Page 14

EETE JUN 2015

ceo interview What’s next after Tower’s turn-around? By Peter Clarke May 2015 marked the tenth anniversary of Russell Ellwanger taking over as CEO of speciality foundry Tower Semiconductor Ltd. (Migdael Haemek, Israel), which now trades as TowerJazz. And so EE Times Europe asked Ellwanger about Tower’s last ten years and about the future. What were the big changes at Tower over the last ten years? “There have been multiple phases of change. The first big change was the drive to become profitable,” said Ellwanger. “When I arrived, the company wasn’t market driven. The company had $100 million in sales and negative EBITDA of $20 million and negative $55 million cash flow from operations and was $550 million in debt EBITDA is earnings before interest, tax, depreciation and amortization.” “Before I arrived it had a central R&D group and design centre in Israel and a sales office in Santa Clara, California. We had to decentralize the product lines and give each line a general manager. We targeted a positive EBITDA by the fourth quarter of 2005 and positive cash flow by 4Q06. The teams worked incredibly hard and we did hit those two financial goals.” Ellwanger explains that the second phase was dropping digital work and focusing the company on analog, RF and sensors. Speciality foundry Tower Semiconductor’s CEO, Russell Ellwanger. Over the years 2005 to 2008 things gradually improved for Tower but aside from CMOS image sensors the company was still generally a second or third source of digital circuits manufactured using 130nm or 90nm CMOS. SanDisk, for whom Tower made flash memory controller ICs, was the biggest customer. “So we told SanDisk we would have to raise prices.” This was not an easy conversation because Eli Harari, chairman and chief executive officer of SanDisk at the time had also been a director of Tower and instrumental in bringing in Ellwanger. All that Jazz “And in 2008 we acquired Jazz Technologies Inc., which was experienced in mixed-signal, power management and RF and ran RF-capable CMOS, BiCMOS and silicon-germanium processes in its wafer fab in Newport Beach, California.” “We were able to take two $200 million annual revenue companies and take out a lot of redundancy and boost buying power with suppliers. There was almost no overlap in products and we achieved a $100 million reduction in costs. 2009 was a very bad year for the industry but for us TowerJazz was a very effective merger and in 2010 we had $500 million of revenue,” said Ellwanger. The third phase was the creation of the TOPS business. TOPS stands for transfer, optimization and development of process services. This is where Tower works with IDMs that don’t want to commit to the cost of adding manufactu-ring capacity. “Tower agrees to take in their process and use it exclusively for them to fulfil long-term manufacturing contracts. We have worked with Vishay, Fairchild and International Rectifier. It involves IP transfer but behind a firewall.” The long-term nature of those contracts in areas such as power MOSFETs and discrete parts provides both Tower and the TOPS customer with price stability during the chip industry’s boom-bust cycles. It also removes the year-on-year pricing pressure found elsewhere in the industry. The final phase The final phase in the rejuvenation of Tower was the acquisition of additional manufacturing capacity in the eastern hemisphere. This has resulted in the creation of the TowerJazz Panasonic Semiconductor Co. Ltd. – which operates three former Panasonic wafer fabs and in which Tower holds 51 percent. These fabs are about 50 percent loaded fulfilling a $400 million per year, five-year contract for Panasonic, said Ellwanger. This means the remaining capacity is available to be filled in a highly profitable way. “This includes a 300mm wafer fab with a world-class 65nm CMOS image sensor flow,” Ellwanger added. What were the most significant changes in the industry in the last 10 years? “Mobile platforms which encompass three mega-trends: green energy consumption, wireless everything, and smart sensors,” says Ellwanger. These are all areas in which Tower operates from CMOS image sensors, through antenna switches to power management ICs. “In addition many IDMs have had to move up to offer system level reference designs and chipsets. This means that they need to buy in analog manufacturing and even design capability. Intel is not a fab-lite company but they need lots of chips beyond their principle digital expertise. We recently announced that we are manufacturing a near infrared light sensor used for depth sensing within Intel’s RealSense 3D camera.” “And of course the fab-lite trend feeds the foundries. It started in the digital domain but now it is the same with analog. In the pure-play digital foundry world no one can compete with TSMC, which has billions of dollars to invest. But in the analog space it is an even playing field and much lower cost.” The wafer fab at Newport Beach, California. Source: Tower Semiconductor. 14 Electronic Engineering Times Europe June 2015 www.electronics-eetimes.com


EETE JUN 2015
To see the actual publication please follow the link above