Intel Scraps $300 Million Manufacturing Pact with Tower Semiconductor

The semiconductor giants enter mediation as the U.S. chipmaker pulls back from a post-merger-collapse production agreement.

By: AXL Media

Published: Feb 14, 2026, 1:25 PM EST

Source: Calcalistech

In a significant shift for the global semiconductor landscape, Intel has officially signaled its intent to withdraw from a major 300-million-dollar manufacturing agreement with Israel based Tower Semiconductor. The partnership, which was originally established in September 2023, was designed as a strategic bridge between the two companies following the high profile collapse of Intel's planned 5.4 billion dollar acquisition of the firm. Under the terms of the pact, Intel was slated to manufacture 300-millimeter wafers for Tower's global clientele at its advanced facility in Rio Rancho, New Mexico.

The sudden withdrawal has prompted the two tech titans to enter formal mediation. Tower Semiconductor revealed the development in its latest earnings report, noting that Intel has expressed its intention not to perform under the existing contract. This agreement would have seen Tower invest approximately 300 million dollars in specialized equipment for the Intel site, securing a production capacity of over 600,000 photo layers per month. The move was initially hailed by Tower CEO Russell Ellwanger as a synergistic solution to bolster next-generation power management and radio-frequency technologies.

Despite the friction with Intel, Tower Semiconductor appears to be navigating the transition with resilience. The company announced that it is already redirecting production flows originally destined for New Mexico to its Fab7 facility in Japan. This shift leverages existing qualified processes to ensure continuity for its customers. The redirect comes at a time of record growth for the Israeli chipmaker, which reported a 14 percent year-over-year revenue increase in its most recent quarter, reaching 440 million dollars.

Market analysts have noted that while the dissolution of the partnership represents a setback for Intel's foundry expansion goals, Tower's stock market performance remains exceptionally strong. Over the past year, Tower's valuation has tripled compared to the value of Intel's initial abandoned bid, reaching a record high of 15 billion dollars. The surge is largely attributed to the company's success in silicon photonics and advanced data center technologies, which continue to drive demand in the surging AI sector.

As the mediation process unfolds, the industry is closely watching how this withdrawal will impact Intel's broader ambitions to become a m...