Tower to build fab in India? "Easier said than done"

Russell Elwanger and Gautam Adani  credit: Inbal Marmari, APSEZ
Russell Elwanger and Gautam Adani credit: Inbal Marmari, APSEZ

Oppenheimer Israel senior analyst Sergey Vastchenok: It’s not like China, where the Party gives an order and everyone comes into line.

At the weekend, official Indian sources reported on X (Twitter) a huge investment by Israeli semiconductor manufacturer Tower Semiconductor (TASE: TSEM; Nasdaq: TSEM) together with Indian conglomerate Adani Group headed by Gautam Adani, which controls Haifa Port after buying it from the state early last year.

According to the report, Tower and Adani Group will together invest $10 billion in constructing a chip factory in the state of Maharashtra. "BIG news for Maharashtra" wrote Deputy Chief Minister of Maharashtra Devendra Fadnavis. According to him, the two companies will invest the sum in two stages: 70% initially, with annual output of 40,000 wafers, rising to 80,000 at full capacity.

Apparently no agreement on the project has yet been signed - Tower would have been obliged to report such an agreement to the Tel Aviv Stock Exchange and the US Securities and Exchange Commission. Speculation about Tower constructing a factory in India has, however, been heard for a while. India offers incentives to attract chip makers that could cover much of the investment and thereby reduce the risk. Tower said in response to the reports: "Tower constantly examines growth opportunities. If there’s something material, the company will report as required." At any rate, under the influence of the report, Tower opened trading on Friday on Wall Street with a rise, but later came into line with the negative trend of the market, to close 1.8% off.

Two year process

Sergey Vastchenok, senior equity analyst at Oppenheimer Israel, says that India is more ready than in the past to build a chip factory. "Building a fab isn’t simple. It’s a long process that takes two years on average. Money isn’t the main thing," Vastchenok stresses. "TSMC, for example, is building a new fab in Arizona, and that’s a company that knows how to build fabs, but the project has still been stuck for several years and is due to start working only next year.

"There’s a great deal of demand for chips," he adds, "and the 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 bureaucratic situation is there. It’s not like China, where the Party gives an order and everyone comes into line. It’s easier said than done."

Tower currently has fabs in Israel, the US, and Japan, to which was recently added a fab in Italy, and an Intel fab in the US (New Mexico) for 300 mm chips. This was under an agreement between Tower and Intel signed after the Intel’s acquisition of Tower was cancelled last summer. The agreement stipulates that Tower will invest $300 million to acquire and install equipment in the facility.

In Israel, Tower operates at Migdal Ha’emek. Earlier this year, it announced the closure of Fab 1, one of its two fabs in the town, which produced old designs of chips for which demand had fallen.

"Good financial opportunity"

In an interview with "Globes" six months ago, Tower Semiconductor CEO Russell Ellwanger said that the company had set itself an annual revenue target of $2.66 billion, which compares with actual revenue of $1.4 billion in 2023. The model does not set a target date, and is based on 85% capacity usage.

Ellwanger said then that, although the company was not under pressure to invest further in expanding production capacity, it was certainly looking at opportunities. "If there’s a financially good opportunity, we’ll do it," he said. He also said, "It’s no secret that India wants to set up chip production factories, and the state will provide incentives, but we’ll check everywhere that we can add value without harming our shareholders. Our eyes are open."

Asked why the company would want to expand in India rather than in Israel, Ellwanger replied, "If we had an opportunity to build in Israel, that would certainly make more sense than in a country where we have no presence at all. If all the conditions were equal, Israel would be the first place in which to expand. But Israel does not have a history of 75% grants like India. If it wants to subsidize competitively, it will certainly be a preferred destination. We owe a lot to Israel."

Tower Semiconductor is traded on Nasdaq and the Tel Aviv Stock Exchange at a market cap of $4.5 billion and a share price of $40.50, after a 33% rise so far this year. This is still not the level at which it was traded when it was due to be acquired by Intel, when it was valued at $5.4 billion and its share price was 30% higher than it is now.

