Intel's Tower Semiconductor Acquisition Derailed by Chinese Regulators

• Financial

In a surprising twist, Intel Corporation, the American multinational corporation and technology giant, has decided to forego its planned acquisition of Israeli chip manufacturer, Tower Semiconductor. Initially valued at a hefty $5.4 billion, the acquisition met an unexpected roadblock due to regulatory concerns.

China's Role in the Voided Agreement

Central to Intel's decision was the lack of approval from Chinese regulators. While the acquisition necessitated the nod from several global regulatory bodies, China's agreement was pivotal.

However, the Chinese authorities did not send their approval by the set Wednesday deadline. This comes against a backdrop of heightened tensions between the US and China. Recent moves from Washington have included stringent export controls and restrictions aimed at preventing China from procuring and manufacturing advanced chips.

These geopolitical dynamics have inevitably spilled into the business domain. It's pertinent to note that Intel had initially earmarked the contract's conclusion for the early part of 2023. This timeline was subsequently stretched, with China's regulatory stance being the prime reason.

Intel's ambitions with this acquisition weren't just financial; the company foresaw an augmentation of its capacities, with new doors opening for growth in the US, Israel, Italy, and Japan.

Financial Implications and Forward Trajectory

The fallout of the voided agreement is significant.

Intel Corp. has announced a termination fee to the tune of $353 million, which it will pay to Tower. As a direct consequence, Tower's stock, traded in the US, plummeted by over 9% at the opening bell. In Tel Aviv, the decline was even steeper, exceeding 10%.

Pat Gelsinger, Intel's CEO, reflecting on the halted acquisition, stated, “Our respect for Tower has only grown through this process, and we will continue to look for opportunities to work together in the future”.

This sentiment was mirrored by Russell Ellwanger, Tower Semiconductor’s CEO, who conveyed, “Tower was very excited to join Intel to enable Pat Gelsinger’s vision for Intel’s foundry business. We appreciate the efforts by all parties”.