SAN JOSE, Calif. - After a long dispute, specialty foundry vendor TowerJazz said that the Israeli Investment Center Committee has approved grants of up to 150 million shekels ($42 million) to the company.
The grants are aimed for investments in TowerJazz' Fab 2 plant in Israel. This resolves the discussions with regard thereto held during the past years between the company and the Investment Center. Grants payment to Tower is expected to be done over the upcoming two years, with the majority of the funds during 2011.
The grants are not refundable, do not constitute a loan of any kind, do not carry interest, and are a pure participation by the Israeli government in capital spending costs of companies investing in peripheral areas such as Migdal Haemek, Israel, in which Fab 2 is located.
“Since coming to the company in 2005, we have increased the 200-mm fab capacity in Migdal Haemek by more than 3x and seen the company revenue grow more than 5x,'' said Russell Ellwanger, CEO of TowerJazz, in a statement. ''The government grant will enable us to increase the 200-mm factory in Migdal Haemek to its full capacity, allowing continued service to a growing customer base and further employment opportunities in the north of Israel.''
Tower Semiconductor and Jazz merged in 2008 in a stock-for-stock transaction. The merged company is called TowerJazz. Tower Semiconductor was founded as a National Semiconductor spinoff and it became a public company in 1994. Jazz Semiconductor was formed in 2002 as a spinoff of Conexant Systems.
TowerJazz maintains two manufacturing facilities (6- and 8-inch) in Israel, an 8-inch fab in the U.S., and has access to additional capacity in China through manufacturing partnerships. Several years ago, Jazz entered into manufacturing supply agreements with China's ASMC and HHNEC that are designed to allow it to utilize production capacity at two additional fabrication facilities in China
Recently, TowerJazz signed an amendment to its existing lease, confirming its right to retain the building that houses its semiconductor manufacturing facility in Newport Beach, Calif. through March 2027.
In 2000, the Israeli government’s Investment Center approved an investment program in connection with Fab 2, which has been in production for some time. Under the terms of the approval, TowerJazz was eligible to ''receive grants equal to 20 percent of up to $1.25 billion invested in the Fab 2 plant and equipment, or an aggregate of up to $250 million,'' according to a filing.
At one time, TowerJazz ''received a cumulative amount of approximately $165 million in grants from the Investment Center in relation to Fab 2,'' according to the filing. Israeli law limits the ability of the Investment Center to extend the time for investments eligible for grants beyond a five year period, unless approved through an expansion plan, according to the filing.
''Tower has therefore been holding discussions with the Investment Center for approval of an expansion plan to commence as of January 1, 2006. From January 1, 2006 through March 31, 2010, Tower invested approximately $225 million in Fab 2 plant and equipment. As of March 31, 2010, $45 million of cash grants (were) pending,'' according to the filing.
''While in December 2005 the Industrial Bank of the Investment Center gave a positive recommendation for approval of the expansion plan, the governmental approval process has been protracted. As a result, in May 2008, Tower filed a petition with the Israeli High Court of Justice seeking an approval certificate from the Investment Center for the expansion plan,'' according to the filing.
''In August 2008, the Investment Center Committee rejected Tower’s expansion plan request. In November 2008, Tower filed an appeal on this decision to the Israeli Ministerial Appeal Committee. In February 2010, the Israeli High Court of Justice dismissed the petition and instructed the appeal committee to review this matter as soon as possible and provide its recommendation to the investment center and the Ministers of Finance and Industry,'' according to the filing.
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