By Tova Cohen and Sophie Knight
TEL AVIV/TOKYO Dec 20 Israeli chipmaker
TowerJazz Semiconductor Ltd will create a joint venture
with Panasonic Corp to manufacture Panasonic's
semiconductors for cars and other products, a move expected to
boost TowerJazz's revenue by 65 percent.
Panasonic, which is wrapping up a multi-billion-dollar
restructuring, will transfer three semiconductor factories in
central Japan to the joint venture, which will be 51 percent
owned by TowerJazz, the companies said on Friday.
TowerJazz will issue to Panasonic roughly $8 million in
ordinary shares, to be calculated based on TowerJazz's average
share value during March 2014. Panasonic will become a minority
stakeholder in TowerJazz and the company's largest client.
"From day one this joint venture, of which we are the
majority shareholder, will provide us with $400 million of
annual profitable revenue," TowerJazz Chief Executive Russell
Ellwanger told Reuters. "On top of that there is substantial
added capacity available in those manufacturing facilities
beyond the agreement with Panasonic."
TowerJazz already has customers seeking to have their
products manufactured at the Japanese facilities, he said. The
company said it might seek to consolidate Panasonic's factories
with the other plant it owns in Japan that it acquired from
Micron Technologies Inc.
The Israeli company's push into Japan is a boon for
Panasonic, which lost 20.5 billion yen ($196.68 million) on its
chip business in the last financial year, as other Japanese
companies struggle to find buyers for their chip facilities
after racking up similar losses.
Those include Fujitsu Ltd, which is still in
negotiations with Taiwan Semiconductor Manufacturing Co Ltd
to sell off a chip plant in Mie prefecture, although
its CEO said it has opened discussions with a number of other
companies too. Sources say that Renesas Electronics Corp
is discussing the sale of one of its image sensor
facility in Tsuruoka with Sony Corp.
Panasonic has committed to procuring chips from the joint
venture for at least five years.
The deal with TowerJazz would not have a material impact on
its results forecast for the fiscal year ending March 31, 2014,
the company said. Separately, Panasonic said it would cease
production at its chip factory in Okayama in southern Japan
before March and reassign staff from there within the company.
The Japanese company is also looking to sell its five other
chip plants in Indonesia, Malaysia and Singapore and is in
negotiations with an unidentified buyer.
The deal, which is expected to close in April, will enable
TowerJazz to achieve a $900 million annual run rate from the
second quarter of 2014 and reach its target of $1 billion a year
in revenue by 2015, Ellwanger said.
TowerJazz, which makes mobile phone chips as well as battery
chargers and AC/DC adapters, now expects to post revenue of at
least $225 million in the second quarter of 2014, up from $133
million in the year-earlier quarter.
Ellwanger said he hoped the loss-making company, which had a
net loss of $78 million in the first nine months of 2013, would
turn profitable by the fourth quarter of 2014.
TowerJazz will gain capacity to produce silicon wafers with
a 300 mm (12-inch) diameter that can be used in x-ray machines,
high-end image sensors and digital SLR cameras.
The company's chairman, Amir Elstein, said there was also
huge potential in automotive-related components and that it was
important for his company to close the gap between its brand
strength and its performance in the capital market.
TowerJazz shares closed at $4.49 on Nasdaq on Thursday, off
a year high of $8.67. Panasonic's share price closed up 0.2
percent at 1,215 yen in Tokyo on Friday, just under a three-year
high of 1,233 hit the day before.