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Intel Corp (INTC) has agreed to buy Tower Semiconductor Ltd for $5.4 billion. Tower Semiconductor Ltd is an Israeli chip company specialising in making chips used in cars, mobile devices, and industrial, medical, and military services. Tower has many factories located in the US in San Antonio, Texas and Newport Beach, California, and some overseas factories in Japan and Israel. Last year INTC lost the title of being the biggest chipmaker. This was due to the supply shortages in making these chips. As a result of the pandemic, consumers and businesses started to buy more electronic devices to aid staff with working remotely. This surge in demand for electronics led to a decrease in the availability of both the chips that go into such devices and the materials required for making the chips. The CEO of INTC said that the acquisition would help Intel’s foundry service, which was founded last year, expand and allow them to produce chips specifically used in cars and mobile devices. These chips will then be available to third parties who require them. As previously mentioned, due to the ongoing global chip shortage, INTC hopes that it will be able to expand its manufacturing capacity and global footprint to increase its impact across the entire value chain.
Intel will be paying $53 per share for Tower, and the transaction has been approved by the companies’ boards and expects to close in around 12 months. Pat Gelsinger, who took the role of Chief Executive Officer of INTC last year, aims to go head-to-head and directly compete with the Taiwanese company Taiwan Semiconductor Manufacturing Co (TSMC), which currently dominates the chip-making market. Although INTC has had very little success in handling different types of chips and designs, it will not have to worry about starting right from the basics. As INTC will be acquiring Tower, it will also be able to use the expertise of many workers who are already specialised in working in this field, which will help INTC get a head start.