Q2 2011



2011 is off to an active start for the semiconductor industry with several notable M&A and fab transactions announced or completed so far this year:

  • In January, ON Semiconductor completed its strategic acquisition of SANYO Semiconductor from SANYO Electric to gain access to the Japanese market and expand its product portfolio.
  • In April, Texas Instruments announced plans to acquire National Semiconductor at a huge multiple ($25 per share in an all-cash transaction of about $6.5 billion).
  • In May, ATREG advised Renesas Electronics in the sale of its Roseville, CA fab to TELEFUNKEN Semiconductors for approximately $53 million.
  • In June, ATREG advised insolvency administrator Dr. Michael Jaffé, on behalf of Qimonda Dresden, in the sale of Qimonda’s remaining 300mm fabs to Infineon Technologies for approximately $150 million.
  • Finally in June, TowerJazz acquired Micron Technology’s operational 200mm fab in Nishiwaki, Japan for approximately $140 million.

ATREG President & CEO Stephen RothrockCould some of these transactions point to a new trend of increased investment in what are typically perceived as higher-cost regions? Today, demand for front-end manufacturing capacity is the strongest ATREG has seen in 10 years. Many semiconductor companies are seeking to enhance their competitive position by adding cost-effective capacity in locations that offer strong IP protection, a highly trained workforce, a stable supply chain, and wage stability. With the decline of the Euro, regulatory pressures, and government subsidies, Europe could well be stabilizing again as a preferred manufacturing base. As for Japan, the recent TowerJazz / Micron transaction may turn out to be the first of several in which outside companies choose to acquire Japanese fabs. Given the right deal structure, more transactions like this could make sense for both sides in coming months.


Stephen Rothrock
President / Managing Principal





In this article, we thought we would share our perspectives on the recent acquisition of the Micron Nishiwaki fab by TowerJazz, highlighting the potential implications of the transaction for the industry at large, as well as the reasons why this transaction may be the first of several that will happen in Japan over the coming months.

Executive summary

Circuit board assemblyRecent trends in the market, typified by the recent TowerJazz acquisition of Micron Nishiwaki, show strong global demand for fabs and the continued, rapid growth of the foundry segment of the market. On June 4th, Micron Technology (“Micron”) announced that TowerJazz (“Tower”) bought its Nishiwaki City, Japan 200mm fab for $140 million, with Micron simultaneously entering into a supply agreement with Tower. Under the supply agreement, Tower will continue to produce wafers for Micron for at least the next three years. The transaction illustrates the recent, aggressive growth of mid-tier foundries. Other recent transactions exemplifying this trend include TELEFUNKEN’s purchase of Renesas’ Roseville, CA fab, and LFoundry’s purchase last year of Atmel Corporation’s Rousset, France fab. The Micron transaction presents a great opportunity for Tower to acquire a large fab at a fraction of its original cost, as well as get locked-in income from Micron as a great customer. For reasons that will be discussed in this article, this may be the first of several transactions that happen in Japan over the coming months.

Transaction summary

The structure of the Tower / Micron transaction fits the mold of many of the recent fab transactions seen in the marketplace, including long-term supply agreements between buyer and seller. Micron is one of the 10 largest integrated circuits (IC) companies in the world, with 2010 sales of just over $9 billion and a global manufacturing footprint with fabs on three continents. Like many other companies in the sector, Micron has been looking for ways to reduce fixed costs, increase capacity utilization, and focus on leading-edge technology. Tower, a mid-tier foundry based in Israel with fabs domestically and in California, reported 2010 sales of approximately $509 million. The company has been on an aggressive growth trajectory, and has been looking worldwide to expand its business.

While Micron did not actively market its Japan facility, it solicited interest from a select group of companies willing to operate in Japan. After extensive negotiations, Tower agreed to pay Micron $40 million in cash, roughly $22 million in stock, and assume approximately $78 million in long-term liabilities associated with the fab. In addition, Micron entered into a take-or-pay supply agreement with Tower, under which Tower will manufacture products for Micron in the fab for at least the next three years with processing technology licensed from Micron. Specific details of the supply agreement were not disclosed, but based on other similar transactions, the supply agreement probably calls for significant loading in the initial year, declining over time. That way, the fab buyer can slowly qualify and ramp in its own products or those of its customers. The wafer pricing in this type of transaction is usually based on cash costs at the fab, plus a small margin for the buyer. Several market observers commented on the relatively low price paid for the fab, but without knowing the details of the supply agreement, conclusions about the price cannot be made at this point in time.

