Indian conglomerate Adani Group, led by Gautam Adani, has made a major investment after buying Haifa Port along with Israeli semiconductor maker Tower Semiconductor (TASE: TSEM; Nasdaq: TSEM), Indian official sources said on X (Twitter) over the weekend. state early last year.
According to reports, Tower and Adani Group will jointly invest 10 billion dollars in the construction of a chip factory in Maharashtra. “BIG news for Maharashtra,” wrote Maharashtra Deputy Chief Minister Devendra Fadnavis. According to him, the two companies will invest this amount in two stages: initially 70%, annual production of 40,000 wafers, up to 80,000 units at full capacity.
Apparently, no agreement has yet been signed on the project – Tower was required to report such an agreement to the Tel Aviv Stock Exchange and the US Securities and Exchange Commission. Speculations about Tower building a factory in India have been rife for some time. India offers incentives to attract chipmakers that can cover much of the investment, thereby reducing risk. In response to the news, Tower said: “Tower is constantly exploring growth opportunities. If there is anything material, the company will report as requested.” In any case, Tower opened higher on Wall Street on Friday after the report, but later closed down 1.8%, matching the market’s negative trend.
A two-year process
Sergey Vastchenok, chief equity analyst at Oppenheimer Israel, says India is more ready to build a chip factory than in the past. “Building a factory is not easy. It is a long process that takes an average of two years. The main thing is not money,” Vastchenok emphasizes. “For example, TSMC is building a new factory in Arizona, and it’s a company that knows how to build fabs, but the project is still a few years away and won’t start until next year.
“There is a huge demand for chips,” he adds, “and Indians want to reduce their dependence on China, but I’m not sure how many people in India are capable of working in such a factory and what the bureaucracy is. It is not like China, where the party gives orders and everyone falls in line. It’s easier said than done.”
Tower currently has fabs in Israel, the US and Japan, recently added a fab in Italy, and an Intel fab for 300mm chips in the US (New Mexico). This was based on an agreement signed between Tower and Intel last summer after Intel’s acquisition of Tower was called off. The agreement envisages that Tower will invest $300 million in the purchase and installation of equipment at the facility.
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Operates at Tower Migdal Ha’emek in Israel. Earlier this year, it announced the closure of Fab 1, one of its two fabs in the city, which produced older chip designs for which demand has declined.
“Good financial opportunities”
In an interview with Globe six months ago, Tower Semiconductor CEO Russell Ellwanger said the company had set an annual revenue target of $2.66 billion, compared with actual revenue of $1.4 billion in 2023. The model does not set a target date. , and based on 85% capacity utilization.
Ellwanger went on to say that while the company is not under pressure to invest more in expanding its manufacturing capacity, it is certainly looking at opportunities. “If there is a good financial opportunity, we will do it. He also added, “It’s no secret that India wants to build chip factories, and there will be incentives from the government, but we’ll be looking everywhere to see if we can add value without hurting our shareholders. Our eyes are open.”
When asked why the company wanted to expand in India rather than Israel, Ellwanger said, “If we had the ability to build in Israel, it would make more sense than in a country where we have no presence. All things being equal, Israel certainly owes Israel a lot if it doesn’t have a 75% grant history like India.”
Tower Semiconductor trades on the Nasdaq and Tel Aviv Stock Exchange with a market capitalization of $4.5 billion and a share price of $40.50 after a 33% gain so far this year. That’s still not the level it traded at when it was due to be acquired by Intel, when it was valued at $5.4 billion and the stock price is 30% higher than it is now.
Globes, Israel business news – en.globes.co.il – published on September 9, 2024.
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