Intel Drops $5.4B Tower Acquisition Deal amid Growing Tension between US and China

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Intel Drops $5.4B Tower Acquisition Deal amid Growing Tension between US and China

Intel Corporation (NASDAQ: INTC) has announced that it will not be pursuing the acquisition of Israeli contract chipmaker Tower Semiconductor any further. According to a press release, the deal, which expired on Tuesday, August 15, will see Intel pay a termination fee of $353 million to Towers. However, the chipmaker assures that the contract termination has been mutually agreed to.

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Meanwhile, sources with inside knowledge of the matter have claimed that the decision to drop the deal borders on Intel’s failure to secure regulatory approval from China. That is after signing the $5.4 billion acquisition deal over 18 months ago.

Growing Tension between China and the US

For what it’s worth, the situation only goes to prove further, that relations between the United States and China have recently deteriorated. That is especially in the aspect of trade and technology. And now, even corporate deal-making such as the Intel/Tower acquisition is being affected.

DuPont De Nemours is another company that had a similar experience with Chinese regulators. Last year, Dupont also dropped an already agreed $5.2 billion acquisition deal for electronics materials maker Rogers Corp. And its reasons are quite similar to Intel’s. At the time, Dupont also claimed that there were delays in getting regulatory the Chinese regulators to approve the deal.

It remains unclear whether regulators would have approved the deal if Intel and Tower had extended the contract. However, Intel appears to be leaving nothing to chance.

According to Intel Chief Executive Pat Gelsinger, all efforts to get the Tower deal approved by the regulators proved abortive. Gelsinger, who visited the country as recently as a month ago, says even his meeting with government officials has not yielded any results either.

Intel to Focus on Foundry Business

According to Intel’s CEO, the goal is to regain transistor and power performance leadership by 2025. He said in a statement:

“Our foundry efforts are critical to unlocking the full potential of IDM 2.0, and we continue to drive forward on all facets of our strategy.”

Away from regulations, Intel will divert its attention to its foundry business, which makes chips for other companies. Intel will hope to achieve this, by investing heavily in its foundry, says Gelsinger.

Intel Drops $5.4B Tower Acquisition Deal amid Growing Tension between US and China

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