Intel's $5.4 billion acquisition of Tower Semiconductor will drag on profit margins

Intel plans to spend $ 5.4 billion to buy Israeli chipmaker High Tower Semiconductor (hereinafter referred to as "High Tower"), but analysts believe that the deal will not solve some of Intel's biggest problems.

Wall Street has been dissatisfied with the recent decline in Intel's gross profit margin, and although the acquisition of towers will give Intel access to several foundry factories, it will drag profit margins further down. The foundry that Intel will acquire will not help it become a leading foundry, an analyst said on Tuesday.

Evercore ISI analyst Muse raised the issue of gross margin pressure, "High tower margins are very low, and while their margins will gradually improve over time, we think it will take longer than Intel expects, especially in the semiconductor industry. Balanced.” He believes the deal will give Intel the talent it needs to run its foundry business.

Mizuho Bank analyst Vijay Rakesh said he thinks the smaller would "slightly" dilute Intel's profit margins. What worries investors is that the gross profit margin of the tower is expected to be about 25% in 2022, and Intel's gross profit margin before this transaction is no less than 52%.

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