Intel has officially terminated its acquisition of Tower Semiconductor, the Israeli chipmaking company it announced its intention to buy for $5.4 billion in February 2022. In a press release Intel blamed its “inability to obtain… the regulatory approvals required under the merger agreement” in a timely manner, adding that both parties agreed to terminate the deal. Intel had originally hoped to close the transaction in 12 months, but will now pay a termination fee of $353 million to Tower.
Although Intel’s press release doesn’t mention the regulator directly, Bloomberg reports that it was the Chinese authorities who hadn’t approve the deal ahead of the transaction’s deadline at midnight California time on August 15th. Sure enough, Intel’s press release was published at two minutes past midnight PT. Increased US-China tensions in recent years, especially when it comes to the so-called “Chip War” over semiconductor manufacturing, have reportedly created challenges getting regulatory signoff on these kinds of acquisitions.
Tower has experienced building specialized chips
The failure of the deal will be seen as a setback for Intel’s fledgling Intel Foundry Service (IFS) division, which Intel hopes to build into a significant contract chip manufacturer to compete with rival TSMC. Although smaller than the likes of Intel and TSMC, Tower has expertise building specialized products like radio frequency (RF) chips, CMOS image sensors, and power management parts, and Bloomberg notes that it supplies large companies like Broadcom.
In a statement, Intel CEO Pat Gelsinger struck a defiant tone. “We are executing well on our roadmap to regain transistor performance and power performance leadership by 2025,” the CEO said, adding that Intel is “investing to deliver the geographically diverse and resilient manufacturing footprint the world needs.”
“Since its launch in 2021, Intel Foundry Services has gained traction with customers and partners, and we have made significant advancements toward our goal of becoming the second-largest global external foundry by the end of the decade,” said IFS general manager Stuart Pann.
Although the termination of the deal was officially announced today, the markets appear to have been expecting it to fall through for several months. Bloomberg notes that US-traded shares of Tower have declined 22 percent this year, bringing its share price well below what Intel agreed to purchase the company for.