Israel’s TowerJazz to set up China chip plant with Tacoma Semi

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JERUSALEM (Reuters) – Israeli chipmaker TowerJazz is linking up with Tacoma Semiconductor Technology Co to establish a fabrication plant in Nanjing, China to make 8-inch wide wafers, as it seeks a foothold in the world’s second-largest economy.

TowerJazz shares jumped 6.5 percent to $26.64 in early Nasdaq trading on Monday.

TowerJazz, which makes chips for smartphones, battery chargers, AC/DC adapters and image sensors, is not investing any money in the plant. But it will provide technological expertise together with operational and integration consultation.

It will receive payments based on milestones during the next few years, subject to a definitive agreement.

Tacoma will be responsible for funding the project, including the construction of the facility, which is being supported by the Nanjing Economic and Technology Development Zone Credito Capital. Funding could also come from third party investors and other entities, TowerJazz said.

TowerJazz noted it had already received its first payment of $18 million from Tacoma.

Under the deal, from the start of production at the facility TowerJazz will be entitled to a capacity allocation of up to 50 percent of the targeted 40,000 wafers per month capacity.

This will provide TowerJazz with additional manufacturing capability and flexibility to address growing global demand.

TowerJazz operates two plants in Israel, one in California, one in Texas, and three in Japan through a joint venture with Panasonic.

Earlier this month it reported a more than 20 percent rise in second-quarter profit and said it was on track for record revenue in the current quarter.

Last year, TowerJazz bought Maxim Integrated Product’s 8-inch wafer fab plant in San Antonio, Texas for $40 million in stock.