Margaret Henschel, an employee at Intel’s facility in Chandler, Arizona, moves through the facility's cleanroom. (Photo/Library of Congress-Carol M. Highsmith)
Margaret Henschel, an employee at Intel’s facility in Chandler, Arizona, moves through the facility's cleanroom. (Photo/Library of Congress-Carol M. Highsmith)

Intel to acquire Israeli chipmaker for $5.4 billion

Intel, which manufactures and sells semiconductor chips that power computers across the world, is betting big on Israel. The Santa Clara–based company announced plans to acquire Israeli firm Tower Semiconductor for the whopping sum of $5.4 billion.

Tower, headquartered in the northern Israeli city of Migdal HaEmek, makes chips used in cars, medical devices, aerospace and defense equipment and other industries at factories in Israel, the U.S. and Japan. The move will help Intel secure its position as global demand for chips stays high amid ongoing supply chain woes.

The deal will unlock “new opportunities for existing and future customers in an era of unprecedented demand for semiconductors,” Intel’s CEO Pat Gelsinger said in a press release.

There’s been a global shortage of chips since the onset of the Covid-19 pandemic, and Intel is trying to position itself to meet that need, without relying on production in China. In March 2021, Intel announced plans to build chip factories in Arizona, and in January of this year it said it plans to invest at least $20 billion in new chip-making capacity in Ohio.

Buying Tower will give them a head start. According to a press release from Tower, the company has two factories in Israel (both in Migdal HaEmek), two in the U.S. (in Southern California and Texas), three in Japan and some facilities in Italy as well.

While Tower is a force in Israeli tech manufacturing, the CEO of the company is from the U.S. Russell Ellwanger, who is Mormon, took the helm at Tower in 2005. According to Israeli outlet Globes, at the time Ellwanger was bullish on Tower even as the firm was losing money. “I saw that the financial position was not positive, that was known, but the people are fantastic, as is the strength in R&D. I believe that if we do things right, Tower can be successful, and so I took the job,” he said.

That’s been borne out: Intel paid a 60 percent premium for Tower’s shares, which closed at $33.13 before the news of the acquisition broke. Since then they’ve jumped more than 40 percent.

According to Israeli tech news site Calcalist, the success of Tower is a testament to investments made decades ago in the company by Israel Corporation, a joint government and private venture. While the kind of work that Tower does isn’t “glamorous,” Calcalist said, it’s the kind of basic hardware know-how the company has that makes it valuable to Intel.

For those who are worried about the effect of the boycott, divestment and sanctions movement on investment in Israel, the Intel move comes as good news.

“Despite the best efforts of the BDS campaign to tarnish Israel, Intel’s acquisition of Tower demonstrates the strength and innovation of Israeli businesses,” said Julie Hammerman, CEO of JLens, a Bay Area-based organization that pushes for Israel and Jewish values to be represented in investing. “JLens advocates with U.S. companies to build partnerships with Israeli companies, and to ignore the falsehoods perpetuated by BDS activists.”

Intel has had a presence in Israel since 1974, according to its website, and currently has both R&D and manufacturing facilities across the country employing 12,800 people.

Maya Mirsky
Maya Mirsky

Maya Mirsky is a J. Staff Writer based in Oakland.