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Intel has confirmed earlier rumors that it’s planning to acquire “contract” chipmaker Tower Semiconductor in an all-cash deal worth $5.4 billion.

Founded in 1993, Tower Semiconductor manufacturers analog chips for hundreds of companies across automotive, medical, industrial, aerospace, and more. The Migdal HaEmek, Israel-based company makes chips designed by other companies, and competes against Taiwan’s TSMC, one of the world’s largest semiconductor firms.

The acquisition comes almost a year after Intel revealed plans to invest $20 billion in two new factories in Arizona, while simultaneously announcing Intel Foundry Services (IFS) — a dedicated unit for manufacturing chips for external designers. In July, Intel CEO Pat Gelsinger revealed that the company was talking to at least a hundred potential customers for IFS.

Reports also emerged last summer that Intel was in talks to buy TSMC rival GlobalFoundries for $30 billion, though the company elected to go public on the Nasdaq instead.

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Capacity and reach

With Tower Semiconductor under its wing, Intel has given its burgeoning contract chip making aspirations a major boost, both in terms of manufacturing capacity, global reach, and IP / technology.

“Tower’s specialty technology portfolio, geographic reach, deep customer relationships and services-first operations will help scale Intel’s foundry services and advance our goal of becoming a major provider of foundry capacity globally,” Gelsinger said in a press release. “This deal will enable Intel to offer a compelling breadth of leading-edge nodes and differentiated specialty technologies on mature nodes – unlocking new opportunities for existing and future customers in an era of unprecedented demand for semiconductors.”

Should the transaction receive shareholder and regulatory approval, Intel said that it expects the deal to close within the next 12 months.

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