TowerJazz acquires three of Panasonic’s large written off wafer fabs for around US$ 100 million

Massive market entry to Japan for TowerJazz

Nikkei (the world’s biggest business daily, see our J-Media report) reported as their top headline yesterday, that TowerJazz is planning to acquire interests in three of Panasonic’s reportedly largely written-off semiconductor fabs valued at about US$ 100 million.

Nikkei reports that Panasonic plans to spin out three fabs into a separate company, to be owned 51% by TowerJazz and 49% by Panasonic:

Uozu-shi in Toyama-ken (富山県魚津市)
in Tonami-shi in Toyama-ken (富山県砺波市), and in
Myoku-shi in Niigata-ken (新潟県妙高市)

TowerJazz entered Japan’s market by acquiring the Nishiwaki semiconductor fab near Nishiwaki-shi in Hiyogo-ken near Kobe.

TowerJazz is a leading Israel-USA foundry company traded on NASDAQ. TowerJazz in 2011 acquired a semiconductor fab in Nishiwaki-shi in Hiyogo-ken (兵庫県西脇市). The Nishiwaki fab was initially built by a joint-venture between Texas-Instruments and Kobe-Steel, and was later acquired by Micron. TowerJazz acquired the Nishiwaki-fab from Micron in 2011.

We believe that the driver for these transactions are both PUSH and PULL:

PUSH:
- Panasonic’s need for capital
- Panasonic’s need to withdraw from loss-making operations (Panasonic’s semiconductor operations reported YEN 20500 million (US$ 200 million) operating losses for revenues of YEN 184 billion YEN (US$ 1.8 billion) and need to focus on a smaller number of core businesses
- need for investments in the semiconductor fabs to upgrade equipment and Panasonic’s difficulties to supply such capital
- the imperative to globalize management
PULL:
- TowerJazz’ business focus on fab operations, and cooperations with partners
- TowerJazz’ interest in expanding operations in Japan

Panasonic’s need for decisive restructuring is well-known

Panasonic’s need for decisive restructuring is well-known, we commented many times on CNBC and BBC about Panasonic’s situation, see for example:

Driver: the “Panasonic shock”

In the past Matsushita (Panasonic was previously named after its founder) was nick-named “Matsushita Bank” because of its solid financial situation. However on October 31, 2012, President Kazuhiro Tsuga announced that “Panasonic is an unusual company” referring to Panasonic’s financial predicament: Panasonic had reported YEN 754.2 billion (US$ 7.5 billion) net losses for FY2012 (ending March 31, 2013). At the same time, President Tsuga also announced a program to revive Panasonic. This event is known as the “Panasonic shock”.

You can find detailed analysis of Japan’s electronics sector including Panasonic in our report “Japan’s electronics industries: mono zukuri”.

Driver: the need to globalize Japan’s management

In a recent brainstorming event with the President of Tokyo University, the legendary Masamoto Yashiro asked: “In truth, why Japanese management is not global? What should we do?” and explained some answers.

Moving semiconductor fabs from Panasonic to TowerJazz management or co-management/co-ownership is a good example of how Japanese management can be globalized.

Japan electronics industries – mono zukuri.

Japan electronics industries: mono zukuri

TowerJazz to acquire three of Panasonic’s semiconductor fabs (Nikkei headline)