TowerJazz (TSEM.O) holds 51 percent of the joint venture, which will manufacture Panasonic's semiconductors for cars and other products.
Panasonic, which is wrapping up a multi-billion-dollar restructuring, will transfer three factories in central Japan to the joint venture and is committed to acquiring its products from the joint venture for at least five years.
TowerJazz said it will close its plant in Nishiwaki that it bought from Micron Technology (MU.O) in 2011, reducing its annual fixed costs by $130 million. It will keep on about 100 of the 800 employees at the plant and has retained a Japanese outplacement firm to help find employment for the remaining workers, Chief Executive Russell Ellwanger told Reuters.
He said the loss-making company is targeting net profit under generally accepted accounting practices (GAAP) by the fourth quarter of 2014. Its net loss in the fourth quarter of 2013 reached $29.8 million.
Shares in TowerJazz, a maker of chips for smartphones, battery chargers and AC/DC adapters, were up 4.6 percent to 32.33 shekels in late morning trade in Tel Aviv.
"We have already brought multiple customers into the joint venture and this is all incremental business for TowerJazz," Ellwanger said.
The joint venture will enable TowerJazz to achieve annual revenue of $1 billion by 2015, Ellwanger said.
"This is a real break-through opportunity for TowerJazz. The company going forward will not be as we saw it before; we have the opportunity for a different scale," Chairman Amir Elstein said.
TowerJazz issued to Panasonic 870,454 shares worth about $7.5 million, giving Panasonic a 1.8 percent stake in TowerJazz.
($1 = 3.48 shekels)
Reporting by Tova Cohen; Editing by Steven Scheer