7 April 2011

TowerJazz aims to nearly double capacity by buying Micron fab in Japan

Specialty foundry TowerJazz (which has two fabrication plants at Tower Semiconductor Ltd in Migdal Haemek, Israel plus one at its US subsidiary Jazz Semiconductor in Newport Beach, CA) has signed a non-binding term sheet contemplating its purchase of the wafer fabrication plant in Nishiwaki City, Hyogo, Japan belonging to memory chip maker Micron Technology Inc of Boise, ID, USA.

As a manufacturer of integrated circuits with geometries ranging from 1.0 to 0.13-microns, TowerJazz’s existing process portfolio spans specialty technologies such as SiGe, BiCMOS, mixed-signal and RFCMOS, power management (BCD), non-volatile memory (NVM), CMOS image sensors and MEMS. Additional capacity is available in China through manufacturing partnerships.

The proposed purchase would almost double TowerJazz’s current internal manufacturing capacity, increasing production by 60,000 wafers per month. The availability of extra capacity needed to serve the growing demands of its expanding customer base, combined with the additional business potential in Japan, is expected to help TowerJazz to achieve its targeted annual revenue run rate of $1bn by 2014.

As part of the proposed acquisition, the firms expect to sign a supply agreement for TowerJazz to manufacture products for Micron in the Japan fab for about the next three years. The fab can support geometries down to 95nm and can also be used to make other products using TowerJazz process technologies. TowerJazz plans to quickly qualify its core power management platforms to serve the substantial growth in demand from its Korean customers and then build high-end RF capabilities. Increased manufacturing scale and expanded addressable market would further support TowerJazz’s strategy to extend its position as the number-one specialty foundry worldwide.

The value of the proposed transaction (including assumed liabilities) is expected to total about $140m (of which $40m would be paid in cash, about 20 million of Tower ordinary shares would be issued to Micron or its Japanese subsidiary, and the remainder is assumed long-term retirement liabilities that would be payable incrementally upon employee retirements). The parties are currently negotiating definitive agreements.

“We see this as the first step in a long-term partnership,” says TowerJazz’s CEO Russell Ellwanger. “The acquisition of a fab in Japan would be a strategic move by TowerJazz to enter the Japanese market and strengthen our presence in the Asia-Pacific region through local, high-quality manufacturing capabilities and, in addition, would provide us with needed, large-scale incremental capacity,” he adds.

“This proposed transaction would provide a long-term bridge toward a successful future for the Nishiwaki site,” comments Micron’s chairman & CEO Steve Appleton. “We look forward to being both a shareholder and working with them in this endeavor.”

Tags: TowerJazz

Visit: www.towerjazz.com

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