Intel to call off US$5.4 billion Tower deal without Chinese approval
INTEL is expected to call off its planned US$5.4 billion acquisition of Tower Semiconductor as time to win regulatory approval runs out, according to people familiar with the matter.
The deadline for the transaction, announced in early 2022, is midnight California time on Aug 15, and the companies do not anticipate getting approval from China by that time, said the sources, who asked not to be identified because the details are private.
A representative for Intel declined to comment on the approaching deadline, while Tower did not immediately respond to a request for comment.
The purchase of the Israeli company was part of Intel chief executive officer Pat Gelsinger’s plan to get into a faster-growing part of the semiconductor industry, the foundry market dominated by Taiwan Semiconductor Manufacturing (TSMC). Tower has a relatively small presence in that area – where companies make chips for clients on a contract basis – but has expertise and customers that Intel lacks.
Investors had already discounted the chances of the deal being completed. US-traded shares of Tower have declined 22 per cent this year, even as the broader semiconductor industry saw stocks soar. It closed on Tuesday (Aug 15) at US$33.78 – far below the US$53 a share that Intel had offered.
When the transaction was first announced in February of last year, Intel said it would take “about 12 months”. As at October, the chipmaker said it was targeting the first quarter of 2023, but then in March warned that the date might slip into Q2.
Increasing tension between China and the US has made it harder to secure approval for transactions that require sign-off from regulators in Beijing and Washington, particularly when the deals involve semiconductors, a key area of friction.
Tower is a fraction of the size of Intel and TSMC in terms of revenue, but it makes components for big customers such as Broadcom. Intel’s plan was to combine plants with Tower and tap its customer list. Though Tower-made chips do not require the state-of-the-art production techniques that an Intel or Nvidia processor demands, they serve growing markets such as electric vehicles. BLOOMBERG
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