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Date: 22-12-13

Panasonic turns fablite and TowerJazz a bigger foundry player

The Japan's leading consumer electronics joint Panasonic has signed definitive agreement with the Israel-based semiconductor foundry service provider TowerJazz to form Joint Venture to own and manage some of the important semiconductor fabrication facilities of Panasonic. TowerJazz to acquire 3 Panasonic semiconductor Factories in Japan. This results into a semiconductor foundry services expansion in the areas beyond deep node logic ICs.

TowerJazz says its revenues are expected to increase approximately by $400 million a year, through this transaction.

TowerJazz to own 51% of the joint venture resulting in availability of additional capacity of approximately 800,000 wafers per year (8 inch equivalent) in three manufacturing facilities in Japan.

Panasonic has committed to buy the chips/devices made at these joint venture facilities for a period of at least 5 years of volume production.

TowerJazz said it will add to its capacity a 300 mm analog semiconductor chip fab including best of class 65nm CMOS image sensor dark current and quantum efficiency performance and additional 45 nm digital technology.

Within the scope of the JV, Panasonic will transfer its semiconductor manufacturing process and capacity tools of 8 inch and 12 inch wafers at its Hokuriku factories (Uozu, Tonami and Arai) to the JV.

TowerJazz said it will rationalize its Japanese business, which may include fab consolidations between TowerJazz's Nishiwaki facility and the JV's facilities, and to this end, TowerJazz is evaluating potential ventures for the Nishiwaki facility.

Through this agreement TowerJazz can offer specialty flows such as High Definition FSI – a world famous CIS (CMOS Image Sensor) benchmark technology for high quantum efficiency, low dark current CIS technology, and high voltage SOI (silicon-on-insulator) based power management technologies, to its global customers.

TowerJazz says High Definition FSI is a unique technology that enables the use of front side illumination (FSI) even for small pixels, where usually, an expensive backside illumination (BSI) is being widely used in the industry. This helps TowerJazz to expand into high performance image sensor market both for SLR cameras and for such similar applications.

Another important gain for TowerJazz is high voltage SOI technology from Panasonic which immediately extends TowerJazz's BCD (Bipolar-CMOS-DMOS) offering from 80V to 190V enabling entry into new display driver, industrial and medical markets previously not accessible. The technology includes a low-Rds(on) integrated IGBT (insulated-gate bipolar transistor) to enable efficient high-voltage drivers, 5V CMOS for integration of digital and analog functions, SOI substrates for virtually perfect signal isolation, and thick Cu layers for low-loss interconnects, as explained by TowerJazz.

This will result into TowerJazz emerging as one of the leading foundry service provider for the broad range of semiconductor devices. This is a unique strength, TowerJazz is gaining compared to other foundry service providers such as TSMC and Globalfoundries who are more focused towards deep-node digital logic -based SOC chips. This biz agreement set the trend where chip foundry business is not only about finFET or 14 nm, it can even cover various aspects of semiconductor fabrication services. Also other merchant semiconductor companies now ponder about becoming even more fablite or offering foundry services, depending upon the strength.

Amir Elstein, TowerJazz Chairman, stated, "This acquisition and the JV creation with Panasonic Corporation is just one of the culminating strategic events, that is enhancing TowerJazz's business leadership, and is intensively focused on creating shareholder value". Russell Ellwanger, TowerJazz CEO, commented, "We are honored to place our name side by side with Panasonic Corporation to create an innovative joint venture that provides high capacity, highest quality, multiple world leading analog platforms and, as well, 300mm advanced technology nodes. This partnership brings together two leaders – Panasonic, an acknowledged analog components and systems leader, and TowerJazz, a recognized analog foundry leader - to create a company that will serve and grow the analog foundry space as no existing single foundry company can."

Further agreement details disclosed by TowerJazz includes:

As consideration for its 51% equity holding in the JV, after closing of this transaction, TowerJazz will issue to Panasonic ordinary shares in the value of approximately $8 million, to be calculated based on TowerJazz average shares value during March 2014. As a result of holding its ordinary shares, Panasonic will become a minority stakeholder in TowerJazz.

The JV balance sheet assets will include, among others, the cap-ex tools of the three fabs, cash in the amount of approximately $40 million to be invested by Panasonic and work in process (inventories) manufactured at Panasonic fabs before the closing date.

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