Intel Joins Bidding for Micron Microchip Plant

Intel would upgrade the aging Kiryat Gat plant and use it to produce its next generation of chips.

Intel Corporation has joined TowerJazz Semiconductor in bidding to purchase the Micron Technology microchip plant in Kiryat Gat. A third option for Micron is shuttering the facility.

A few days ago, Intel’s management informed Micron that it is interested in using the facility, according to sources privy to the negotiations on the plant’s purchase.

Intel apparently wants to upgrade the plant and use it to produce 10-nanometer chips, its next generation of chips. Upgrading the existing plant would likely involve an investment amounting to billions of dollars.

Under a 24-year leasing arrangement with Micron, Intel − the plant’s original owner − holds a veto over transferring it to any third party, which means Intel can prevent the factory’s transfer to Tower, a chip maker based in Migdal Ha’emek, or any other potential rival. The Micron plant specializes in manufacturing 45- and 65-nanometer memory chips.

TheMarker has learned that Micron’s head office in the United States has until June 30 to decide on the facility’s fate.

The factory was built by Intel in 1999 to produce the then-new Pentium microprocessor and is one of Israel’s oldest microchip plants. In February 2010, Micron bought Numonyx, a company that had taken over the Kiryat Gat facility, and acquired the facility as part of the deal.

One of the main questions under any scenario is what will happen to the 1,300 people currently working at the Micron plant. The company informed its work force last December of its intention to sell the plant or to shut it down by 2015.

It appears that most of the workers will stay on in the event that either Tower or the management of Micron Israel buys the plant and continues to operate it. It’s less clear how many of the workers would be hired by Intel should the company take over and upgrade the facility. But a top-level source in the local high-tech sector said that Intel considers Micron’s labor force, with its specialized experience in producing microchips, to be the plant’s main asset.

To further its attempt to sell the plant, Micron has sweetened the deal with a promise to supply the buyer with orders for several years.

Eliyahu Hershkovitz