Intel dumps chipmaking investment after forgetting to secure Chinese approval

August 18, 2023: On Wednesday, Intel terminated its purchase of Israeli chipmaker Tower Semiconductor, after forgetting to secure Chinese approval.

The tech giant said it is ditching the intended deal “due to the inability to obtain promptly the regulatory approvals required under the merger deal.”

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

Intel announced choices to purchase Tower, a contract chipmaker that fabricates semiconductors for different companies, in February 2022 for $5.4 billion.

Tower Semiconductor’s Israel-listed shares were down 8% around 4:18 a.m. ET.

On Tuesday, Intel required to approve the deal from the Chinese sources before a crucial deadline passed. Chinese authorities have yet to communicate approving the purchase publicly.

“After careful consideration and thorough discussions and having received no indications about certain required regulatory approval, both parties have agreed to terminate their merger agreement having passed August 15, 2023, outside date,” Tower Semiconductor said in a statement Wednesday.

The deal’s ending is a potential impact to Intel which, under CEO Pat Gelsinger, has pledged to increase its foundry business. Foundries refer to companies that manufacture semiconductors.

Over the years, Intel failed its lead in chipmaking to Taiwanese firm TSMC and South Korea’s Samsung and is now trying to catch up. The deal would have given Intel a foothold in the specialty technologies on which Tower focuses, such as radio frequency and industrial sensors.

Intel is vital to the U.S. bid to recover leadership in semiconductor manufacturing.

The termination of the acquisition also highlights how business deals continue to get caught between the U.S. and China’s broader technology battle, with semiconductors at the center.

The U.S. has used export rules to cut China from key semiconductor technology. China has restricted the export of certain metals required in chipmaking and other technology. And Beijing also banned some entities in China from buying products from U.S. memory chip firm Micron.

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