Intel ends deal to buy Tower Semiconductor after failure to gain Chinese regulatory approval
- The US$5.4 billion acquisition had been part of the American tech giant’s plan to expand its foundry business
- The failed deal highlights the precarious situation of US chip companies doing business in China amid geopolitical tensions
The American tech giant on Wednesday terminated its deal to acquire Tower for US$5.4 billion “due to the inability to obtain in a timely manner the regulatory approvals required under the merger agreement”, the company said.
Beijing requires mergers involving companies with a major business presence in China to be approved by the State Administration for Market Regulation (SAMR), the antitrust regulator.
China is one of Intel’s largest markets. The company also houses several factories there.
Intel’s aborted acquisition was largely expected following several delays over the past year because of SAMR’s opposition. Nasdaq-traded shares of Tower have declined by about 22 per cent year-to-date, closing at US$33.78 on Tuesday – compared with Intel’s offer of US$53 per share.
Based on the terms of their agreement, Intel said it would now pay a walkaway fee of US$353 million to Tower.
Last month, mainland Chinese regulators approved US chip maker MaxLinear’s multibillion-dollar purchase of Taiwanese semiconductor firm Silicon Motion. However, the approval came with additional conditions, including a requirement for MaxLinear and Silicon Motion to continue supply of NAND flash memory chips to China in a “fair, reasonable and non-discriminatory manner”.
MaxLinear ultimately chose to terminate its purchase of Silicon Motion.
Intel has been walking a fine line trying to balance business interests on both sides of the Pacific.
Intel saw the Tower deal as part of its efforts to break into the chip contract-manufacturing market and provide a US-based alternative to Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest semiconductor foundry.
While Tower is a fraction of the size of TSMC, the smaller company serves growing markets like electric vehicles. Intel had said Tower could provide the US giant with expertise and customers that it lacked.
Intel on Monday announced a strategic partnership with American electronic design automation company Synopsys to develop a portfolio of various intellectual property offerings for its foundry services.
In the second quarter, Intel’s foundry business reported a surge in revenue to US$232 million, up from US$57 million in the same period last year.