Published by Globes, Israel business news - en.globes.co.il - on September 9, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

Russell Elwanger and Gautam Adani  credit: Inbal Marmari, APSEZ
Russell Elwanger and Gautam Adani credit: Inbal Marmari, APSEZ
Microsoft campus in Herzliya  credit; Eyal Izhar Microsoft: Exempt Israel from AI-chip export restrictions

Israel is among countries mentioned in a blog post by Microsoft vice chair and president Brad Smith criticizing the restrictions.

Paz gas station credit: Tali Bogdanovsky Gasoline prices in Israel to fall Saturday night

The maximum price of government price controlled 95 octane gasoline at self-service pumps in Israel will fall on Saturday at midnight March 2, 2025, by NIS 0.08 per liter to NIS 7.23 per liter.

Tel Aviv credit: Shutterstock Tel Aviv master plan sees 600,000 residents by 2035

The Tel Aviv District Planning and Building Committee has approved for deposit the TA/5500 master plan for Tel Aviv-Yafo.

Mizrahi Tefahot Bank  credit: Eyal Izhar Mizrahi Tefahot to pay huge dividend on record 2024 profit

The bank reported net profit of NIS 5.5 billion last year, up 11% from NIS 4.9 billion in 2023.

Sheba, Tel Hashomer Hospital Photo: Tamar Matsafi Israel's Sheba climbs in "Newsweek" world hospital top ten

Last year "Newsweek" ranked Sheba Medical Center in ninth place and previously it was in tenth place.

Cyberattack  credit: Shutterstock Israel second most targeted country for cyberattacks

The report by Radware found that Israel suffered 1,550 cyberattacks in 2024, second only to Ukraine which suffered 2,052 attacks.

BIG Fashion Glilot credit: Dror Marmor Israel's biggest mall opens Thursday

BIG Fashion Glilot strip mall is in Ramat Hasharon's new office park, adjacent to Cinema City Glilot.

Tesla Model Y credit: Shutterstock Can Tesla stage a comeback in Israel in 2025?

After taking Israel by storm four years ago, Tesla has gradually lost market shares to Chinese rivals but this trend could change this year.

Ghost jobs illustration: Tali Bogdanovsky 10% of Israeli tech vacancies are ghost jobs

Ethosia CEO Eyal Solomon says the proportion of "ghost" jobs - vacancies that have been advertised but not filled and continue to appear on the company's website - has jumped dramatically in recent years.

Prime Minister Benjamin Netanyahu and Transport Minister Miri Regev credit: Marc Israel Sellem Jerusalem Post Jerusalem Red Line extension awaits ribbon cutting

Opening the light rail extension has been delayed while a date is found for a ceremony attended by Prime Minister Benjamin Netanyahu and Transport Minister Miri Regev.

Tel Aviv light rail Light rail fares in Israel jump 33.3%

Bus fares will also rise 33.3% after the 2025 budget is passed.

Quantum Machines founders credit: Eyal Izhar Israeli co Quantum Machines raises $170m

Sources say that the company's valuation, which before the latest round was $520 million, has now risen to $670 million.

Pay cuts illustration: Shutterstock Treasury plans pay cuts for doctors, teachers, and civil servants

The move is intended to ensure that the budget savings target of NIS 5 billion shekels in 2025 is achieved, as part of efforts to reduce the state budget deficit.

Shekel credit: Shutterstock Vladirina 32 Shekel weakens after BoI rate call

Poria Financial Planning chairman Or Poria: There is growing uncertainty over the collapse of the hostage deal, and the increasing probability of renewed fighting in the south.

Daniel Aronovitz credit: Joseph Laor Insight Partners: $6b and still investing in Israel

Insight Partners newly appointed Israel partner Daniel Aronovitz tells "Globes" about the US firms plans for Israel and reveals the huge extent of past investment.

Bank of Israel Governor Amir Yaron credit: Eyal Izhar, Tali Bogdansky BoI Governor: We hope for two rate cuts in second half

Bank of Israel Governor Prof. Amir Yaron tells "Globes" he remains concerned about inflation, higher demand than supply, and real estate balloon loans.

Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018