Tower seeks fab deal in China

Tower seeks fab deal in China

Business news |
Specialty foundry Tower Semiconductor Ltd. (Migdal Haemek, Israel), which trades as TowerJazz, is actively seeking a wafer fab opportunity in China.
By eeNews Europe


The deal, if it happens, is likely to be multi-party and include Tower as a supplier of manufacturing process technology or fab management expertise rather than cash.

Tower has been building up manufacturing capacity in recent years through deals and now operates six wafer fabs. At the end of 2013 Tower acquired control of three wafer fabs in Japan through a joint venture with Panasonic. Tower has also been part of a consortium bidding to build a wafer fab in Uttar Pradesh, India, with government support. However, the process in India has taken three years with no indication of when the project might break ground.

It is not yet clear how a Chinese deal would be constructed but Russell Ellwanger, CEO of Tower, told eeNews Europe in an interview that "China can move faster than India. But you would be keen to spread out the opportunity to avoid capex. Another model would be for Tower to act as technology provider."

When asked whether Tower was considering a move into Chinese-based production Ellwanger said: "More than just considering; actively looking at the opportunity." But when asked for further details Tower declined to provide more saying: "We have a lot of activity there and customer engagements but nothing major that is public and can be highlighted."

Tower has been active in Shanghai. In December 2013 the company signed a memorandum of understanding to provide access to its foundry through the Shanghai IC Technology & Industry Promotion Center (Shanghai ICC). Shanghai ICC is a non-profit group formed by the Chinese government to help grow China’s emerging IC companies by providing EDA and testing services to local companies and organizing multiproject wafer runs.

However, Tower may increase its manufacturing capacity in Japan before it does in India or China. Ellwanger said in the interview that at the time Tower was negotiating with Panasonic another systems company with chip manufacturing capacity had wanted to participate in a larger, three-way venture. Ellwanger did not name the other company and said the decision was made to keep the deal simple with just two parties to speed the talks to a successful conclusion. But Ellwanger said that a deal with the unnamed third party was still possible.

Next: 1Q15 financial results

In the first quarter of 2015 Tower made a net loss on a GAAP basis of $73 million although this included a financing expense of $85 million related to the conversion of debenture of $162 million. The company’s revenues were $226 million, up 71 percent compared with $133 million recorded in the first quarter of 2014.

Tower expects revenues for the second quarter of $235 million plus or minus 5 percent, which would represent a sequential growth at the mid-point of 4.0 percent.

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CEO interview: What’s next after Tower’s turn-around?

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