Tower CEO Russell Ellwanger to remain at the helm

Russell Ellwanger Photo: Eyal Yizhar
Russell Ellwanger Photo: Eyal Yizhar

Ellwanger has no desire to retire and insists that despite the cancelation of the acquisition by Intel, the Israeli chipmaker is in its best situation ever.

Six months after the deal for Intel to acquire Israeli chipmaker Tower Semiconductor Ltd. (Nasdaq: TSEM; TASE:TSEM) was canceled because the US chipmaker was unable to receive Chinese regulatory approval, Tower CEO Russell Ellwanger says that the company is in the best situation it has ever been.

He said, "I sent an email to all the company's employees at the start of the year, and I wrote to them that I have never been more enthusiastic about the opportunities that lie ahead in terms of the financial situation, what we have to offer technologically, the ability to expand production capacity, the partners and customers."

Ellwanger has managed Tower since 2005, when it was a troubled company with big debts and major concerns about liquidity. Over the years, he has led the company through processes that brought about streamlining and a shift to growth and profitability, paying back all its debts, and finally the acquisition deal with Intel for $5.4 billion (albeit it was canceled) - a valuation 68% higher than the company's current market cap.

After the deal was canceled last summer, there was astonishment that Ellwanger stayed on at Tower. He says resolutely, "I have no intention of ceasing to work here and no desire to resign. Between Christmas and New Year we held a family meeting at home. We had a conversation on the subject of heritage and my wife and I agreed that my heritage is to create value - not necessarily money but to make things happen, to help people. When I arrived at Tower it was worth $60 million and now we are worth $2-3 billion, and when you grow a company you influence very many people. So I plan to continue with this and do not plan to retire."

Tower beat the analysts in its fourth quarter 2023 results in both revenue and profit. Revenue for the fourth quarter was $352 million, down 12.8% from the corresponding quarter of 2022. Annual revenue was $1.42 billion, down 15.2% from 2022.

Ellwanger stresses, "The market is not very strong at the moment but we are bullish about the future." He cites power management as a major engine of growth for the company. After cancelation of the Intel deal, Tower signed an agreement with Intel to expand production capability in which Tower will use Intel's advanced plant in New Mexico to manufacture chips.

In the fourth quarter, Tower reported a net profit of $53.8 million, down from $83.3 million in the corresponding quarter. For full-year 2023, Tower reported a net profit of $518 million, almost double its profit in 2022, thanks to the compensation received from Intel for cancelation of the deal. Adjusted net profit amounted to $247 million, down 12.9% from 2022. After publication of its fourth quarter results, Tower's share price jumped 7%.

An Indian plant? "If it will be financially attractive"

In 2023, Tower generated cash flow of $677 million from current operations, up from $530 million in 2022, and at the end of the year the company had more than $1.2 billion in cash.

In the first quarter of 2024, Tower expects $325 million revenue within a 5% range in either direction, in line with the analysts' forecasts, although the forecast was adversely affected by an earthquake that hit Japan in early January, near Tower's plant. There were no injuries to employees or damage to the building, but there was damage to tools and work processes that resulted in delays. "Had it not been for the earthquake, the forecast would have been higher," says Ellwanger and adds that the company expects growth from quarter to quarter during 2024. "Our operations are strong and the plant in Italy is also progressing according to the schedules," he notes.

There were recent reports that Tower will build a plant in India for $8 billion.

"Yes I read them."

Is it happening?

"When there's something substantial, we will announce it. It is true that I met with India's Minister of Electronics. Tower continues to seek opportunities everywhere. In any event, every action we take we want to be sure that in financial terms it will be attractive and it will contribute to our profit from the first day."

"We haven't lost one order because of the war"

How much has the war in Israel affected Tower's operations?

"One of the beautiful things in Israel is the fact that when there's a 'headwind' people work together in a strong way. We have a lot of employees in the army reserves but those who are here are happy to work more and we haven't lost one order."

Tower is traded on Nasdaq and the TASE with a market cap of $3.53 billion. The company's share price lost 41.7% since its record high in 2022 following the planned acquisition by Intel, but has recovered and has gained 30.7% from its low-point in October 2023. Analysts covering the share see an average price target of $33.67 per share, 17.6% higher than its current price.

Published by Globes, Israel business news - - on February 15, 2024.

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

Russell Ellwanger Photo: Eyal Yizhar
Russell Ellwanger Photo: Eyal Yizhar
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