The Integrated Device Manufacturing (IDM 2.0) model is the core of Intel’s second-generation manufacturing plans in the Industrial 4.0 era. Back in March 2021, Intel CEO Pat Gelsinger had outlined the role of IDM 2.0 in taking the company to new heights with an innovative approach to manufacture, design and deliver leadership products. Then labeled as a w****** formula to meet the future needs of customers, Intel’s plans received a major blow this week. Earlier this week, Intel announced its decision to mutually part ways with Tower Semiconductor, dropping its acquisition plans due to regulatory bottlenecks.
Intel had entered into the merger agreement with Tower Semiconductor in February 2022 for $5.4 billion. This acquisition plan was projected as a cornerstone project in Intel’s IDM 2.0 strategy within Intel Foundry Services (IFS).
The termination of agreement led to Intel paying $353 million to Tower this week.
What happens now?
IDM 2.0 and Intel Foundry Services made significant advancements in the semiconductor manufacturing areas in the last 2 years. Tower Semiconductor, a leading foundry for semiconductor solutions, would have added immense value to the project through their expertise and market reach. The aim of the Intel-Tower Semiconductor merger deal was to establish a diverse system foundry at Intel’s fabs and to meet the surging global demands for world-class top-performing semiconductor products. Together, the pair would have led the race toward becoming the biggest manufacturers in the ~$100 billion addressable foundry market. With the deal falling apart, that chance has vanished, at least for some months until Intel finds backs its groove to build a resilient semiconductor manufacturing footprint that would re-establish its reputation as a formidable name in the transistor and power performance domains.
At the time of this announcement, Pat Gelsinger, CEO of Intel confirmed that his company would continue to build the systems that unlock “the full potential of IDM 2.0.” The company aims to build the momentum with the customers and invest into fabs to continue as a market leader.
By 2025, Intel plans to establish IFS as a go-to destination for all foundry-related solutions, empowering the customers and partners with world’s first Open System foundry to manage wide range of technology portfolios and manufacturing programs, including packaging, chiplets, software and wafer manufacturing. So far, the company majorly focused on the US and European region. Now, it may have to expand the scope of their foundry projects through a strategic collaboration to support its ongoing projects at IFS and IDM 2.0.
Why did the deal with Tower Semiconductor fell apart?
Speculations state that the Chinese regulators were the reason for this blockade. They had been showing no sign of approving the merger, according to a Bloomberg report.
The Intel-Tower Semiconductor would have immensely helped the US semiconductor industry. It would have also emerged as a key ally to the ongoing US government initiatives in sectors such as aviation, energy management, space research, military, telecom, edge, and AI education.
According to independent news sources, the ongoing US-China tussle played a role in this severed bond. It’s a speculation that it could also be seen as a retaliatory action from the Chinese side to what Intel and other US-based manufacturing companies did to Huawei in 2019. In March 2019, Intel, Qualcomm, Micron Technology, Google, Western Digital, and Broadcom had opted out of doing business with Huawei. For a very long time, the semiconductor industry had remained a major battleground for US and China, where both the countries wanted to establish their nation as a technology leader.
Last week, POTUS Joe Biden had signed an executive order, restricting the flow of US-led investments and knowledge sharing with Chinese high-tech companies. The semiconductor industry, in addition to edge and quantum processing, were likely to be hit.
What’s next for IDM 2.0 and IFS?
Intel is a technology giant. It would continue to push for more innovations and greater technical efficiency in its attempt to continue building IDM 2.0 as a global foundry ecosystem.
In all likelihood, this blow would eventually turn into a boon for Intel and Tower Semiconductor who could continue to work as partners, “unlocking new opportunities for existing and future customers in an era of unprecedented demand for semiconductors” — much like what they would have done if they had merged this year. Mentioning his sentiments toward the peers at Tower Semiconductor, Pat said, “Our respect for Tower has only grown through this process, and we will continue to look for opportunities to work together in the future.”
Intel is upbeat about its expansion in Ohio and Arizona.It had already announced $20 billion funding to Arizona where it’ setting up two leading-edge factories for $20 billion. This is part of Intel’s 40-year plan that would establish Arizona as the global semiconductor powerhouse.Similarly, Intel will be setting up two new chip factories in Ohio with an initial investment of $20 billion. The company has also earmarked $100 million additional funding to forge collaboration with the top-ranking educational institutions in Ohio to bolster STEM efforts and create a talent pool of students, researchers, and workers.
