Tower Semiconductor Ltd. TSEMTSEM (Nasdaq: ; TASE: ) Announces it has closed the deal to commence its new Joint Venture with Panasonic Corporation.
The Joint Venture will include three Semiconductor Factories in Japan, manufacturing, Panasonic and other Products
The JV should enable a greater than US$900 Million of revenue annually commencing in the second quarter of 2014, and permit a consolidation of Japanese Operations thus will reducing annualized fixed costs by approximately $130 Million.
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Within the scope of the JV, Panasonic has transferred its semiconductor manufacturing process and tooling capacity for 8 inch and 12 inch wafers at its three Hokuriku factories, Uozu, Tonami and Arai to the joint venture. Panasonic is also committing to buy volume production from the JV for a long-term period of at least five years. TowerJazz holds 51% of the shares of the JV, and its revenues will increase by approximately US$400 million per annum. Panasonic Corporation will be a 49% shareholder of the JV.
This new JV now enables TowerJazz to offer its customers state of the art technology fabs including best of class 65nm CMOS image sensor, with dark current and quantum efficiency performance, and additional 45nm digital technology. The JV adds available capacity of approximately 800, 000 wafers per year (8 inch equivalent) in the three manufacturing facilities in Japan. The JV will continue production of Panasonic’s own semiconductor requirements as well, as Panasonic’s subcontractor and also seek to expand operations by leveraging TowerJazz’s customers and businesses to capture out-of-group sales.
In addition, TowerJazz now plans to cease the operations of its Nishiwaki (Japan) facility as part of a restructuring and rationalization of its Japanese manufacturing and business plans. This will enable the company to reduce its annual fixed costs by approximately $130 million per annum. The company has retained the services of a Japanese outplacement company, with a history of 95% placement success, to facilitate obtaining continued employment for the remaining employees. Products of key customers, currently being manufactured at the Nishiwaki facility, will be transferred into the company’s other worldwide factories.
Amir Elstein, TowerJazz Chairman, stated, “I am pleased that we have completed this strategic and momentous business agreement with Panasonic. The consolidation of our Japanese operations, resulting in significant reduction in fixed costs with an actual increase in available capacity and an enhanced technology offering, will strongly impact the company’s future profitability and shareholder value.”
Russell Ellwanger, TowerJazz CEO, commented, “This joint venture and 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. Over these months of negotiations and business and operational strategic planning and alignment, we have gained great respect for the technical capability and the great personal and corporate character of our Panasonic partner at all levels with which we’ve interacted. Already, enabled by this partnership, additional customers and products have been brought within the TowerJazz manufacturing umbrella whilst others anxiously await first engagements.”
Ellwanger further stated: “We greatly appreciate the dedication and performance of our Nishiwaki employees. It is important to note that our intention to cease operations of this facility is business and shareholder value based only, and not a reflection of the quality and performance of the facility.”
As consideration for its 51% equity holding in the JV, TowerJazz issued to Panasonic 870, 454 of its ordinary shares with a value of approximately $7.5 million, which were calculated based on TowerJazz’s average share price during the 15 trading days period ended on March 27, 2014. As a minority stakeholder in TowerJazz, Panasonic will now hold approximately 1.8% of TowerJazz’s outstanding ordinary shares.
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