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TowerJazz Soars On JV With Panasonic Worth $400 Million In Sales To Tower Aannually

TowerJazz Japan

Tower Semiconductor Ltd. (Nasdaq: TSEM; TASE: TSEM) (which trades as TowerJazz) is to set up a joint venture with Panasonic Corporation to manufacture Panasonic’s products, the two companies announced on Friday. The joint venture is expected to be worth $400 million in sales to Tower annually. This will enable Tower to reach an annual rate of sales of at least $900 million in the next five years, starting from the second quarter of 2014. Tower Semiconductor shares are currently up 43% on the Tel Aviv Stock Exchange.

Tower will own 51% of the venture, in consideration for which it will issue to Panasonic ordinary shares in the value of approximately $8 million, to be calculated based on Tower’s average share value during March 2014. As a result of holding its ordinary shares, Panasonic will become a minority stakeholder in TowerJazz.

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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, committing to acquire its products from the JV for a long term period of at least five years of volume production.

Tower says that 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.

The JV will continue the production of Panasonic’s semiconductor processes as Panasonic’s subcontractor as well as seek to expand operations by leveraging TowerJazz’s customers and businesses to capture out-of-group sales.

Tower says that the JV will increase TowerJazz’s technology offerings, adding for example Panasonic’s High Definition FSI, which it says is a 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. This Panasonic technology allows excellent images in low light conditions with no bright pixels in the image, and is suited for high end DSLR (digital single lens reflex) type cameras.

Tower chairman Amir Elstein said, “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.”

Tower CEO Russell Ellwanger said “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.”


“Globes” correspondent Hillel Koren spoke to Tower CEO Russell Ellwanger:

Would you define the deal with Panasonic as a game changer?

“Yes to a certain extent. This is a very positive announcement and it will allow us to continue leading in the markets in which we work.”

Can the deal bring in major new customers because of the reputation of Panasonic?

It’s reasonable to assume so but I also want to stress that Tower has an excellent reputation and we serve good customers around the world. What is the case is that Panasonic can help us in the Japanese market. Panasonic is a giant company and with its plants there is a very good chance of getting new Japanese customers. Regarding the rest of the world we already have a good name.”

Were you surprised the way the share price soared on Friday?

The truth is that I’m often surprised by the market’s reactions to Tower’s announcements and I don’t always understand those reactions. But clearly I was satisfied with the trading on Friday. It’s a pleasure to see something that you’ve built, that you’ve invested so much energy in give positive expression on the capital market.”

Tower reported on Friday that the joint venture is expected to be worth $400 million in sales to Tower annually. This will enable Tower to reach an annual rate of sales of at least $900 million in the next five years, starting from the second quarter of 2014.


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