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The backstory: Last year, US tech giant Intel made headlines when it revealed its plan to acquire Israeli company Tower Semiconductor for US$5.4 billion. Now, Tower Semiconductor isn't just any tech company – it's a major player in the chipmaking world. But, the deal needed several regulators around the world to approve it, including those in China, where it does some of its business.
Now, in a different lane, there's ongoing tech tension between the US and China. And at the heart of this tussle are semiconductors. The US has been imposing limits on exporting crucial semiconductor technology to China to try and slow its progress in the sector. Meanwhile, China has restricted the export of certain metals essential for chip production and blocked specific Chinese entities from buying products from a US memory chip company called Micron.
More recently: Intel initially wanted to close the deal by the end of the first quarter this year, but it ended up extending the deadline as it was still waiting on China’s regulatory approval. The company’s CEO Pat Gelsinger even headed over to China last month to try and make sure that the deal got the green light from Chinese regulators.
The development: Now, Intel's US$5.4 billion deal to buy Tower Semiconductor has fallen apart. Intel officially waved the white flag on the deal, saying it couldn't get the green light from all the required regulators "in a timely manner." Intel now has to pay US$353 million as a termination fee to Tower. That's not all – Tower’s stock price also took a hit after the announcement.
According to sources familiar with the matter, Reuters reported that Intel couldn't get a thumbs up from China before a crucial deadline. As of now, Chinese authorities have not made any public statements regarding approval of the acquisition.
“After careful consideration and thorough discussions and having received no indications regarding certain required regulatory approval, both parties have agreed to terminate their merger agreement having passed the August 15, 2023 outside date,” said Tower Semiconductor in a statement Wednesday.
“We are executing well on our roadmap to regain transistor performance and power performance leadership by 2025,” said Intel CEO Pat Gelsinger in a statement.
Intel said in a statement that “due to the inability to obtain in a timely manner the regulatory approvals required under the merger agreement.”
“Tower was very excited to join Intel to enable Pat Gelsinger’s vision for Intel’s foundry business,” said Russell Ellwanger, Tower Semiconductor’s CEO, in a statement. “We appreciate the efforts by all parties.”