Intel (INTC) Stock; Edges Higher Despite Withdrawal From Tower Semiconductor Wafer Deal

TLDRs;

• Intel stock edged higher as investors viewed the Tower wafer deal exit as a minor, non-core strategic adjustment.
• The agreement focused on legacy manufacturing, not advanced chips, limiting its long-term importance to Intel’s strategy.
• Tower shifted production to Japan and continues to post strong growth, led by silicon photonics demand.
• Markets appear focused on Intel’s broader restructuring and capital discipline rather than this isolated withdrawal.

Intel shares edged modestly higher in recent trading even as the company confirmed it is backing away from a previously announced wafer manufacturing agreement with Israel-based Tower Semiconductor. The muted stock reaction suggests investors view the move as a contained strategic adjustment rather than a material setback, especially as Intel continues to recalibrate its manufacturing footprint and capital priorities.

The withdrawal, disclosed through Tower Semiconductor’s latest earnings report, relates to a September 2023 agreement under which Tower would have manufactured 300-millimeter wafers at Intel’s Fab 11X facility in New Mexico. The partnership followed Intel’s failed $5.4 billion acquisition attempt of Tower, which was ultimately blocked by Chinese regulators.

Despite the collapse of that earlier merger plan and now the manufacturing agreement, markets appeared more focused on Intel’s broader restructuring efforts and long-term foundry ambitions than on the loss of a single, non–leading-edge deal.

A Deal Rooted in Legacy Capacity

The original agreement was never about cutting-edge semiconductor production. Instead, it was designed to make practical use of Intel’s older Fab 11X facility, which had been underutilized. Tower planned to invest up to $300 million of its own capital to install equipment capable of producing mature 65-nanometer analog chips, components commonly used in power management and radio frequency applications.

Intel Corporation, INTC

An Intel executive had previously described the site as an “older factory for older technologies,” underscoring that the partnership was more about filling idle capacity than building a shared roadmap for next-generation chips.

For Intel, the arrangement offered incremental utilization without diverting resources from advanced process nodes. For Tower, it provided additional manufacturing flexibility close to key customers.

Intel’s decision to withdraw now suggests that the company sees better uses for that capacity or prefers to simplify its operational commitments as it sharpens its focus on higher-value projects.

Production Shifts to Japan

With Intel stepping back, Tower has redirected the planned production to its Fab 7 facility in Japan. The company said it is currently engaged in mediation with Intel to resolve outstanding issues related to the agreement, though neither side has disclosed financial details or potential penalties.

Notably, Tower’s updated long-term financial model no longer assumes any contribution from Intel’s New Mexico fab. That change implies Tower believes it can meet its growth targets regardless of how the mediation process unfolds, reducing the strategic importance of the disputed deal.

Tower’s Growth Narrative Remains Intact

While Intel exits the agreement, Tower’s business momentum appears strong. The company reported a 14% year-over-year increase in fourth-quarter 2025 revenue to $440 million. Its market capitalization has climbed past $15 billion, with shares up more than 170% over the past year.

A major driver of that growth has been Tower’s expanding silicon photonics (SiPho) business, which supports optical connectivity in AI data centers. SiPho revenue more than doubled in 2025 to $228 million, helping justify a $920 million expansion of silicon photonics and silicon-germanium (SiGe) capacity.

More than 70% of that capacity is already reserved or in the process of being reserved through 2028, backed by customer prepayments.This trajectory helps explain why investors did not interpret Intel’s withdrawal as a significant threat to Tower, or as a major risk factor for Intel.

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