Intel to abandon $5.4 billion Tower Semiconductor acquisition

Intel Corp will withdraw from its $5.4 billion agreement to acquire Israeli contract chipmaker Tower Semiconductor Ltd as their contractual period concludes today, as per sources familiar with the matter.

The acquisition, inked by Intel in February 2022, hit a roadblock when Chinese regulatory approval, mandated by the agreement with Tower Semiconductor, was not secured, sources revealed.

Intel has no intentions of pursuing an extension of the contract and will instead remunerate Tower Semiconductor a break-up fee of $353 million to terminate the deal, according to the sources, who requested anonymity prior to the official announcement.

Both Intel and Tower Semiconductor opted not to provide comments. Representatives of China's antitrust regulator, the State Administration for Market Regulation, were unavailable for immediate comment.

Tensions between US and China

This development highlights the extension of tensions between the United States and China into the realm of corporate transactions, particularly concerning technology companies. Ongoing disputes encompass matters such as trade, intellectual property, and the future of Taiwan.

A parallel instance emerged last year when DuPont De Nemours Inc scrapped its $5.2 billion deal to acquire electronics materials manufacturer Rogers Corp due to delays in securing approval from Chinese regulatory authorities.

Intel's CEO, Pat Gelsinger, had been striving to secure Chinese regulatory consent for the Tower Semiconductor deal. Gelsinger's efforts included a recent visit to China to meet with government officials.

Will continue to manufacture chips for others: Intel

However, Gelsinger concurrently emphasised that Intel was investing significantly in its foundry business, responsible for manufacturing chips for other entities, regardless of the outcome of the Tower Semiconductor deal.

In June, Israeli Prime Minister Benjamin Netanyahu unveiled Intel's commitment to invest $25 billion in a novel factory in Israel, marking the country's most substantial international investment to date.

Intel to invest $25 billion in Israel | Image credit: Unsplash

Anticipations for the Tower Semiconductor deal had waned among investors. Consequently, Tower Semiconductor's Nasdaq-listed shares concluded trading at $33.78 on Tuesday, reflecting a notable disparity from the deal price of $53 per share.

During the second quarter, Intel's foundry segment reported revenue of $232 million, representing a notable increase from $57 million in the previous year. This surge was driven by advancements relative to competitors, including industry leader Taiwan Semiconductor Manufacturing Co.

(With Reuters inputs)