Intel's $5.4 Billion Tower Semiconductor Deal Scrapped After China Regulatory Hurdle

Intel has terminated its $5.4 billion acquisition of Israeli chipmaker Tower Semiconductor after failing to get regulatory approval from China.

Credit: REUTERS

The US firm will now pay a $353 million breakup fee to Tower. Shares of Tower plunged 11% in premarket trading on the news.

The scrapped deal highlights how US-China tensions are spilling into mergers and acquisitions, especially in tech. Last year, DuPont called off its $5.2 billion purchase of Rogers Corp due to delays in Chinese approval. Intel CEO Pat Gelsinger had tried securing China's blessing, even visiting the country last month. But with no green light forthcoming, the firms let their merger pact expire on Tuesday.

For Intel, it's back to boosting its foundry business organically. Foundry revenue surged to $232 million last quarter, up from $57 million a year before. Demand for Intel's chips has cooled post-pandemic. So it's cut $3 billion in costs this year, aiming for $8-10 billion in savings by end-2025.

In June, Intel announced a record $25 billion factory investment in Israel. With that underway, investors had lost hope for the Tower deal anyway. To summarise, Intel has ditched its Tower Semiconductor acquisition after failing to get Chinese approval. It will instead focus on growing its foundry business alone as chip demand slows.

Cost cuts are also underway. The failed deal shows how US-China tensions are complicating tech mergers.

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• Intel terminates $5.4B deal to acquire Tower Semiconductor after failing to get regulatory approval from China

• Move highlights how US-China tensions are affecting tech mergers and acquisitions

• Intel to focus on boosting its foundry business organically as chip demand cools post-pandemic

Source: REUTERS