The chip "fight" is fierce, and Intel acquires tall semiconductors for $5.4 billion! What are the implications?

Text | Jaly

Under the guidance of the open strategy, the technology giant Intel is rapidly expanding the chip foundry capacity through multiple acquisitions, and plans to build its own factories on a large scale.

On the evening of February 15, Intel announced that it would acquire the Israeli semiconductor foundry Tower Semiconductor (hereinafter referred to as Tower) for $5.4 billion. Under the deal, Intel will buy The Tower in cash for $53 per share, but the company's last deal is $33 per share, with a premium of up to 60 percent. The transaction is expected to close within 12 months.

It is worth noting that the frequent voice of high-tower semiconductors will lay out the Chinese market. Intel has previously competed with TSMC and is in a weak position in the process, after this transaction, what is Intel's deployment for the Chinese market? Can the lack of core be alleviated, and what is the impact on the industrial structure and industrial chain?

Expand the global foundry layout

Behind the large-scale acquisition is Intel's ambition to expand into more chip foundry fields.

At the time of the decline in the original deep layout of the PC market, Intel began to increase the opening of wafer foundries to the outside world, opened its chip foundries to all chip companies, and gradually wanted to turn former competitors such as Qualcomm, Samsung, MediaTek, and NVIDIA into customers of its own wafer foundry business. Last year, Intel launched the IDM 2.0 strategy to accelerate the degree of openness, and the business became a combination of "Intel factory + third-party capacity + foundry services".

"After Pat Kissinger returned as CEO, Intel returned to the technology route and completely abandoned the long-lasting toothpaste strategy, and the company's development strategy has become more open, and the expansion of wafer foundry capabilities and the completion of the industrial chain are the focus of its efforts." According to people familiar with the matter.

Recently, Intel announced the establishment of a $1 billion Foundry Services (IFS) Innovation Fund to make strategic investments in start-ups in the chip foundry field. As part of Pat Kissinger's IDM 2.0 strategy launched last March, it's a clear sign that Intel is once again opening up its foundry services to the outside world.

From the perspective of global chip sales, the huge growth force shown by the analog semiconductor market has made many foundry companies moved. Recently, the American Semiconductor Industry Association (SIA) released data showing that the global semiconductor market sales totaled $555.9 billion in 2021, an increase of 26.2% year-on-year, a record high.

Under the expansion of customers and the growing market demand, Intel is facing a huge gap in production capacity and chip supply. The acquisition of a mature chip company Tower will help it quickly expand its production capacity, and supplement the industrial chain in the current markets such as the most demanded and fastest-growing analog semiconductors, while radiating to more chip foundry fields.

Aiming for the top ten wafer foundries?

From the perspective of market segmentation, as a product commonly used in the automotive, consumer goods and computer fields, analog semiconductors have the highest average annual growth rate, reaching 33.1% in 2021. In addition, logic chips and memory products also increased by 30.8% and 30.9% over the previous year. A number of giants such as Yardno and ADI are accelerating the expansion of analog semiconductor production capacity.

Tower Semiconductor is the world's ninth largest wafer foundry, the main focus is on analog chip production, its current market value of 3.594 billion US dollars, in the RADIO frequency, power supply, industrial sensors and other professional technology has expertise, mobile, automotive and power supply and other markets across the regional operation of foundry business.

"Analog chips are not like digital chips that pursue advanced processes, most of which are concentrated below 28nm, and the industrial chain can be controlled by acquiring mature enterprises." At present, the amount of semiconductors in new energy vehicle analog chips has increased rapidly, and Intel can smoothly make up for a certain gap after acquisition, and open up more markets in the fields of automobiles and power chips. Alibaba MVP Ma Chao said that in addition, Gaota Semiconductor has many years of experience in the fields of RADIO frequency and industrial sensors, which can complement Intel's long-term desktop and cloud computing fields. At present, only a very small number of companies in the world can independently complete all the processes of chip design, manufacturing and packaging and testing, including Intel, which will greatly improve its industrial chain and increase the competitive chips with TSMC and Samsung in the pocket.

In addition to acquisitions, Intel itself is also building a fab. Last month, Intel announced a new fab investment plan to build a new chip production base in Ohio, USA, with an initial investment of $20 billion, which is expected to begin production in 2025, and the base will accommodate 8 chip manufacturing plants.

Intel's continuous expansion of production capacity in the foundry battlefield and joint attack with high towers will affect the market pattern to a certain extent. According to Jibang Consulting data, in the third quarter of last year, TSMC ranked first with a market share of 53.1%, and Gaota Semiconductor ranked ninth with a share of 1.4%.

After the completion of the acquisition, Intel is expected to enter the top ten of wafer foundry, and with the release of new plant capacity in many places in the next few years, its competition with TSMC, Samsung and other leading companies will be more intense.

Difficult to resist the temptation of the Chinese market?

According to The Tower's financial report, it achieved operating income of US$387 million and net profit of US$39 million in the third quarter of 2021. Intel acquired the tower for $5.4 billion, equivalent to $53 per share. But Gaota's last deal was $33 per share, with a premium of 60 percent, a high-premium acquisition.

In this regard, the industry believes that in addition to the foundry ability of the tower, the layout of its business in China is also intel's concern.

Ma Chao believes: "In recent years, the tower has made a lot of efforts in Chinese mainland, and the Chinese market is showing great potential in the semiconductor field. ”

According to the data released by the SIA, in 2021, China is the world's largest semiconductor market, with semiconductor market sales of $192.5 billion, an increase of 27.1% year-on-year. China's huge market has attracted more and more semiconductor manufacturers to lay out and build factories in China, and at the same time, China's local chip manufacturers are also accelerating their breakthrough.

Yi Xianjing, deputy general manager of Di Xian Information, told the Securities Daily reporter, "With the improvement of the industry boom, the cash flow of many semiconductor companies is now very abundant, and taking advantage of the fact that the valuation of some chip factories has not yet risen, it is a very cost-effective transaction to take the opportunity to expand its position through mergers and acquisitions, which is one of the reasons why mergers and acquisitions in the global semiconductor industry have occurred frequently recently." In the next few years, the market structure will also be fine-tuned. The scale of domestic chip manufacturers is also developing rapidly, and embarking on the road of independent listing, with the threshold raised, the supervision becomes stricter, the integration phenomenon will increase. ”

"Overall, Intel's acquisition of tall towers is a microcosm of the tight global chip supply. At present, the latest 4nm process process is basically close to the physical limit, and the room for upward improvement is very small, so Intel is no longer obsessed with catching up with TSMC in terms of process, but has found another way to develop comprehensively on different architectures and chips of different specifications. Intel from the professional to the large and complete model, which in itself means that the imbalance in the chip field is intensifying, as long as the entire industry chain is missing a link will be stuck in the neck, so whether intel or AMD, Nvidia in the past two years is the rhythm of buying and buying. Chinese manufacturers can also seize the opportunity to find the right target. Ma Chao said.