise substantially above its US$100bn value in the coming decade.
Intel chips make up roughly 70% of this market, Gelsinger added, with the remaining 30% served by smaller companies including Tower.
"We think this makes a lot of sense. [Tower] is a foundry for trailing edge process technology that is likely to be tight for the next several years," Gus Richard, Northland Capital Markets analyst, commented.
The purchase will broaden Intel’s presence into a sector dominated by Taiwan-based TSMC, the world’s largest chipmaker, Reuters said.
Intel already owned five sites in Israel and has operated there for almost half a century.
Tower shares surged 42% on Tuesday to US$47.07 and had a market capitalisation of US$3.6bn prior to the news. Intel shares rose 1.8% to US$48.44.
Intel said in January it will invest up to US$100bn to build a colossal chip-making complex in Ohio to reduce America’s reliance on Asia.