Intel and Israeli contract chipmaker Tower Semiconductor said on Wednesday their proposed $5.4 billion (Rs 44,919 crore) deal has been jointly terminated due to inability to obtain timely regulatory approval.
Shares of the Israeli company fell about 9 percent in the U.S. and Tel Aviv.
Intel, which decided to acquire Tower last year, will pay the latter a termination fee of $353 million (approximately Rs. 2,936 crore), Intel said in a statement.
Tower and Intel did not provide details on regulatory approvals.
Reuters reported late on Tuesday that Intel would walk away from the deal once the contract expires without Chinese regulatory approval.
Tower Semiconductor said in a statement: “After careful consideration and thorough discussions, and in the absence of any indication of receipt of certain required regulatory approvals, the parties have agreed to terminate the merger agreement after August 15, 2023.”
The development underscores how tensions between the United States and China over issues such as trade, intellectual property and Taiwan’s future spill over into corporate deals, especially when technology companies are involved.
Last year, DuPont De Nemours called off its $5.2 billion (Rs 4,327.4 crore) takeover of electronic materials maker Rogers Corp after failing to secure approval from Chinese regulators.
Intel Chief Executive Pat Gelsinger has said he is working to get Chinese regulators to approve the tower deal and visited China last month to meet with government officials.
But Kissinger also said that regardless of the Thar deal, Intel is investing in its foundry business, which makes chips for other companies.
In June, Israeli Prime Minister Benjamin Netanyahu announced that Intel had agreed to spend $25 billion (approximately Rs. 208,020 crore) to build a new factory in Israel, the country’s largest ever international investment.
As a result, investors lost hope in the tower deal. Tower’s Nasdaq-listed shares closed at $33.78 (roughly Rs. 2,800) on Tuesday, a steep discount to the trading price of $53 (roughly Rs. 4,400) per share.
In the second quarter, Intel’s foundry business revenue was $232 million (about 19.3 billion rupees), up from $57 million (about 4.74 billion rupees) in the same period last year, ahead of rivals such as industry leader TSMC. .
The growth in foundry sales comes from “advanced packaging,” a process in which Intel can combine chips made by another company to create more powerful chips.
Demand for Intel chips has cooled after two years of strong growth fueled by remote work during the pandemic, leading the chipmaker to turn to cost-cutting. It has pledged to cut costs by $3 billion (approximately Rs. 249.64 billion) this year, targeting savings of $8 billion (approximately Rs. 665.69 billion) to $10 billion (approximately Rs. 832.19 billion) by the end of 2025.
© Thomson Reuters 2023
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