Deal drivers

One of the key motivations for Tower to complete this transaction was the ability to acquire an advanced 200mm fab, including land, buildings, and manufacturing equipment, for a fraction of its original purchase price. In fact, one way to look at this transaction is that Tower paid a price of $2.3 million per 1,000 monthly wafers of capacity, a figure that compares favorably to the high cost of acquiring new tools, which would run about $10 to 15 million per 1,000 monthly wafers of capacity. In addition to nearly doubling Tower’s manufacturing capacity at low cost, by adding Micron as a new, large foundry customer, Tower’s annual revenue will significantly increase as a result of this transaction. Tower’s larger scale and expanded footprint will give it more market clout and the ability to serve its growing customer base worldwide.

Transaction implications

Circuit boardWe can expect the Tower / Micron transaction to have the following potential implications for the industry at large:

  • There is significant demand for cleanroom manufacturing facilities and equipment worldwide. While Japan still produces a large portion of the world’s ICs, it is one of the more expensive places to operate. General market consensus held that non-Japanese companies would not make investments in Japanese manufacturing facilities, yet we have seen Texas Instruments in 2010 and now Tower in 2011 commit to new manufacturing investments in Japan. Tower and others made their investment decision based on several factors, including the excellence of Japanese manufacturing operations, the proximity to Japanese customers, and the lack of other suitable facilities elsewhere in the world available at a similar price point.
  • Global fab demand continues to be strong, a trend illustrated by the recent sale of fabs in the U.S. (Renesas, Roseville, CA) and Europe (Qimonda Dresden). Both transactions happened rapidly as IC manufacturers continue to scramble to keep up with rising demand.
  • The Micron transaction also illustrates the growth of mid-tier foundries over the last several years. Tower grew from one fab in Israel to a global company by acquiring Jazz based in Newport Beach, CA in 2008. Since then, we have witnessed the growth of several other foundries, such as X-Fab and the creation of both TELEFUNKEN and LFoundry. These companies continue to expand worldwide, and in the last 12 months, LFoundry has acquired a second 200mm fab in France and TELEFUNKEN a 200mm fab in the U.S. This growth demonstrates the strong customer demand for outsourced IC manufacturing, especially for specialty type analog / mixed-signal products.


The Tower / Micron transaction should turn out to be a win-win situation for both companies. Micron gets to reduce its fixed expenses, shed some liabilities, and phase out of a facility that is no longer suited to meet its customer demands. Tower gets to acquire a 200mm operation that is well suited to its needs at a low entry cost while adding Micron as a significant customer with long-term, built-in revenue. This transaction may turn out to be the first of several in which outside companies choose to acquire Japanese fabs. Given the right deal structure, more transactions like this could make sense for both sides in the future.





Former Renesas Roseville fabATREG recently facilitated two substantial fab transactions in the U.S. and Germany. ATREG acted as the exclusive financial advisor to Renesas Electronics in the sale of its 200mm semiconductor fab to TELEFUNKEN Semiconductors for approximately $53 million. TELEFUNKEN will use the Roseville, CA facility to manufacture its own analog / mixed-signal high-voltage products as well as products for strategic foundry partners. The buyer has also entered into a supply agreement with Renesas Electronics for manufacturing services at the Roseville fab while preserving the entire workforce.

In Germany, ATREG advised insolvency administrator Dr. Michael Jaffé, on behalf of Qimonda Dresden, throughout the successful sale of Qimonda’s remaining fabs. Infineon Technologies, a leading provider of semiconductor and system solutions addressing energy efficiency, mobility, and security headquartered in Munich, Germany, purchased these assets for €100,600,000. The transaction includes a 300mm production fab, a 300mm R&D fab, manufacturing equipment, as well as related support and administrative facilities.