Intel drops $5.4 billion deal after China holds up approval: Report 

Intel Corp. announced that it is foregoing plans on its $5.4 billion acquisition of Tower Semiconductor Ltd. because it was unable to obtain regulatory permission in time, according to a report by Bloomberg.

According to a statement released on Wednesday, Intel Corporation and Tower Semiconductor have mutually decided to end the agreement made in February 2022. The Israeli firm confirmed that the contract had been terminated. Bloomberg had previously reported that the two corporations were in talks to cancel the agreement after failing to obtain Chinese approval.

The acquisition of the Israeli firm served as the cornerstone of Intel Chief Executive Officer Pat Gelsinger’s strategy to enter the Taiwan Semiconductor Manufacturing Co. (TSMC), dominated foundry business, a sector of the semiconductor industry that is expanding more quickly. However, Tower has experience and clients that Intel does not, while having a relatively tiny presence in the market where companies build chips on a contract basis.

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“We will continue to look for opportunities to work together” with Tower in the future, Bloomberg quoted Gelsinger as saying.

Intel will pay Tower a termination fee of $353 million.

When the settlement was announced, Intel stated that it would take “about 12 months.” The chipmaker stated in October that it was aiming for the first quarter of 2023, but in March it cautioned that the timeframe might shift to the second quarter.

The deal has to be completed by midnight on August 15 in California.

Securing approval for deals that need the consent of authorities in Beijing and Washington has grown more challenging due to the rising tension between the two countries, particularly for transactions involving semiconductors.

Despite having a smaller revenue in comparison to Intel and TSMC, Tower is active in the manufacturing of older types of chips for significant clients like Broadcom Inc. Intel’s strategy aimed to incorporate Tower’s clientele with aging plants in its network. Many new types of chips for applications like electric vehicles could be produced in these older facilities even if they do not necessitate the state-of-the-art manufacturing processes that an Intel or Nvidia Corp. requires.

Investors had already lowered their expectations for the deal. Compared to the overall growth in chip equities, Tower’s US-traded stock has fallen 22 per cent this year. As of Tuesday, it was at $33.78. Intel had made a share offer of $53.

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